Home affordability has once again found its way lower according to a recent release from the Royal Bank of Canada.
According to RBC’s housing affordability index, housing affordability has decreased during Q1 of 2014, largely due to the increase in housing prices in the larger Canadian markets such as Toronto, Vancouver and Calgary.
This past week, the crown corporation responsible for insuring and backing a large part of the Canadian mortgage market, CMHC (Canada Mortgage and Housing Corporation) released a report indicating that home prices across Canada would continue to rise at a more moderate pace when compared to years past.
In certain markets however, houses were actually deemed more affordable. Markets such as Ottawa, Edmonton and Atlantic regions were shown to have become more affordable according to the housing affordability index.
The reason for the continuing erosion of housing affordability in Canada has been the ever increasing prices of homes fueled by continued demand and historically low interest rates. As per RBC’s affordability index, housing affordability has declined in three of the last four quarters.
While it is believed that this continuing trend of decreased housing affordability will not present any threat to the Canadian housing market; the Bank of Canada has indicated that they will not be raising interest rates until the end of 2015 – the Bank of Canada has not changed the overnight lending rate since September 2010.
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