Homes in Canada became a bit more affordable in the third quarter of 2011, according to a new report by RBC. Most parts of Canada saw a decrease in housing costs, with Vancouver being the one exception.
The index RBC uses calculates the affordability of housing at a given time. The lower the index, the more affordable homes are expected to be. In the third quarter of 2011, the amount of pre-tax household income a family would need to pay for home ownership went down across much of Canada. In Vancouver, however, home prices continued to be extremely high in wealthier neighborhoods.
The increase in affordability can be attributed to many factors, including the economic crisis in Europe, which has kept interest rates low. Experts at RBC expect prices to level off sometime next year, and those few places where prices increased (Toronto, Montreal, and Ottawa) will also start to see some stability in their home affordability.
"Housing affordability levels are quite good in most parts of Canada and will pose little threat to overall housing demand," said Craig Wright, senior vice-president and chief economist.
The affordability index takes into account a number of factors beyond just the sticker price. It includes actual mortgage payments, utilities, and property taxes. It then formulates an affordability reading percentage, which indicates the amount of pre-tax monthly household it would take to cover those home ownership expenses. While Toronto and Montreal have an index of 52.1% and 40.9% respectively, Vancouver's index is 90.6%.
Image courtesy: Anna Kucsma