Vancouver’s ‘extreme levels’ of unaffordable housing a drag on B.C.: RBC

Housing affordability in B.C. improved slightly in 2014’s fourth quarter but prices in Vancouver continue to drag down the province’s overall affordability, according to RBC’s quarterly housing trends report.

RBC’s affordability measure — which shows the proportion of median pre-tax household income required to cover a mortgage payment — dropped between 0.1 and 0.7 percentage points in B.C. between the third and fourth quarters.

“Nonetheless, affordability remained poor in the province due to the persistence of extreme levels of ‘unaffordability’ in segments of the Vancouver market,” RBC chief economist Craig Wright wrote in the March 3 housing report.

The RBC affordability measure determined it would cost the average detached bungalow owner in B.C. 68% of his or her household income to cover mortgage payments in Q4 compared with 68.7% in Q3.

The affordability of a standard two-storey home in B.C. improved by 0.3 percentage points to 72.5% and condo affordability improved 0.1 percentage point to 33.1%.

Across Canada, the affordability measure was 42.7% for a bungalow, 48.1% for a two-storey home and 27.4% for a condo.

The report noted affordability remained uneven throughout different markets in B.C., as Victoria, Kootenay and the Okanagan posted declines at the same time Vancouver and the Fraser Valley recorded gains.

“Despite extremely stretched affordability conditions facing homebuyers, (Vancouver’s) housing market found renewed vigour in 2014 with resales reaching close to a three-year high by the fourth quarter,” the report said.

“Unsurprisingly, this situation heated home prices in the area to the point that Vancouver reclaimed a spot among Canada’s markets exhibiting the fastest-rising price increases (alongside Toronto and, until very recently, Calgary and Edmonton).”