Victoria is Canada’s third least affordable real estate market, despite slowdown

Dated: December 24 2018

Views: 25

Victoria is Canada’s third least affordable real estate market, despite slowdown

Interest rate hikes and mortgage stress test mean a Greater Victoria home is still far out of reach for many, says RBC

Greater Victoria is the country’s third least affordable real estate market, after Vancouver and Toronto, according to Royal Bank of Canada’s latest housing affordability study.

The capital region’s homes are close to record-level unaffordability when compared with local incomes, as prices have not fallen along with sales, and interest rates have risen, reported the bank.

article continues below 

RBC’s affordability index for Greater Victoria in 2018’s third quarter was 65.3 per cent, which is only 0.1 percentage points lower than the previous quarter, and still very close to that record high.

That index means that a person with an average local income would have to spend 65.3 per cent of that income on housing costs to buy an average priced home (aggregate of property types, assuming a 20 per cent down payment).

RBC affordability index December 2018 Victoria
Source: RBC Economics 

Single-detached homes were even higher than that, at more than 70 per cent, while even the average condo was unaffordable at around 40 per cent of local earnings.

In order to pass the mortgage stress test and service a mortgage on an aggregate-priced home in Greater Victoria at an affordable level, the annual household income required was $154,000 in the third quarter.

RBC said in its report, “RBC’s aggregate affordability measure stalled in the third quarter (down marginally by 0.1 percentage points) but the fact remains that ownership costs in Victoria are the third-highest in Canada. So local buyers continue to struggle to find something they can afford … Add in the mortgage stress and market-cooling measures introduced by the B.C. government and it’s not a surprise that home resales fell 20 per cent this year.”

The bank added that it expected affordability levels to stay approximately where they are over the next year, as any decline that may occur in prices would be largely cancelled out by further interest rate increases.

The report said, “We expect the Bank of Canada to hike the overnight rate two more times next year, which will sustain upward pressure on ownership costs. Still, we don’t think that affordability is set to erode significantly either. A generally soft environment for prices and rising household income will contain some of that pressure.”

Nationwide, the affordability index increased to its worst level in Canada since 1990, when interest rates were extremely high. A key reason for the near-record levels is that while Vancouver, Toronto and Victoria’s indexes have barely improved, affordability in other major cities – especially Montreal – is deteriorating.

RBC said of the national index, “It would have taken 53.9 per cent of a typical household’s income to carry the ownership costs of average home bought last quarter. This is up 1.5 percentage points from a year ago.”

RBC’s affordability index compares local average incomes with local average home prices, but it does not take into account any private wealth, non-local incomes, home equity built up among those who own a home, or generational wealth transfer to young buyers.

Blog author image

Steven Axford

Steve is a award winning Realtor in Victoria BC, with his listings selling faster and for top dollar! Growing up in Victoria, BC and has always been active in his community. Steve is a Victoria Couga....

Latest Blog Posts

A greater commitment to development required to balance local housing market

October 1, 2021  A total of 761 properties sold in the Victoria Real Estate Board region this September, 23.1 per cent fewer than the 989 properties sold in September 2020 and 8.4 per cent

Read More

CMHC says annual pace of housing starts in Canada slowed in July

OTTAWA — Canada Mortgage and Housing Corp. says the annual pace of housing starts in July fell compared with June.The national housing agency says the annual pace of starts fell to 272

Read More

Victoria housing inventory continues to decline over summer months

August 3, 2021  A total of 835 properties sold in the Victoria Real Estate Board region this July, 14.7 per cent fewer than the 979 properties sold in July 2020 and 11.4 per cent fewer than the

Read More

Victoria's $100 million Customs House luxury condominium project nears completion

Three years after touring Victoria’s Customs House mixed-use condominium and retail offering during its interior de-construction, Citified is honoured to be the first media

Read More