RBC Economics says housing affordability in Canada is at its worst level since in 27 years, with Vancouver, Toronto and Victoria being the least affordable markets in the country, according to RBC Economics’ quarterly affordability report.
Vancouver is still the least affordable market with 87.9 per cent of household income needed to cover the cost of mortgages.
Toronto and Victoria weren’t far behind with 78.4 per cent and 64.5 per cent, respectively, of household income needed to cover mortgage costs.
Affordability in Montreal and Ottawa is not yet a problem, according to the report, but “affordability tensions” could be emerging in those areas.
The most affordable region in Canada is Saint John, N.B. with 24.5 per cent of household income going toward mortgage costs.
With the Bank of Canada expected to raise interest rates next year, the report also forecasts a 75-basis-point rise in mortgage rates.
As a result, RBC argues household income would need to climb by 8.5 per cent in order to cover the hike in homeownership costs.
“At the end of the day that means that’s going to put added pressure on affordability going forward,” RBC Senior Economist Robert Hogue told BNN in an interview Thursday.
As homes in Canada’s hottest markets become less affordable, Hogue says housing policy should focus on the rental side going forward, arguing “owning a home is something for the wealthy.”