During the third quarter, demand for homeownership remained high throughout the country.
As a result, soaring prices and higher mortgage rates slammed housing affordability during Q3-2021, pushing RBC’s aggregate measure — the ratio of ownership costs to household income — up 2.0 percentage points to 47.5% — its worst level in 31 years, according to RBC senior economist Robert Hogue.
Meanwhile, as demand-supply conditions tightened, bidding wars became the new norm, even in markets that rarely see them, and intensifying in places more accustomed to them, Hogue said.
Earlier on in the pandemic, homebuyers were benefiting from the declining interest rates that were offsetting the impact of rising property values.
And while the Bank of Canada has yet to raise interest rates, a slight rise in rates alone could drive up RBC’s national affordability measure another 2.0 to 3.5 percentage points over the coming year.
That being said, the bank says it expects buyers in Canada’s priciest markets, including in Vancouver, Toronto, Victoria and, to a lesser extent, Ottawa and Montreal, to be under the most pressure to reset their buying expectations.
“That would be the market’s self-correcting mechanism at work.
In fact, RBC’s aggregate measures remain well below their long-run averages — and are likely to stay so in the year ahead — in Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Saint John, and St.