The Canadian Real Estate Association says the average price for a home sold last month fell to $488,000, down 2.9 per cent compared with November 2017. (iStock)

Housing affordability worsened in first quarter

A report by the Royal Bank of Canada found that housing became less affordable in Canada in the first three months of 2018. The figures reflect the total, before tax family income needed to pay for mortgage payments, property taxes and utilities like heat and electricity.

The proportion of median family income that was needed to pay for a house was 48.4 per cent. That was up 0.4 per cent from the final quarter of 2017. The change reversed a 0.3 percentage drop that had occurred in that period.

Interest rates are going up increasing the cost of mortgage payments. (iStock)

Interest rates add pressure

Mortgage rates had increased for two quarters and there is an on percentage point increase in the Bank of Canada’s overnight interest rate by the first half of 2019. This would worsen housing affordability.

The rule of thumb in the 1970s used to be that one should spend no more than one-quarter of one’s income on housing. In Vancouver now, it takes a whopping 87.8 per cent and in Toronto 74.2 per cent.

Some cities are still reasonable for housing

Affordability decreased modestly in most other Canadian markets because higher interest rates outpaced stable housing prices. There was deterioration in cities like Saskatoon, Ottawa, Halifax and St. John’s but housing costs there are more reasonable at between 27 to 36 per cent.

The report suggests that the next city to see a drop in affordability may be Montreal where costs the proportion of family income needed to own a home reached an all-time high of 43.7 per cent.

Middle class dreams dashed in Vancouver, Toronto

Middle class parents living in major Canadian cities have little hope that their children will be able to buy homes there. And unless those children rocket into the upper class, they will not be able to afford a house on one salary.

Categories: Society
Tags: , ,

Do you want to report an error or a typo? Click here!

For reasons beyond our control, and for an undetermined period of time, our comment section is now closed. However, our social networks remain open to your contributions.