Housing affordability gains stall as prices steady and rates weigh
The share of income needed for ownership costs remains high in Vancouver and Toronto, well above the national average.
Housing affordability in Canada showed little progress in the second quarter, with the smallest improvement seen in almost a year.
Rising household income accounted for the entire improvement of affordability against a backdrop of steady interest rates and home prices, according to a report.
The stability in home prices was a departure from a trend of steady declines.
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"While the risk of higher rates through 2027 could weigh on home prices anew, rising mortgage rates would likely offset any pricing benefit," the report said.
This situation, in turn, could maintain pressure on the affordability front.
The share of household income needed to cover ownership costs in Vancouver and Toronto was 83.9 per cent and 64.1 per cent, respectively, still materially above the 52.8 per cent Canadian average.
That said, this is well off the highs experienced in 2023 when the national average was 63.6 per cent.
"In an environment of rising interest rates, we will likely need to see strength in housing starts and rising wages for conditions to shift meaningfully in favor of buyers," the report said.
Your Space Hamilton reported in September that RBC warned Canada's housing affordability gains were stalling, with its national measure improving by only 0.4 percentage points last quarter.
Canada’s economy saw no growth in July, pausing after averaging 0.5 per cent monthly gains between April and June.
However, Statistics Canada’s advance estimate indicated a 0.2 per cent rise in GDP for August, with the economy tracking a slower growth rate in the third quarter than the 3.3 per cent jump in the second quarter.
The early August data provided little indication of significant negative economic impact from the 50 per cent U.S. tariffs on a subset of Canadian exports that took effect Aug. 22.
Labour market indicators and consumer spending remained resilient, although future reports will be critical in assessing the U.S. tariffs’ full impact on vulnerable industries and regions.
The consensus forecast for economists is growth in the third quarter to be slower than in the second quarter as earlier support from recovering automotive production and trade fades.
New tariff-related uncertainty and financial tightening from rising bond yields represent meaningful downside risks, although government support may help soften the impact for businesses and workers.
With respect to the Bank of Canada, policymakers have to balance growth and inflation risks against resilient economic data.
Most economists have a base case that anticipates rates will be on hold through 2026 before gradual increases in 2027.
Mike Candeloro, senior portfolio manager and wealth advisor with RBC Dominion Securities and the head of The Mike Candeloro Wealth Management Group, supplied the housing and economic analysis.
With files from North Bay Nugget