Housing affordability to worsen Policy makers likely give themselves high marks for guid- ing Canada’s housing market to a soft landing in 2018, yet there has been no improvement in affordability. The bar to home ownership is higher than ever in Vancouver and Toronto, where a typical household would need to spend a record 88% and 76% of its income, respectively, to pay the mortgage, property taxes and utilities for a home pur- chased today. The bar will get even higher in 2019, as the Bank of Canada continues to hike rates. Add in tougher mortgage stress-test rules and some first-time buyers will be looking at a very high hurdle. Home ownership costs relative to incomes will rise Home ownership cost at market value as a % of median household income 100 2018 Q2 2019 Q4 90 88.488.4 79 7 .3 5. 80 9 70 60 53. 56 9 50 43. 46.8 46 9 44. 39 1 . 40 38.6 7 29 30 28.4 .4 20 10 0 Canada V ancou er Calgary Edmonton T or onto Ottaw a Montr eal aedonC orecated€nteretrateand‚oue‚old€ncomeƒ„ee…€ng‚ome…r€ceunc‚anged. †ource‡ˆ†ƒ†tat€t€cCanadaƒan„oCanadaƒCEconom€ceearc‚ * Based on RBC’s forecasted interest rates and household income, keeping home prices unchanged. Source: RPS, Statistics Canada, Bank of Canada, RBC Economics Research RBC Economics Research | Navigating 2019 - 9 big insights for the year ahead | January 2019 6
navigating 2019 Page 6 Page 8