The Canadian housing market has received a checkup from one of Canada’s biggest banks, and the prognosis was good — for the most part.

RBC runs a Canadian Housing Health Check each quarter looking at how current trends compare with historical norms.

There are 10 categories : affordability, market balance for both the resale and rental segment, interest rates, employment, and demographics, as well as housing supply and construction of single-family and multi-family homes.

In all categories but two, the Canadian market got a clean bill of health in the second quarter.

The two exceptions were affordability and the number of multi-family homes, including condo and rental units, under construction, both of which were observed to be “significantly” removed long-term norms.

“Poor affordability is a significant source of vulnerability for Canada’s housing market despite some improvement since the fall,” write RBC Chief Economist Craig Wright and Senior Economist Robert Hogue.

Earlier this year, RBC noted that Canadian housing affordability improved for the first time in more than three years.

But as of the second quarter, median-earning Vancouver households needed to put 82 percent of pre-tax income to afford an average-priced home, compared to 66 percent for households in Toronto.

RBC also breaks the health assessment down into urban centres, looking at these two markets as well as Calgary and Montreal.

“The high cost of homeowner- ship in Vancouver, Toronto and, increasingly, Montreal are a top vulnerability for Canada’s major markets,” the economists note.

The pace of multi-family home construction was flagged as significantly deviating from norms in three of the four markets.

In Calgary, the outlook was less risky but construction in this segment was still “modestly” outside the historical trend. However, Wright and Hogue suggest the outlook is improving.

“The number of condo units under construction is still high from a historical point of view but has come down since late-2018. More units have been completed than started in the past year,” say the economists.

Risk in Toronto is “limited” despite the high number of units being built.

“Market absorption has been very strong in recent years, which indicates that current construction levels are unlikely to be excessive,” the report reads.

Same goes for Vancouver, where a drum-tight rental market helps create demand for housing under construction and guard against negative impacts of overbuilding.

“[The] low inventories and rental vacancy rate, as well as rapid population growth largely mitigate such risk,” say Wright and Hogue.

Canada’s Housing Market is Healthy, But Affordability is Still a Major Problem by Josh Sherman | Livabl