Home ownership in Canada is at its most unaffordable level since the “housing recession” of 1990. That’s the grim news today from RBC Economics and its latest quarterly housing affordability report. Outside of Alberta, housing affordability has deteriorated in every market and for every type of housing.
Most low, moderate and many middle-income Canadians live in the one-third of homes that are in the rental markets. Rental markets have been increasingly troubled in recent years as average market rents charged by landlords have outpaced the affordable rents that renter households can afford based on stagnant or declining tenant household incomes.
However, the ownership market in recent years offered some hope to some, with relatively low mortgage rates and a relatively strong supply of new homes. But all of that is being swept away by growing unaffordability starting in 2007. Rapidly rising house prices in most parts of the country have outpaced the real incomes of owner households – creating the affordability squeeze.
In the words of RBC Economics: “Nationwide housing affordability deteriorated in every consecutive quarter throughout 2007 to end up at its most unaffordable level since the housing bubble peaked in 1990. Back then, soaring interest rates and a recession sparked much of the trouble. Today, however, a long upward trend in house prices driven by sounder macroeconomic fundamentals like job growth is primarily responsible. Adding more fuel to this housing cycle is mortgage product innovation that has expanded the market to more potential buyers since mortgage insurance liberalization began two years ago. Only Alberta bucked the trend in the latest quarter. Outside of Alberta, affordability deteriorated in every single market and for each type of housing.”