If mortgage payments are gobbling up more of your earnings, you're not alone.
Housing affordability has deteriorated for the fourth straight quarter because house prices are rising faster than income growth, a bank survey showed Wednesday.
The erosion comes despite stable borrowing rates and a small drop in utility costs, the Royal Bank of Canada said in its housing affordability index report.
That said, housing should become less expensive next year, “as the lagged effects of fourth quarter mortgage rate declines, easing energy price pressures and a topping out of home price appreciation will have a positive impact for home buyers,” said Derek Holt, RBC's assistant chief economist.
RBC's affordability index measures the proportion of pre-tax household income needed to service the costs of owning a home.
The bank expects new home construction and house re-sales to soften nationwide next year “alongside more reined-in expectations for house price gains.” Home building and sales will stay strong, as will housing prices, RBC predicts.
Looking at the regional trends, affordability in central Canada is already improving even though incomes are softening. In Toronto prices for two-storey homes and town houses are flat compared to a year ago while bungalows are up mildly, and condo gains are weakening, the report said.
However, British Columbia, Alberta, Saskatchewan, and most types of housing in Atlantic Canada, are still seeing a deterioration in affordability.
Nationally, the most affordable housing class remains the standard condo. A standard townhouse is next, followed by a detached bungalow. A standard two-storey home is still the least affordable housing type.
The higher the city is in an index, the more costly it is to afford a home. For example, a reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up half of a typical household's monthly pre-tax income.
The following shows the affordability index for a detached bungalow in Canada's largest cities:
• Vancouver 70.1%
• Toronto 43.8%
• Calgary 40.9%
• Edmonton 33.4%
• Montreal 36%
• Ottawa 30.8 %
© The Globe and Mail
