“To own a single-family home in the area, you need to be, effectively, at the higher end of the income distribution. Even those in the middle cannot afford to buy at today’s prices and interest rates,” said Robert Hogue, senior economist at RBC Economics Research.DARRYL DYCK/The Globe and Mail
Housing affordability levels in Vancouver are approaching the worst ever recorded in Canada as home sales soar 30 per cent higher than the city's 10-year average, according to a pair of reports on Canadian housing outlooks.
The RBC Economics report, released Monday, shows that an average two-storey house in Vancouver is so unattainable, people who have managed a 25-per-cent down payment and the minimum amount of household income required by lenders to obtain a mortgage would then find themselves spending 90.6 per cent of their pretax household income on home ownership costs. This includes mortgage payments, taxes and utilities.
The report lists the average price of a standard two-storey home in Vancouver at $979,600 – more than double the Canadian average.
A detached bungalow, at an average price of $967,500, would gobble up 88.6 per cent of the average household income, the report found. The local condo market is relatively cooler.
Deteriorating affordability has not impeded home resale activity.
Measures are based on a 25-per-cent down payment, a 25-year mortgage loan at a five-year fixed rate and estimated on quarterly basis. Median household income is taken from Statistics Canada figures on average weekly earnings for provinces and urban areas and then extrapolated using in-house methodology. The report does not factor in various provincial property-tax credits.
Robert Hogue, senior economist at RBC Economics Research, said while there is nothing new about soaring home prices in Vancouver, the second quarter of 2015 saw prices increase at an accelerated pace.
"It's great for some people, but unfortunately one of the casualties is housing affordability – particularly in the single detached [home] segment of the market where price increases have been the fastest most recently," Mr. Hogue said.
"To own a single-family home in the area, you need to be, effectively, at the higher end of the income distribution. Even those in the middle cannot afford to buy at today's prices and interest rates."
In comparison, condo ownership is more attainable, costing a typical Vancouver household 40.1 per cent of its pretax income (up 0.5 percentage points from the start of the year), according to the report. Mr. Hogue attributes this to there being a stronger supply of condos, relative to single-family homes.
The report says the average price for a standard condo is listed as $421,200.
Given the tightness in the Vancouver market, Mr. Hogue said prices will likely continue to rise at a rapid clip. "Further deterioration [in affordability] should probably be expected in the next quarter or two."
In a separate report, also released Monday, TD Economics says home price growth in both Vancouver and Toronto "continues to forge ahead at an unsustainable pace and the risk of deeper correction rises with every month of double-digit home price growth."
Vancouver and Toronto home sales have increased 30- and 20-per-cent, respectively, above their 10-year averages in July, TD said.
Outside of Vancouver and Toronto, housing affordability remains fairly neutral, the report stated.
Andrea Woo