Fewer than one-quarter of Ontario households actually have the income required to own a single-family home and affordability levels are now at or near “worst-ever” levels, a new report from RBC suggests.
The report, authored by RBC Economist Robert Hogue, shows that fewer than 50 per cent of Ontario households have “sufficient income” to own a condominium in the province amid “sky-high” prices and borrowing costs.
But the report paints an even more stark picture when it comes to single-family homes.
It says that only about 22 per cent of Ontario households have the income required to own a single-family home, compared to 26 per cent of households nationally.
“There’s a very long way to go before affordability is meaningfully restored,” Hogue writes. “Buyers in many of Canada’s large markets will contend with extremely difficult conditions for some time. We expect home resale activity to stay especially quiet in Ontario and British Columbia until interest rates fall materially. And then, the recovery that will follow is likely to be gradual at first.”
The report notes that in Toronto about 84 per cent of the average household income would have went to home ownership costs in the third quarter, based on current real estate values.
That is less than in Vancouver where the number rises to 102.6 per cent.
Still, the report says that ownership costs in Toronto have reached “crushing levels” with an index RBC uses to track affordability levels surpassing the previous all-time low set at the end of 2022.
The good news is that Hogue believes “the latest bout of housing affordability deterioration has likely run its course” and the situation will improve in 2024 “as home prices drift lower or stabilize” and incomes rise.
But he says that housing affordability is unlikely to return to pre-pandemic levels anytime soon, even with the Bank of Canada likely to cut interest rates in the second half of 2024.
“The significant loss of affordability during the pandemic has shrunk the pool of homebuyers in Canada,” the report notes. “Close to 60 per cent of all households could afford to own at least a regular condo apartment in 2019 based on their income. That share has plummeted to 45 per cent in 2023.”
The average price of a home across all property types in the GTA peaked at $1,334,062 in February 2022, prior to the Bank of Canada’s first interest hike.
It eventually dropped to a low of $1,037,542 but prices have rebounded since then, with the latest data from the Toronto Regional Real Estate Board pegging the average cost of a home in the GTA at $1,125,928.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
