Home ownership getting less affordable in Canada

 

 

 

 

Dont let the title of this article scare you, Canada is not Vancouver! Got to love the media. Worth a quick read below.   http://business.financialpost.com/2012/05/29/home-ownership-getting-less-affordable-in-canada/   TORONTO — RBC says home ownership was less affordable in most major Canadian cities during the first quarter, although Calgary and Edmonton bucked the trend. The latest RBC Economics report on home affordability says its index deteriorated sharply in Vancouver and to a lesser degree in Toronto, Montreal and Ottawa — primarily due to higher real-estate prices. But the bank’s affordability index was unchanged in Calgary and improved in Edmonton compared with the fourth quarter of 2011. The report tracks how much of a home owner’s income would be required to pay typical costs associated with owning a standard one-storey detached house. In Vancouver, RBC estimates the combined cost of mortgage payments, utilities and property taxes rose 3.1 percentage points to 88.9%. In Calgary, by contrast, only about 36.7% of pre-tax income would be required to pay for a standard bungalow — unchanged from the previous study — and in Edmonton the index improved by 0.4 percentage point to 32.4%. In Toronto, the index deteriorated by 1.2 percentage points to 53.4%; in Montreal, the cost of ownership increased 1.2 percentage points to 41.4% of income and in Ottawa it was up 0.9% to 41.8%. “It became a little tougher on household budgets to carry the costs of owning a home at market prices at the start of this year,” said Craig Wright, RBC’s chief economist said in a statement Tuesday. “Strong buyer demand was a principal driver of the modest rise in homeownership costs. While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases.” He said the challenge will likely increase once the Bank of Canada begins raising interest rates. “Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years,” Wright said. “Affordability headwinds are likely to increase next year, as interest rates make their way towards more normal levels.” He said RBC expects Canada’s central bank will hike rates gradually, starting in the fourth quarter. “A gradual pace of increases will allow income growth to provide some offset,” he said.      Courtesy of

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