Home price increases in Ontario were key to a slight decrease in housing affordability across Canada, said a report from RBC.
The bank said although owning a home at current market value in Canada was less affordable for the second straight quarter as of the end of 2014, affordability trends have stayed relatively flat since 2010.
“Calgary became a buyers’ market in the fourth quarter following a prolonged period of nearly three years when sellers had the upper hand,” said Craig Wright senior vice-president and chief economist for RBC. “While we’ve seen some improvements over the past couple of years, Vancouver still takes the top spot for the least affordable market in Canada.”
In mid January, the Bank of Canada cut its overnight rate to 0.75% – a decrease from the 1% that had held since September 2010. RBC said these reductions are likely to help improve housing affordability in the near term.
“With limited upward pressure on prices in most local markets, lower interest rates should have a positive affect on affordability,” said Wright. “By 2016 however, we expect the Bank of Canada will reverse course and begin to normalize monetary policy – any rise in interest rates would threaten to erode affordability conditions and weigh on home buyer demand in Canada.”
Read the full report here.