Key role low mortgage rates play to change soon
Ashley Ford
Province
Believe it or not, housing in B.C. is getting more affordable, if not less expensive.
The bad news is that with interest-rate increases looming on the near horizon the pendulum could start swinging the other way.
In its latest housing-affordability report, RBC Economics yesterday said, despite ever-increasing prices, the second quarter of the year improved marginally in the favour of B.C. buyers.
“Going forward, B.C.’s affordability is unlikely to get much better in the near-term, as housing prices continue to climb and mortgage rates drift higher,” said RBC economist Allan Seychuk. “Steady migration to B.C. continues to put pressure on the province’s housing markets and affordability is poised to worsen in the coming quarters.”
The index measures the proportion of pre-tax household income needed to service the costs of ownership. Vancouver‘s housing market remains very strong and, despite the fact the province is likely the only one in Canada that will see any increase in house construction this year, supply will remain tight.
Low mortgage rates continue to play the key role in affordability but that will quickly change if rates rise by more than one per cent.
RBC said affordability for a detached bungalow stood at 55.3 per cent, a standard two-storey home 61.5 per cent and a standard townhouse was at 41.9 per cent.
Underlining why the condo market is so strong here is the fact a standard condo required 28.7 per cent of household income, not significantly more than Montreal at 28.1 per cent and Toronto at 27.3 per cent.
The index has been compiled since 1985 and based on the costs of owning a detached bungalow, a reasonable property benchmark for the housing market. Other housing types included are a standard two-storey home, a standard townhouse and a standard condo (excluding maintenance fees).
The higher the index, the more costly it is to afford a home.
For example, an affordability index of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.
© The Vancouver Province 2005