The Royal Bank of Canada has raised serious concerns that for most people housing is simply too expensive in Vancouver.
On Monday, RBC released its quarterly report on housing and affordability. According to the report, on average, the typical Canadian homeowner spends 48.9 percent of their household income on servicing the mortgage on a median two-storey home – an increase of 2.1 percent overall due to rising mortgage rates.
However, in Vancouver it’s a very different story – the proportion of income required to service the mortgage on a median two-story home or a detached bungalow (a smaller starter home anywhere else in the country) has risen to an astonishing 70 percent. The situation is not much better for owners of apartments or condominiums – servicing the mortgage on a condo consumes 43 percent of household income.
The report singled out Vancouver’s white hot housing market, but it wasn’t to pass around congratulations: "RBC housing affordability measures are very close to their all-time high, which points to significant underlying stress and raises a red flag," said RBC Economist Robert Hogue. “Generally we have dismissed the case of housing market bubbles in Canada, but the situation in Vancouver is probably the closest to one in the country.”
This means the market could take a big hit unless the pressures ease - "very poor affordability is likely to restrain demand in the period ahead," said Hogue. According to the report, BC and Ontario saw the worst deterioration in housing affordability as prices neared the record highs seen in 2008.
Photo: Even condos in Vancouver may be out of reach for most homeowners. Credit: Beaster725, Flickr
Sources: Bank Raises Red Flag Over Housing Affordability, The Vancouver Sun; House Costs Near Record High in BC, The Province; Housing Becomes Less Affordable, The Globe and Mail.