Homeownership affordability improves in Ontario

By Wayne Karl
December 10, 2014

Amid continuing talk of high levels of household debt and varying real estate market conditions in some areas, RBC Economics Research’s latest Housing Trends and Affordability report reassures that homeownership affordability is still improving slightly. Housing in Canada became more affordable in the third quarter of 2014.

“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, senior vice-president and chief economist, RBC. “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.”

Mortgage affordability

The way RBC’s affordability measures work is, the higher the measure, the more difficult it is to afford a home. For example, an affordability measure of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s pre-tax income. A decline in the measure represents an improvement in affordability.

For the Ontario market, homebuyers benefited from some modest improvement in affordability, though it still remains relatively strained – mostly in Toronto. RBC’s measures edged lower in all three housing categories monitored, between 0.1 percentage points and 0.4 percentage points.

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In Ontario’s largest market, Toronto, affordability improved in two of the three housing categories, notably in standard two-storey homes. Affordability in this home type fell 1.1 per cent (meaning it became more affordable) to 64.2 per cent, while deteriorating slightly in detached bungalows – up 0.3 per cent to 56.3 per cent. For standard condominiums, affordability improved, falling 0.2 per cent to 34.1 per cent.

 

About Wayne Karl

Wayne Karl is an award-winning writer and editor with experience in real estate and business. Wayne explores the basics – such as economic fundamentals – you need to examine when buying property. wayne.karl@nexthome.ca

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