RBC: Strong household price increases have hurt housing affordability across Canada.
Strong household price increases have hurt housing affordability across Canada.
"Canada's housing markets started 2010 the same way they ended 2009: firing on all cylinders," a report from RBC concludes.
RBC affordability measures rose for the third straight quarter, increasing between 0.4 and 0.9 per centage points depending on the housing type. The bank's measures are above their long-term average, but still significantly less than the peaks reached in 2008. According to RBC, this suggests that homeownership costs are starting to pinch typical Canadian households, but not "dangerously so at this stage."
Alberta was the only province that registered affordability improvements in the first quarter. British Columbia experienced, by far, the sharpest deterioration. Saskatchewan and Manitoba also registered strong deterioration while affordability decreased more modestly in Ontario, Quebec and Atlantic Canada.
"Looking ahead, further erosion in affordability is likely to take place in Canada in the coming 12 to 18 months. The main cause will be an anticipated rise in interest rates, which are currently at exceptionally low and clearly unsustainable levels."
However, housing affordability isn't expected to exceed peak levels as supply (in both existing and new home markets) is responding to strong demand and local markets are heading towards balanced conditions.
RBC also expects demand for housing to cool during the latter half of 2010 citing that the pent-up demand of recent months has probably already ceased to be a factor.