According to a recent Housing Trends and Affordability report from RBC Economics, housing affordability in Canada increased in the third quarter of 2014, despite an upward trend in house prices. Factors affecting affordability included declines in fixed mortgage rates, rising incomes and reduced utility costs, say economists.
“Owning a home was a bit easier in Q3 thanks to rising household incomes, low and steady interest rates and cheaper utility costs in many parts of the country – Toronto even saw some relief,” says Craig Wright, RBC Senior Vice-President and Chief Economist. “With home resales sitting close to the highest levels since early 2010, the overall tone of Canada’s housing market is quite solid at this stage.”
Across Canada, resales increased in October for the eighth time in the last nine months, reflecting ongoing activity and buyer confidence in the country’s hottest markets, Calgary, Toronto and Vancouver. Wright also notes that, across all markets, condominium affordability witnessed a broad improvement and continues to be the most affordable option for home ownership.
Looking forward, however, RBC forecasts a dip in affordability in 2015, citing potential increases in mortgage rates and housing prices.
“A combination of gradually increasing interest rates and higher prices will likely reverse the improvement in housing affordability that took place in the past year and weigh more and more heavily on homebuyer demand in Canada,” adds Wright. “We expect the next stage of the housing cycle to be a transition toward lower resales and slower price increases.”