Canada

RBC: Toronto Real Estate Affordability is Worse, Vancouver Makes Biggest Improvement

Already unaffordable Canadian real estate became a little less affordable during the pandemic. RBC, Canada’s largest banks, updated their housing affordability data for Q1 2020. The bank observed worsening affordability, meaning housing required more income last quarter. This was due almost entirely to Ontario, as other regions saw affordability improve.

Canadian Affordability Is Still Getting Worse

Canadian real estate was a little harder to buy last quarter, but more affordable than last year. The median household would need to spend 50.5% of their income in Q1 2020, up 0.2 points from the previous quarter. This is down 0.3 points from the same quarter last year. This implies housing was 16.43% higher than the long-term average seen in Canada. RBC notes the rise during the pandemic was nearly almost all due to Ontario.

Canadian Real Estate Affordability Index

The cost of homeownership as a percentage of the median household income.

Source: RBC, Better Dwelling.
 

Toronto Real Estate Becomes More Unaffordable, But It May Fall Soon

Toronto is one of the few markets seeing fundamentals detach further from reality. The median household needs to devote 69% of income as of Q1 2020, up 0.8% points from the previous quarter. Compared to last year, this is 1.3 points higher than the same quarter. The region is now about 36.63% more unaffordable than the long-term average, according to the bank. The recession and slow immigration is expected to lower demand, and prices in the future.

Vancouver Real Estate Makes The Biggest Affordability Improvement In Canada

Vancouver real estate continues to see affordability improve, as selling pressure pushes prices lower. The median household now needs 79% in Q1 2020, down 0.3 from the previous quarter. This is down a huge 4.2 points from last year – the biggest point drop of any market in Canada. Compared to the long-term average, prices are still 30.57% higher than typically seen. Affordability improved, but it’s still out of whack.

Montreal Real Estate Is Becoming More Affordable

Montreal real estate is seeing affordability improve. The median household needs 43.5% of their income in Q1 2020, down 0.2 points from the previous quarter. This represents a decline of 0.4 points from last year. Housing affordability is 12.98% higher than the long-term average. Steep compared to historic standards, but a deal in contrast to Toronto and Vancouver.

The bank warned this recovery will be a “long and bumpy road,” with high unemployment and slow immigration taking its toll. The most unaffordable markets, Toronto, Vancouver, and Victoria, are expected to be hit by this trend later this year. They added. “We expect moderately lower home prices and exceptionally low interest rates to reduce home ownership costs in the period ahead.”

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8 Comments

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  • Trader Jim 3 weeks ago

    We did it. The worst affordability bubble in history.

    • James Spears 3 weeks ago

      I feel like it should be called a marginal affordability index, since it really is just the cost of buying now. It’s not the total cost paid by everyone.

    • RM 3 weeks ago

      Hey Jim,

      Worst ever in Ontario? Canada? All of history, everywhere? Just curious about the numbers/ comparisons. Either way, it’s really messed up.

  • Gib Cairns 3 weeks ago

    Only in Ontario? That’s half of people in Canada. And no one lives in Northern Ontario.

    • Gord Brix 3 weeks ago

      House prices and indexes are weighed by volume. Toronto is probably half of Transactions.

    • Ahmed 3 weeks ago

      Bank of Canada: Long bumpy road

      RBC: Long bumpy road

      Moody’s Long road to recovery

      Condo buyers: FOMO.

  • Derek 3 weeks ago

    This data represents Jan-March. The lockdown began mid March.

    Just pointing out the obvious, if there is a crash it wont be until q4 results are posted in 2021 IMO. That is when mortgage deferrals and also likely CERB will expire.

    Just an average Joes 2 cents.

  • Jim Welland 3 weeks ago

    Hi,

    My name is Darlene and I’ve been working part time as a waitress for the past 20 years. I decided to take my waitressing skills and become a real estate agent.

    Folks, I must tell you there’s never been a better time to buy. Things like massive unemployment, zero immigration and record household debt only make housing prices go higher…

    Now how about we get out there and buy you a house.

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