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Rising Home Prices Eroding Housing Affordability in Canada: RBC Economics

TORONTO, May 20, 2011 — Canadian housing affordability eroded in the first quarter of 2011, following improvements in the last half of 2010, according to the latest Housing Trends and Affordability report released today by RBC Economics Research. Home price gains in the majority of Canada’s key markets were the main driver of the decline in housing affordability, while flat mortgage rates played a neutral role this time. In the previous two quarters, declines in mortgage rates were the principal source of improvement in affordability.
The detached bungalow benchmark measure rose by 0.7 of a percentage point to 40.5 per cent, while both the standard two-storey home and the standard condominium measure rose by 0.2 of a percentage point, to 46.2 and to 27.7 per cent respectively, in the first quarter.
The majority of Canadian markets experienced weakened affordability in the first quarter of 2011. Most notable was the sizeable deterioration in British Columbia. More specifically, Vancouver saw significant gains in property values, which drove the already elevated cost of homeownership even higher. Quebec’s homebuyers also faced noticeable rises in ownership costs, while those in Atlantic Canada saw their affordability advantage somewhat diminish. The picture remained mixed in other areas of the country, with Ontario, Alberta and Saskatchewan experiencing ups and downs in ownership costs, depending on the housing type.
RBC’s housing affordability measure for a detached bungalow in Canada’s largest cities is as follows: Vancouver 72.1 per cent (up 3.4 percentage points from the last quarter), Toronto 47.5 per cent (up 0.8 of a percentage point), Montreal 43.1 per cent (up 2.0 percentage points), Ottawa 39.0 per cent (up 0.4 of a percentage point), Calgary 35.9 per cent (up 0.9 of a percentage point) and Edmonton 31.5 per cent (up 0.5 of a percentage point).
The full RBC Housing Trends and Affordability report is available by clicking PDF RBC.

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