Vancouver and Toronto housing markets ‘increasingly, dangerously unaffordable,’ RBC says
Story by: Garry Marr | FinancialPost
The cost of carrying a detached home in Vancouver is now more than a typical household makes in Canada’s most expensive housing market, according to a new survey.
Royal Bank of Canada’s affordability calculator for the fourth quarter of 2015 found that households with median income must now pay 109 per cent of pre-tax earnings to buy just an average home in the metro Vancouver area — leaving nothing for food, clothing or other essentials.
Toronto appears to be headed in the same direction, the report says, and RBC now calls both cities “increasingly, dangerously unaffordable” and out of reach for an average household.
Is it time for the average family to abandon the dream of owning a single detached home? Robert Hogue, senior economist with RBC, said that dream ended long ago.
“The family at the middle of the income distribution needs more money than they actually make,” said Hogue. “It’s been unaffordable for some time. It’s just becoming more visible now because it’s (more than 100 per cent).”
Ideally, RBC says only 32 per cent of your pre-tax household income should go towards your home ownership cost — which include mortgage payments, utilities and property taxes — and is based on a 25-year amortization and 25 per cent down payment.