{"id":18194,"date":"2021-07-14T11:11:00","date_gmt":"2021-07-14T18:11:00","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=18194"},"modified":"2021-07-13T09:29:46","modified_gmt":"2021-07-13T16:29:46","slug":"forecasts-home-prices-to-continue-to-rise-because-of-tight-supply-demand-conditions","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2021\/07\/forecasts-home-prices-to-continue-to-rise-because-of-tight-supply-demand-conditions\/","title":{"rendered":"Forecasts : Home Prices to Continue to Rise Because of Tight Supply &#038; Demand Conditions"},"content":{"rendered":"<p style=\"text-align: justify;\">The ability for Canadians to afford a home has fallen to its worst level in 31 years, according to RBC, which used its own affordability measure to make the determination.<\/p>\n<p style=\"text-align: justify;\">The country\u2019s housing market peaked in early 2021, with bidding wars becoming commonplace in previously subdued markets and prices escalating nationwide, save for the Prairies and New Brunswick. RBC\u2019s ratio of ownership costs to household income rose by 0.9% to 52%\u2014an increase indicates deteriorating affordability\u2014in Q1-2021, erasing the short-lived gains Canadians enjoyed during the onset of the COVID-19 pandemic when the government doled out financial support to laid off workers.<\/p>\n<p style=\"text-align: justify;\">Of course, tight housing supply and robust demand are responsible for the drastic rise in housing prices across Canada, including in smaller cities and rural areas, and while condominiums remained affordable options for aspiring homebuyers, that market segment is likely to see an erosion of affordability too, says RBC.<\/p>\n<p style=\"text-align: justify;\">Of the major markets hardest hit by deteriorating affordability, Vancouver rose by 1.9% on RBC\u2019s (un)affordability scale, while Toronto climbed by 0.6% and Montreal by 0.9%. Still, carrying mortgages in smaller markets proved more cumbersome.<\/p>\n<p style=\"text-align: justify;\">\u201cA strong influx of buyers\u2014several of whom coming from big cities\u2014has significantly boosted property values in smaller markets in Ontario, BC, Quebec and parts of Atlantic Canada. Large price gains have narrowed their affordability advantage over big cities. Since the pandemic, mortgage carrying costs have increased more as a share of household income in Windsor, Hamilton, London and Niagara than in Vancouver, Ottawa, Montreal or Toronto,\u201d said the report from RBC\u2019s Robert Hogue.<\/p>\n<p style=\"text-align: justify;\">But in Canada\u2019s most expensive markets, the average buyer spends a larger share of their income on various ownership costs. In Vancouver, 74.9% of a buyer\u2019s income goes towards homeownership, followed by Toronto at 67.7% and Victoria at 55.8%. In Montreal and Ottawa, there are signs of stress at 44.6% and 42.4%, respectively. However, according to Montreal-based realtor and brokerage owner Patrice Groleau, low interest rates are providing some bulwark against escalating home prices, at least for the time being.<\/p>\n<p style=\"text-align: justify;\">\u201cIf you take into consideration interest rates, it\u2019s not as bad as it looks and the buying capacity of Montrealers is still quite good. If you look at the RBC study, it was worse in 1990 compared to what it is right now because of the interest rates,\u201d said Groleau, owner of McGill Real Estate.<\/p>\n<p style=\"text-align: justify;\">In fact, RBC determined affordability in the first quarter of the year is as bad as it was in 1990, but interest rates were indeed significantly higher then. Groleau noted that new builds in Montreal saw rapid price increases, in part, because of pandemic-induced supply chain issues, which caused material shortages and drove up costs. But he\u2019s confident that income gains will accelerate when immigration resumes and the job market becomes competitive again.<\/p>\n<p style=\"text-align: justify;\">\u201cRight now there\u2019s huge pressure; we\u2019re missing workers and we need to bring 50,000 immigrants to Montreal every year to catch up,\u201d he said.<\/p>\n<p style=\"text-align: justify;\">The RBC report forecasts that housing affordability will keep eroding because of tight supply and demand conditions, even with market activity poised to moderate from its current unsustainably high level.<\/p>\n<p style=\"text-align: justify;\">\u201cWe expect prices to continue to rise in the near term, further eroding housing affordability,\u201d said the report. \u201cWe also expect condo ownership costs will pick up after easing for the better part of the last year. Buyers have recently renewed their interest in condo apartments and inventories are now shrinking.\u201d<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.canadianrealestatemagazine.ca\/news\/expect-persistent-erosion-of-housing-affordability-rbc-334741.aspx\" target=\"_blank\" rel=\"noopener\">RBC : Expect Persistent Erosion of Housing Affordability<\/a> by Neil Sharma | Canadian Real Estate Wealth<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The ability for Canadians to afford a home has fallen to its worst level in 31 years, according to RBC, which used its own affordability measure to make the determination. &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2021\/07\/forecasts-home-prices-to-continue-to-rise-because-of-tight-supply-demand-conditions\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-18194","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Forecasts : Home Prices to Continue to Rise Because of Tight Supply &amp; 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