The latest Housing Trends and Affordability Report from RBC shows that for the second consecutive quarter, Vancouver has experienced the highest decline in affordability when compared to other Canadian housing markets. Despite this, Vancouver-area resales grew at the strongest rate across the country, implying that homebuyers remain unaffected by recent discourse surrounding the issue of real estate affordability.
In recent years, low interest rates have been instrumental in keeping affordability at a manageable level, but RBC expects “bond yields—the main driver of fixed mortgage rates—to drift gently upward throughout the year ahead of what is likely to be a gradual pace of policy tightening by both the US and Canadian central banks.”
Since reaching a four-year low in the first quarter of 2013, the Vancouver-area market has rebounded with a 42% increase in activity. Despite this resurgence, activity is still below the 10-year average, which does not suggest that the market is overheating. This rebound has, however, placed upwards pressure on prices, thus further exacerbating the issue of affordability. In the third quarter, ownership costs as a percentage of household income in Vancouver has risen the most out of all major markets in Canada and is hovering at levels that the report states are “uncomfortably high and likely purport substantial market stress.”
On a positive note, the RBC report does suggest that market activity in Vancouver will soon stabilize. This will, by all accounts, provide a welcome interlude to the always pleasant online dialogue surrounding the local real estate market.