Housing Trends and Affordability - December 2021Highlights
Soaring prices, higher mortgage rates walloped affordability in the third quarter: RBC’s aggregate measure for Canada jumped 2.0 percentage points to 47.5%—the worst level in 31 years. It came on the heels of a huge 2.7 percentage increase in the second quarter that completely reversed improvements at the start of the pandemic.
Only St. John’s bucked the deteriorating trend: The weight of ownership costs got heavier in all other markets we track for both single-family homes and condo apartments.
Affordability remains well within historical norms in the Prairies and parts of Atlantic Canada despite recent erosion: The situation has become more severe in Ontario, BC and, to a lesser extent, parts of Quebec.
We expect ownership costs to continue to rise quickly in the period ahead: Home prices re-accelerated amid strong demand and scarce inventories this fall. And borrowing costs are poised to get more expensive. Fixed mortgage rates have gone up since summer and we expect the Bank of Canada to start hiking its overnight rate next spring, which would drive variable rates higher. The knock on affordability will be felt across the country.
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