It’s becoming increasingly difficult for families to own a home in Canada and affordability is expected to get worse going forward, according to the Royal Bank of Canada.
RBC chief economist Craig Wright says keeping up with the cost of home ownership in the future is likely going to be an even bigger stretch for households. “The eventual normalization of monetary policy (interest rates) will lead to substantial increases in interest rates over the medium term, which could be too much for other affordability determinants to counteract,” the report said.
The affordability index measures the percentage of pre-tax household income that is needed to service the cost of owning a home at current market prices, including payments for a mortgage, utilities and property taxes. A reading of 50 per cent means service costs swallow up half of a household’s pre-tax income. Nationally, the index rose by 0.1 points to 43.2 per cent for detached bungalows and 0.3 points to 49.0 per cent for two-storey homes, while the measure for condos dipped 0.1 points to 27.9 per cent. But that was an average calculation.
Vancouver’s affordability index rose 0.9 points to 82.4 per cent; Toronto’s by 0.2 points to 56.1 and Calgary’s by 0.9 points to 34.5.
Original article: www.vancouversun.com/business