Buying a home in Canada has never been so unaffordable: RBC

Volodymyr Kyrylyuk/ Shutterstock

If you’re hoping to break into the Canadian real estate market, you might want to hold off — buying a home has never been so unaffordable.

In a new housing affordability report, Robert Hogue, assistant chief economist at RBC, said that rising interest rates have driven ownership costs to record-high levels across Canada.

The Bank of Canada has raised interest rates five times since March. Currently at 3.25%, a further two hikes are expected before year’s end, but the impact has already been “historic.”

The resulting increase in the cost of mortgage payments combined with the surge in property values seen over the course of the pandemic have made it “more difficult than ever to become a homeowner in Canada,” Hogue said.

In April, RBC’s national aggregate affordability measure — which measures ownership costs as a percentage of median household income — reached a record high of 60%. A rise in the measure represents a loss of affordability.

Several cities in Ontario and British Columbia also reached their worst affordability levels ever in the spring, including Victoria (67.6%), Vancouver (90.2%), and Toronto (83.0%). Smaller markets, including Hamilton, London, St. Catharines, and Kelowna did, too.

While some markets — including several in Alberta and Saskatchewan — are still somewhat affordable, Hogue said the “rapidly deteriorating trend” is nationwide.

“Affordability worsened everywhere in Canada,” Hogue said. “The deterioration over the past year has been off the charts in most markets.”

Whether because they no longer qualify for a mortgage or because their budget has been obliterated, many buyers have been forced to the sidelines.

You might also like:

Hogue noted that the impact of higher mortgage rates has not fully run its course; with impending interest rate hikes, the upward pressure on ownership costs will intensify further over the next few months.

The “good news,” though, is that the widespread market downturn will eventually lead to improvements in affordability. Hogue said it’s expected that benchmark prices will fall 14% Canada-wide by next spring and even more so in Ontario and BC, which should help lower ownership costs.

“Our view is unaffordability will peak at the end of this year—though the timing is poised to vary market by market,” Hogue said. “It will likely take years to fully reverse the tremendous deterioration that took place since 2021.”