Affordable Housing in Canada: RBC Report Shows Marginal Improvement in Q2

Discover the latest insights on affordable housing in Canada in a new report by RBC. Despite a slight improvement in Q2, housing affordability remains high for many, with costs making up 59.5% of median household income.

Home ownership in Canada has become marginally more affordable in the second quarter of this year, according to a new report by RBC. However, the report suggests that housing affordability remains "impossibly high for many" despite a "solid gain" in incomes. RBC's aggregate affordability measure, which determines the proportion of median household income required to cover home ownership costs, decreased by 0.3 percentage points. This means that on average, home ownership costs make up 59.5 percent of median household income.

Affordable Housing in Canada: RBC Report Shows Marginal Improvement in Q2 | ogusyis

The alarming state of housing affordability has triggered a noticeable cooling in home resales during the summer months in Ontario and British Columbia. RBC economist Robert Hogue warns that this cooling trend could persist for several months, as many potential buyers are now priced out of the red-hot housing markets in Vancouver and Toronto. In order to alleviate this affordability crisis, a significant increase in housing supply is necessary. However, constructing new homes, particularly large condo apartment complexes, is a time-consuming process that can take several years. Furthermore, the rising construction costs and limited construction capacity make it increasingly challenging to build units that ordinary Canadians can afford to purchase.

Nevertheless, the RBC report views the Canadian government's recent decision to remove the Goods and Services Tax (GST) on the construction of new rental apartment buildings as a "step in the right direction." This move could potentially stimulate rental housing supply and provide a partial solution to the affordability issue.

In terms of monetary policy, the Bank of Canada has chosen to maintain its key interest rate at five percent for now. However, analysts predict that an increase may be implemented in October due to the recent upsurge in the annual inflation rate.

In conclusion, while there has been a slight improvement in housing affordability in Canada, it remains a significant challenge for many prospective homeowners. The high costs and limited availability of affordable housing units continue to hinder buyers, leading to a cooling of the real estate market. Addressing this issue will require substantial increases in housing supply, along with supportive government policies and measures to control construction costs.