The latest report from Royal Bank of Canada (RBC) paints a bleak picture of housing affordability in Canada.
Soaring interest rates have skyrocketed ownership costs, making it the toughest time ever for Canadians to afford a home.
In the fourth quarter of 2023, a household earning a median income needed to spend a staggering 63.5% of it to cover the costs of owning an average home at market price. This is up from 61.8% in the previous quarter.
The monthly mortgage payment for the composite home (valued at $796,300) increased by more than $125 (3.3%) to $3,990.
Affordability Worsens Across the Country
Affordability worsened in all markets tracked by RBC, with Vancouver, Victoria, and Toronto experiencing the biggest deterioration. The situation also got worse in Ottawa, Montreal, and Halifax, where affordability is at or near all-time worst levels.
The Bank of Canada’s historic rate hike campaign has seriously hurt house hunters’ purchasing budgets. RBC estimates that the maximum budget for a household with a median income ($85,400) has shrunk by 22% since the first quarter of 2022, to just under $500,000, while home prices have fallen just 1.8% over the same period.
Continued Pressure on Demand and Prices
The report further suggests that the likelihood of rate cuts starting mid-2024 could bring some respite for housing affordability in Canada.
However, the scope for improvement in the year ahead will be miniscule compared to the loss of affordability that’s occurred over the last few years.
“Meaningfully restoring affordability will likely take years in many of Canada’s large markets,” the report states.
On Tuesday, Prime Minister Justin Trudeau addressed the housing crisis in Canada while making an announcement in Nova Scotia, stating that the issue is not with permanent immigration, but rather with the spike in temporary immigration over the past few years.
