In Canada, the dream of owning a home is becoming more attainable, as highlighted in a recent report by RBC Economics. While there have been improvements in home affordability over the past few quarters, challenges persist for many Canadians.
Key points from the report include:
- Home ownership costs in Canada have decreased for three consecutive quarters.
- The measure of home affordability, comparing the income needed to cover mortgage payments, property taxes, and utilities, reached a record high of 63.8% in late 2023 but has since fallen to 58.4% as of the third quarter of 2024.
- Despite these positive trends, home ownership remains out of reach for many ordinary Canadians.
- Factors contributing to improved affordability include declining property values, interest rate cuts by the Bank of Canada, and growth in household income.
According to RBC, the steady increase in median household income by 4.4% in the second and third quarters of 2024 has played a significant role in enhancing affordability. The report emphasizes that income growth has had a more substantial impact on affordability than other factors combined.
Looking ahead, RBC anticipates further relief in home affordability in 2025. Projected rate cuts by the Bank of Canada and ongoing growth in household income are expected to contribute to this trend. The bank envisions modest home price increases, slight drops in long-term interest rates, and steady income growth until late 2025.
In the third quarter of 2024, Vancouver, Victoria, and Toronto exhibited the most significant improvements in home affordability compared to other Canadian markets. Despite progress in Vancouver, it remains the most unaffordable housing market in the country. Covering homeownership expenses in Vancouver still consumes 96.7% of a median household’s income.
As we move forward, it’s critical to continue monitoring these trends and working towards making homeownership more accessible for all Canadians. By addressing the underlying factors contributing to affordability challenges, we can create a more equitable housing market for everyone.
