A study conducted by the Royal Bank of Canada suggests that home ownership is not as affordable as it used to be for the average Canadian, but many continue to take advantage of current housing trends as fears of a housing bubble continue to grow.
According to the RBC’s analysis, the bank’s housing affordability index had diverged from previous trends in the June ending quarter of calendar 2013 for two of three metrics – bungalows and two-story houses. After housing affordability stats for those two house types improved over the past 12 months, June 2013’s numbers told a different story, as such properties became more difficult for the average Canadian to afford.
Despite that, numbers are still lower than they were one year ago, and the drop for the June 2013 quarter was not too significant. For detached bungalows, affordability dropped 0.3 percent to 42.7 percent, and two-story home affordability moved down from 48.0 percent to 48.4 percent.
Condominium affordability remained as it was at 27.9 percent. Among major Canadian markets, Vancouver and Toronto were the least affordable cities in the June 2013 quarter; affordability decreased in Vancouver from 79.9 percent to 82.1 percent on detached bungalows, while Toronto statistics were down half a percentage point from 54.0 percent to 54.5 percent.
Canada’s affordability index is a gauge of the cost of servicing a home, which includes, but is not limited to one’s monthly mortgage payments, taxes and utility costs, in relation to a household’s income before taxes. Lower affordability scores, in this case, are better, while higher percentages mean a home is less affordable to any given family.