Canadian housing affordability has reached its worst level in 28 years with the most severe challenges in Toronto, Vancouver and Victoria, says a report from RBC.
“Unaffordability is off the charts,” in the country’s most expensive markets and the situation is expected to further deteriorate as interest and mortgage rates rise, says the bank.
In Toronto, the average household would need to spend 75.9 per cent of its income to cover the cost of owning a home, says RBC. That compares to a Canadian average of 53.9 per cent, up from 43.2 per cent three years ago.
Condo affordability in Toronto, considered the city’s most viable entry-level home option, has eroded even more than detached houses in Canada, according to the report.
The worsening picture comes as higher interest rates have raised mortgage carrying costs.
The report comes as the Union Bank of Switzerland has identified Toronto and Vancouver among a list of cities, including Hong Kong, London, Munich and Amsterdam, that are vulnerable to a housing bubble.
Despite the high cost of housing, 68 per cent of Torontonians own, not rent, the third highest rate in the world after Oslo, Norway and Calgary, according to Canadian Centre for Economic Analysis.
But the affordability challenge is so severe, the region is going to be forced to get creative so people can live here, said Cherise Burda, executive director of the Ryerson City Building Institute.