A report this week shows that the chance of buying a house continues to move out of reach for the average Canadian.
The report by RBC Economics Research (Royal Bank of Canada) is called, Housing Trends and Affordability
It shows an increase in housing costs relative to income continued to rise in almost all areas, but especially in the superheated markets of Vancouver and Toronto.
In fact the report said that owning a single-detached house in the Vancouver area was now out of reach for all except a minority of high-income earners.
Those hot markets are also causing rapid price increases in surrounding regions. Home re-sales are booming in Victoria as well, and prices are rising rapidly, which has taken a toll on housing affordability there as well.
“There is no imminent end to this divided picture because home resale activity is very strong in Vancouver and Toronto and demand in both markets exceeds supply by a wide margin,” said Craig Wright, RBC Chief Economist. “First-quarter prices for single-detached homes in Vancouver surged nearly 25 per cent year-over-year, and such a parabolic rise in prices signals the presence of over-exuberance in this segment of Vancouver’s market that is not fully justified by the robust local fundamentals. In sharp contrast, we see balanced conditions in most other markets in Canada, which is likely to keep affordability within reasonable levels.”
The report says however that housing in eastern Canada’s maritime cities remains affordable.
Empty housing tax
In Vancouver and surrounding evidence, there is a great deal of anectdotal feeling that offshore money mainly from Chinese investors is fueling the surging house prices.
To quell the increase in speculation, Vancouver Mayor Gregor Robertson is proposing a tax on empty housing, whereby houses are bought as an investment and not lived in.
“Vancouver housing is first and foremost for homes, not a commodity to make money with,” he said. “We need a tax on empty homes to encourage the best use of all our housing, and help boost our rental supply at a time when there’s almost no vacancy and a real crunch on affordability.”
With affordable rental housing also in crisis, the mayor had proposed the province proceed with a tax on empty housing, but said the city is prepared to proceed on its own if the provincial government doesn’t act.
A report commissioned by Vancouver in March showed almost 11-thousand homes and condos sitting empty in the city.
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