Canada's housing affordability improves in 4th quarter- RBC

Mon Feb 25, 2013 12:00am EST
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* Vancouver least affordable, followed by Toronto

* Lower house prices, mortgage rates helping affordability

* Higher rates seen in 2014

By Andrea Hopkins

TORONTO, Feb 25 (Reuters) - Small declines in home prices and mortgage rates made Canadian home ownership slightly more affordable in the fourth quarter of 2012, the second straight improvement, and soft home buyer demand may help continue the trend in 2013, according to a report by RBC Economics released on Monday.

RBC, Canada's largest bank and a huge mortgage lender, measures affordability as the percentage of monthly pre-tax income for a household needed to cover the typical costs of owning a home, including mortgage payments, utilities and property taxes.

By that measure, the cost of owning a home edged down by 0.2 percentage point to 42.1 percent for a detached bungalow, by 0.3 percentage point to 47.8 percent for a two-story home, and by 0.2 percentage point to 28.0 percent for a condominium, the RBC Housing Affordability index showed.

"Exceptionally low interest rates have been the key factor keeping home affordability from reaching dangerous levels in recent years," RBC chief economist Craig Wright said in a statement.

"Residential property values are elevated in Canada and, for many households, ownership remains accessible only because of rock-bottom mortgage rates. It could be a different story if interest rates were to move swiftly and significantly higher."   Continued...