Real Estate Hasn’t Been this Unaffordable Since 1990 per RBC
Nothing says Merry Christmas like a 27 year low for Canadian housing affordability. That’s right, real estate across Canada has not been this un affordable since the year 1990 per RBC. Spoiler alert house prices tumbled shortly thereafter.
RBC Bank released their updated Q3 numbers for housing affordability. To no surprise, Vancouver leads the nation in the most unaffordable market to buy a home. Followed by Toronto and then Victoria.
“The deterioration in the latest two quarters, in fact, put Vancouver buyers in the worst affordability position ever recorded in Canada.”
Vancouver Un affordability Sets New High In Canada
“The area experienced the sharpest affordability drop among Canada’s major markets between the second and third quarters. RBC’s aggregate measure surged by 5.3 percentage points to 87.5%. This represents a new record high for any market in Canada. We see further downside to Vancouver’s home ownership rate in the period ahead. The rate fell from 65.5% in 2011 to 63.7% in 2016.”
High Un affordability Tends to Lead to Recessions
What RBC didn’t mention in their report is the correlation between elevated house prices that cause affordability issues and recessions. When too much household money is spent servicing mortgage payments it eventually becomes a drag on consumer spending and ultimately triggers a recession.
This is not to suggest a recession is imminent. But when the percent of income the median family would have to use to service debt pushes above 50% in Toronto and Vancouver, a recession typically follows in Canada. Currently Toronto is at 71.7%, and Vancouver is at 79.87%.
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