Toronto's housing affordability deteriorated to worst ever level in Q1
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This is according to the latest Housing Trends and Affordability Report by RBC Economics Research.
The affordability measure stood at 45.9 per cent in Canada - the second-highest level since 1990.
Housing affordability is calculated as a share of household income.
A higher number means housing is less affordable.
Housing affordability hit record levels in Toronto reaching 72.0 per cent (up from 69.3 per cent in the fourth quarter) surpassing the previous high of 70.6 per cent in 1990.
Several other markets in Southern Ontario also saw rapidly rising homeownership costs related to Toronto's overheating.
An influx of buyers coming from the Toronto area in markets such as Hamilton, St. Catharines and Kitchener-Waterloo drove up prices considerably.
In Vancouver, affordability improved for the second-straight quarter (to 79.7 per cent, from 80.9 percent in the fourth quarter). While still the least affordable market in Canada, the series of policy measures introduced last year to cool the market have had a positive effect.
In most Canadian markets outside of Ontario and British Columbia, affordability levels remained relatively stable in the first quarter, with slight improvement in many Prairie markets and marginal deterioration in most of Quebec and the Atlantic region.
While interest rates have played a secondary role in shaping affordability trends recently, indications are that the Bank of Canada may increase the overnight rate sooner than financial markets expect.
As a result, monetary policy could pose a growing risk for Canada's housing market. ■