Canada's Condominium Magazine
In case you missed it from all the previous reports and studies, home ownership is “dangerously” unaffordable in Toronto and Vancouver for those who wish to buy a single detached home. In the rest of the country, according to RBC Chief Economist Craig Wright, there are “few signs” that housing affordability is problematic. In most markets affordability is either improving or stable. Even in Vancouver and Toronto, most of the problem—the “affordability-related stress”—is concentrated in that single-detached segment. Owning a condo, the RBC report points out, is still within reach for many households in those two markets.
The current market conditions in Toronto and Vancouver are not likely to improve anytime soon, continuing to deteriorate in the near term. This will be particularly true in Vancouver. Single-detached homes there have been out of reach of the average local homebuyer for a long time. Condos are the only realistic option for most first-time buyers.
The latest RBC Economics report on housing affordability, covering the fourth quarter of 2015, characterizes the Toronto market, where sellers “took command” in late 2014, as moving ever closer to “risky levels,” thanks to buyers’ “apparently insatiable” appetite and their willingness to pay ever-rising prices. Toronto home sales reached an all-time high in 2015, as did prices, “even condo prices,” which posted gains of 4.4 per cent year over year. Condo ownership has remained “comparatively stable” and more manageable for buyers. The RBC housing affordability index for Toronto rose to 60.6 per cent at the end of 2015, its highest level since 1990. The average index for Canada was 46.7 per cent.
There are few signs that housing affordability is problematic elsewhere in Canada. RBC’s measures generally remain close to historical averages, and recent trends either have been stable or improving slightly. The significant rise in homeownership costs in Vancouver and Toronto had a dominant influence on Canada-wide affordability measures in the fourth quarter of 2015.
Is there a greater role in this for governments? The latest changes to mortgage qualification requirements, which raised the minimum down payment from 5 per cent to 10 per cent on homes over $500,000, are widely seen as having minimal impact on markets. But an Angus Reid survey carried out earlier this month showed that Canadians are at least thinking in terms of some kind of government intervention. The poll found that a majority of Canadians (66 per cent) think that government should intervene to curb real estate prices. In Vancouver, 74 per cent expressed this opinion. The survey does not explore how this could be done.
Commenting on the just-tabled Ontario budget, UBC professor and younger Canadians advocate Paul Kershaw says that the budget fails to grapple sufficiently with the problem of housing affordability, particularly as it affects younger homebuyers, who are being “squeezed for cash and time.” The Ontario government, says Kershaw, “can and should do more to ease this squeeze” by finding more money to help people under the age of 45. It now takes a person in the age group 25–34 fifteen years to save a down payment on a home in Toronto, he claims, a big deterioration in the standard of living for young people today.
The home-building industry in Ontario has long been advocating for a political solution to the housing affordability problem. Bryan Tuckey, president and CEO of the Building Industry and Land Development Association (BILD), has said often that policies and programs that make housing more expensive for everyone should be avoided. In his view, this is mainly a land use issue: not enough developable, serviced land is made available by municipalities for building housing, he argues. Lack of new housing then drives prices higher.