{"id":9693,"date":"2018-07-05T11:11:58","date_gmt":"2018-07-05T18:11:58","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=9693"},"modified":"2018-07-05T10:23:14","modified_gmt":"2018-07-05T17:23:14","slug":"higher-interest-rates-take-a-bite-out-of-housing-affordability-in-q1","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2018\/07\/higher-interest-rates-take-a-bite-out-of-housing-affordability-in-q1\/","title":{"rendered":"Higher Interest Rates Take A Bite Out of Housing Affordability in Q1"},"content":{"rendered":"

\u2022 RBC\u2019s overall housing affordability measure for Canada in the first quarter reversed the slight improvement it showed late last year
\n\u2022 Higher interest rates were the main contributor to a rise in ownership costs across the majority of markets in Canada
\n\u2022 Affordability issues remain intense in Toronto and Vancouver, and may be emerging in Montreal<\/p>\n

TORONTO, July 3, 2018 – The little bit of housing affordability relief that Canadian homebuyers enjoyed in late 2017 slipped away in the first quarter of 2018, according to the latest Housing Trends and Affordability Report<\/a> issued today by RBC Economic Research.<\/p>\n

An average Canadian household needed to allocate 48.4% of their income to carry the costs of owning a home purchased in the first quarter. This was a multi-decade high and represented a 0.4 percentage points increase relative to the previous quarter. A rise in the measure constitutes a loss of affordability.<\/p>\n

\u201cHigher mortgage rates were the main contributor to the rise in ownership costs,\u201d said Craig Wright, Senior Vice-President and Chief Economist at RBC. \u201cWith the prospect of more interest rate hikes in the period ahead, there\u2019s a definite risk that affordability will erode further in the coming year. The odds of this occurring will also depend on the degree to which household income increases.\u201d<\/p>\n

While it was the third-straight time mortgage rates increased, a drop in home prices (centred in the Toronto region) more than offset their effect on affordability in the previous quarter. This was not the case in the first quarter, as housing prices remained flat overall in Canada.<\/p>\n

Nonetheless, in Toronto, home prices fell again in the latest period and enough so to counter the impact of rising interest rates. Housing affordability therefore improved for the second-straight quarter in the area, with RBC\u2019s aggregate measure easing very slightly by 0.1 percentage points to 74.2%. Toronto was in fact one of only two markets tracked by RBC Economic Research that recorded a decline (Winnipeg was the other).While encouraging, the Toronto region still has a long way to go before homebuyers feel any meaningful relief.<\/p>\n

Vancouver home ownership costs reached their highest levels on record in the first quarter of 2018\u2014considered by many to be at crisis levels. Besides the high interest rates that have impacted a number of cities across Canada, Vancouver has also faced a re-acceleration in home prices, causing further material deterioration to affordability. RBC\u2019s aggregate affordability measure jumped to 87.8% in Vancouver, up 1.5 percentage points.<\/p>\n

Elsewhere in Canada, rising interest rates caused affordability to erode modestly in the majority of markets. The quarterly increase in RBC\u2019s aggregate measure in Saskatoon, Ottawa, Halifax and St. John\u2019s was the largest in more than a year. Furthermore, Montreal faced a third-straight rise in its measure, reaching its highest point since 2011.<\/p>\n

\u201cInterest rates will be crucial to the outlook for housing affordability in the year ahead,\u201d continued Craig Wright. \u201cOur view is that the Bank of Canada will proceed with a series of rate hikes that will raise its overnight rate from 1.25% currently to 2.25% in the first half of 2019. This would have the potential to stress housing affordability significantly.\u201d<\/p>\n

Click here<\/a> to view The Housing Trends & Affordability Report.<\/p>\n

Higher Interest Rates Take A Bite Out of Housing Affordability in First Quarter<\/a> | RBC Economics<\/p>\n","protected":false},"excerpt":{"rendered":"

\u2022 RBC\u2019s overall housing affordability measure for Canada in the first quarter reversed the slight improvement it showed late last year \u2022 Higher interest rates were the main contributor to … [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-9693","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"\nHigher Interest Rates Take A Bite Out of Housing Affordability in Q1 • Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2018\/07\/higher-interest-rates-take-a-bite-out-of-housing-affordability-in-q1\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" 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