File photo of a house for sale in Toronto.Fred Lum/The Globe and Mail
The Royal Bank says housing was more affordable across Canada in the second quarter as low mortgage rates offset solid price increases.
In its latest Housing Trends and Affordability Report, the bank says it found that owning a home was more affordable in virtually all provincial and major local markets in the quarter.
The RBC housing affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a specified category of home at current market values. A fall in the measure represents an improvement in affordability.
During the second quarter, affordability measures at the national level fell by 0.9 percentage points to 48 per cent for two-storey homes, by 0.6 percentage points to 42.5 per cent for detached bungalows and by 0.4 percentage points to 27.4 per cent for condominium apartments.
In May and June, Canada's home resales picked up and contributed to a 9.4 per cent seasonally-adjusted advance in the second quarter, which was the strongest quarterly gain in nearly four years.
RBC chief economist Craig Wright says that while a rebound in activity after the harsh winter weather was anticipated, the housing market also got a big boost from the biggest drop in fixed mortgage rates in almost four years.
Sellers also came out from the sidelines with a surge in new listings by eight per cent in the second quarter, following three consecutive quarterly declines.
Greater supply of homes for sale helped to unclog markets such as Toronto, where a lack of quality listings earlier this year stifled activity.
"Stats rolling in suggest that the upward momentum in Canada's housing market is being sustained and further, that a sharp slowdown is not imminent," said Wright.
"In the coming year, however, we do expect the market will gear down its resale levels and that the rate of price increases will soften."
Vancouver remains among the most expensive cities, especially for single-family homes, while Toronto is seeing deteriorating trends in affordability with levels becoming increasingly strained, predominantly for single-family homes.
Almost all other markets across Canada stand at levels close to historical averages, which suggests negative affordability-related pressures should not impact home buyer demand at this stage.