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Briefing highlights

  • How RBC sees your housing market
  • Toronto: ‘A battleground for desperate buyers’
  • Survey shows economic optimism
  • Economy expands 0.2 per cent in April
  • Markets at a glance

This is going to look something like review quotes on a movie poster or the back of a book jacket, but Royal Bank of Canada's housing affordability study is so troubling in some cases that bits of it deserve to be repeated verbatim.

The most worrisome parts, of course, have to do with Toronto, where affordability in the first quarter was the worst since at least the mid-1980s, and other parts of southern Ontario.

Of course, Ontario's new measures, aimed at taming those markets, could help out on that front, said RBC chief economist Craig Wright and senior economist Robert Hogue.

Many other regions of the country don't face such issues, they said in their quarterly report.

But lest the West wag their fingers at the East, read on, Victoria and Vancouver.

The national picture shows a typical family "would have spent a troubling 45.9 per cent of its income to cover the ownership costs for an average home bought in the first quarter of 2017," said Mr. Wright and Mr. Hogue.

"Only once since 1990 have households had to spend this much on ownership costs," the RBC economists added.

Here's what Mr. Wright and Mr. Hogue had to say about your neighbourhood. (Of course, in Toronto, you can't afford your neighbourhood.)

Toronto

"It became a battleground for desperate buyers willing to do whatever it took – and pay whatever price – to purchase one of the very few properties put up for sale by high-expecting sellers."

"These highly combustible conditions propelled Toronto's sky-high prices right into the stratosphere. Runaway prices, in turn, pummelled housing affordability to a never-before-seen level in the area."

"Clearly, the Toronto-area market became alarmingly vulnerable to an unexpected shock last quarter."

"While [the Ontario Fair Housing Plan's] impact on affordability in the GTA may take up to two or three quarters to be felt, our view is that it will bring some sanity back to the market – at least for a period of time. We would be extremely concerned if it didn't."

Southern Ontario

"Toronto was not alone in undermining the national picture. Several other markets in southern Ontario also contributed with a wave of buyers coming from the core (Toronto) in search of housing that is more affordable."

"This influx of buyers drove prices up considerably in markets such as Hamilton, St. Catharines and Kitchener-Waterloo."

Victoria

"After Toronto, it was Victoria that saw the most significant erosion of housing affordability among major Canadian markets in the past year."

"New listings plummeted by close to 20 per cent in the first quarter keeping demand-supply conditions heavily in favour of sellers."

"There are signs that Victoria's market will become balanced in the months ahead. More sellers listed their properties this spring, which should provide increased options for buyers and moderate price increases."

Vancouver

"This moderate price correction was the main factor behind the affordability relief that we saw in the past two quarters."

"Unfortunately, the scope for further relief is limited. Vancouver's market heated up again this spring and sellers have regained some pricing power. Vancouver prices, in fact, were back at record-high levels in most market segments in May."

Calgary

"Calgary's market is in the early stages of recovering from its slump and this has translated into a modest firming of prices in the area. So the increase in homeownership costs is a sign of a healthier market. But there was another not-so-good factor that also contributed – a decline in household income."

"We expect household income to strengthen in Calgary once the provincial economy is on a stronger footing."

Edmonton

"Facing little affordability constraints, buyers became more active in the first quarter."

"We don't expect the strong rate of increase in resales in the first quarter to be sustained. Edmonton's stubbornly high unemployment rate is likely to impede the full restoration of confidence."

Saskatoon

"Buyers are in command of Saskatoon's housing market. The main issue is that there have been fewer and fewer of them since 2014."

"Their decline is not due to poor affordability. Housing affordability in fact has improved steadily and compares well relative to historical norms. The reason is a lacklustre economy."

Regina

"Market conditions are soft but there's scope for a firming."

"Affordability is on a slightly improving trajectory in Regina. … An easing in Regina's unemployment rate this spring bodes well for a rebound in resales."

Winnipeg

"The latest reading of the [affordability] measure was effectively at par with the long-run average – corresponding to a neutral stance."

Ottawa

"Sanity prevails."

"The Ottawa-area market so far has escaped the craze sweeping the GTA and other southern Ontario markets."

"Housing affordability has remained under control – despite deteriorating modestly in the past year."

Montreal

"A stronger economy benefits the housing market."

"A minor flip side of firmer property appreciation, however, has been that households in the region have needed to allocate a little more of their income to cover ownership costs."

Quebec City

"A modest softening in prices contributed to lower ownership costs, as the Quebec City market remained abundantly supplied."

"Still, developments in the first quarter reversed only a part of the affordability deterioration that has taken place over the past several years."

Saint John

"The upswing in Saint John's housing market that began in 2015 was in full force in the first quarter of this year."

"RBC's aggregate measure for the area rose for a seventh consecutive time by 0.3 percentage points in the first quarter. However, it remains much more affordable to own a home in Saint John than in any major city in Canada."

Halifax

"Despite a lower inventory of homes for sale, prices eased in the first quarter. This was the main factor contributing to a slight improvement in affordability."

"Affordability still compares favourably to historical norms."

St. John's

"Ownership costs are coming down but Newfoundlanders have bigger fish to fry."

"Prices face substantial downward pressure and we see little in our (grim) economic outlook for the province that could change that in the near term."

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Readings support rate speculation

Two fresh readings are lending weight to speculation that the Bank of Canada will raise its benchmark interest rate next month.

As The Globe and Mail's Barrie McKenna reports, the central bank's business outlook survey, released today, was upbeat on all fronts, from sales, investment plans and hiring intentions.

"The Bank of Canada's poised to hike rates in the coming months, and its outlook survey gives reason for optimism on the economy," said Nick Exarhos of CIBC World markets.

"Order books look to be in good shape, with half of the firms polled expecting an improvement in the coming year versus the past 12 months," he added.

"The net opinion (greater minus lesser) now stands at 31 per cent on that score, the highest since before the oil shock, with the reading on the indicators of future sales also edging towards levels that prevailed coming out of the Great Recession."

Earlier in the morning, Statistics Canada reported that the economy expanded by 0.2 per cent in April, slower than the 0.5 per cent of March but enough to give the second quarter a push.

"It's happy birthday news for the Canadian economy, as April's GDP sees the second quarter in a partying mood," said CIBC chief economist Avery Shenfeld.

"The 0.2-per-cent rise in GDP doesn't look that hot on the surface, but it's impressive given that it followed a hefty 0.5 per cent March bump, and included a drag from a disruption in the oil sector."

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Markets at a glance

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