News: Vancouver Real Estate Market

Housing Affordability Improves for Second Consecutive Quarter: RBC Economics

   Modest Improvements at the End of 2011 Lighten the Load on Household Budgets

TORONTO, March 7, 2012— Canada's housing market made further steps on a promising path in the closing months of 2011 as affordability improved for the second consecutive quarter, according to the latest Housing Trends and Affordability Report released today by RBC Economics Research. Canadian homebuyers benefited from softer home prices and income gains that helped lighten the load on their budgets in the fourth quarter of 2011.


"The improvement in affordability was modest for the most part, but still significant enough to dial back the deterioration that impacted the market in spring last year," said Craig Wright, senior vice-president and chief economist, RBC. "As a result, the cost of owning a home at market price represented slightly less of a pinch on household budgets in the fourth quarter. Continued low interest rates in 2012 will help keep housing costs at bay in the near term."


The report explains that the erosion of national affordability levels witnessed in the first half of 2011 were mainly a manifestation of dramatic increases in homeownership costs in Metro Vancouver. Developments in the Vancouver area market during the second half of 2011 were more closely aligned to trends in other Canadian markets and had less of an impact on the national picture.


The RBC housing affordability measure captures the proportion of pre-tax household income that would be needed to service the costs of owning a specified category of home at going market values.


During the fourth quarter of 2011, measures at the national level fell for all housing categories tracked by RBC (a fall represents an improvement in affordability). The two-storey home category showed the most notable improvement.


"At this point, housing in Canada is essentially as affordable as it was a year ago, and only slightly less affordable on average than it has been over the long term," Wright noted. "All things considered, the housing market is sitting in a reasonably balanced position overall, despite some minor stress being exerted on housing demand."


Where housing affordability stands in Canada:

Nearly all provinces and major cities saw an improvement in homeownership costs, led by British Columbia and, in particular, Vancouver. Nevertheless, the proportion of a typical Vancouver household's income that would go towards owning a home is still extremely high. RBC says that these tough conditions will continue to be a tall hurdle to clear for local homebuyers.


RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities is as follows: Vancouver 86.0 per cent (down 4.6 percentage points from the previous quarter), Toronto 52.2 per cent (down 0.1 percentage points), Montreal 40.1 per cent (down 0.7 percentage points), Ottawa 40.9 per cent (down 0.1 percentage points), Calgary 36.7 per cent (down 0.7 percentage points) and Edmonton 32.8 per cent (down 0.3 percentage points).


The RBC Housing Affordability Measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market in Canada, at market value. Alternative housing types are also presented, including a standard two-storey home and a standard condominium apartment. The higher the reading, the more difficult it is to afford a home at market values. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, would take up 50 per cent of a typical household's monthly pre-tax income.


Highlights from across Canada:

  • British Columbia: affordability improving but remains poor

    B.C.'s housing market improved for the second consecutive quarter in the final months of 2011 due to a further reversal of earlier substantial increases in home prices, particularly in the Vancouver area, as well as income gains arising from steady job creation. Despite the fact that B.C. registered the most significant reduction in homeownership costs in the country, the provincial housing market remains the least affordable in Canada.

    Measures fell between 0.7 and 2.5 percentage points. RBC expects poor affordability to weigh on local housing demand in the coming year.
    • Increased risks in the Vancouver-area housing market modestly subsided in the fourth quarter - a notable improvement over spring 2011, when it recorded the worst levels of affordability ever witnessed in the annals of Canadian real estate. Vancouver home prices have moderated since the middle of 2011, and affordability measures fell quite substantially in the fourth quarter for all housing types (between 2.0 and 4.6 percentage points). Still, RBC notes that owning a home at current prices would take up the lion's share of a typical household budget, which will continue to be a deterrent for local buyers.

The full RBC Housing Trends and Affordability report is available online, as of 8 a.m. ET today, at


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