Canadian housing became more affordable in the last quarter of 2010 with the help of lower mortgage rates and slight appreciation in home prices, according to a Royal Bank of Canada study. This is the second consecutive quarter where housing became easier to afford.
The information is tracked by RBC’s quarterly Housing Trends and Affordability index report. Affordability is measured by the percentage of pretax household income needed to maintain the costs of homeownership. The lower the measure, the less costly it is.
“We expect affordability measures will rise gradually in the next three years or so while monetary policy is readjusted, but will land softly thereafter once interest rates stabilize at higher levels,” said Robert Hogue, RBC senior economist. “This pattern would be consistent with moderate yet sustained stress on Canada’s housing market. Overall, the era of rapid home price appreciation of the past 10 years has likely run its course and we believe that Canada has entered a period of very modest increases.”
In the last quarter of 2010, to afford a detached bungalow the measure dropped by 0.8 per cent to 39.9 per cent. The affordability measure for a standard condominium fell 0.4 per cent to 27.6 per cent; and for a standard two-storey home, it decreased by 0.4 per cent to 46 per cent.