“Strong demand now sustains historically high levels of activity, even if the pace is less frantic than it was earlier this year. Previously bloated inventories have largely been absorbed, and prices are firming moderately. Buyers continue to benefit from relatively good affordability. Despite rising in the second quarter (up 0.9 percentage points), RBC’s aggregate measure (31.7 per cent) is still well below its long-run average (38.7 per cent). There’s therefore room for prices to rise further without crushing buyers’ ability to own a property,” said the report.
The RBC Housing Affordability Measures show the proportion of median pre-tax household income that would be required to cover mortgage payments (principal and interest), property taxes, and utilities based on the benchmark market price for single-family detached homes and condo apartments, as well as for an overall aggregate of all housing types in a given market.
For Canada, RBC’s aggregate affordability measure worsened the most in more than 30 years: It soared 2.7 percentage points to 45.3 per cent Canada-wide in the second quarter.
“This was the fourth-straight increase, entirely rolling back the improvement that occurred at the start of the pandemic. Every market and housing category got less affordable: RBC measures increased across the board. Toronto, Vancouver and Ottawa recorded the largest deterioration,” said the report.
“Still, ownership costs aren’t an overly heavy burden in the Prairies and parts of Atlantic Canada: They continue to represent a smaller-than-average share of household income in these regions. The burden is heaviest in Vancouver, Toronto and Victoria.
“We expect home prices to continue to rise in the near term, as demand-supply conditions generally remain exceptionally tight. This will further raise ownership costs across a wide spectrum of markets and housing categories. That said, the affordability deterioration is poised to moderate. The rate of price appreciation is now slowing in many places, and we project prices to flatten in 2022.”