We’re number 1! (in lack of affordability)
RBC just release a report on housing affordability in canada. There’s a story in the Globe and Mail:
“In the third quarter, “Alberta and British Columbia had the sharpest erosions in affordability, driven largely by double-digit annual price gains,†the Royal Bank division said Tuesday. “However, Alberta’s soaring price gains still leave the province below past affordability stress points.â€
Housing in Calgary and Edmonton remains more affordable than in Toronto, Montreal and Vancouver, relative to incomes.
“Vancouver, however, is entering uncharted waters as it sets new records for poor housing affordability in two out of four classes, and the other two will likely do so later this year,†the report says.”
See? Vancouver is number one in lack of housing affordability with a record-setting level of unaffordability. I’m sure that comes as a big suprise to everyone here.
“The RBC Affordability Index measures the proportion of pre-tax household income needed to service the costs of owning a home.
The higher the index, the more costly it is to afford a home. For example, an Affordability Index of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.
The most affordable housing class remains the standard condo, with an index of 27.5 per cent.
A standard townhouse is next at 31.4 per cent, followed by a detached bungalow at 39.4 per cent. A standard two-storey home is still the least affordable housing type in the country with an index reading of 44.8 per cent.”
So those numbers are for all of canada, what do the numbers look like for affordability in just the west, specifically in Vancouver? Ah, here we are:
“RBC Affordability Index for a detached bungalow for Canada’s largest cities is as follows: Vancouver 68.2 per cent, Toronto 43.9 per cent, Montreal 36 per cent, Calgary 34.6 per cent and Ottawa 30.3 per cent.”
68.2 percent of the average pre-tax income.. I wonder why they use pre-tax income? It’s not like you can write off your mortgage here like you can in the states.
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September 19th, 2006 at 10:23 am
September 19th, 2006 at 10:49 am
The real question is if affordability is THAT far away from the average income, whats that going to do to future demand?
September 19th, 2006 at 1:20 pm
It’s expensive here because its desireable and there are some hardworking people that are willing to pay the cost of living here.
Oh sure. Just keep on repeating it to yourself and it will come true, eventually.
Lately I’ve been seeing grow equipment for sale ads on Craigslist… unbelievable.
September 19th, 2006 at 6:33 pm
When you graduate from high school you’ll be able to put your amazing theory to work.
Is this guy for real?
September 19th, 2006 at 9:14 pm
September 19th, 2006 at 9:15 pm
September 20th, 2006 at 6:40 am
“RBC Affordability Index for a detached bungalow for Canada’s largest cities is as follows: Vancouver 68.2 per cent, Toronto 43.9 per cent, Montreal 36 per cent, Calgary 34.6 per cent and Ottawa 30.3 per cent.”
These numbers are quite an eye-opener… Thats 68.2 percent of your PRETAX income…that would amount to what?… 95% after tax?
And that is IF the buyers actually paid 25% down… which nobody does nowadays. More like 5% or perhaps just use the credit card. What is the index then???
September 20th, 2006 at 8:22 am
September 20th, 2006 at 8:58 am
September 20th, 2006 at 3:11 pm
True, but the 68% pretax figure is compared against current housing prices, and most homeowners did not pay current prices for housing.
Perhaps the stats affirm that most owners couldn’t afford to buy their own house at today’s prices. If so, then current prices are clearly unsustainable and the much-predicted ’soft landing’ (continued single-digit appreciation) is clearly not going to take place.
September 20th, 2006 at 3:35 pm
September 20th, 2006 at 3:50 pm
We have the record high debt load ratios, lowest historical affordability, 0% down mortgages are now possible (with your downpayment coming out of your cerdit cards or line of credit) and at the same time the guys from RBC say that they approvrd more mortgage applications this year then the year before…
HOW THE HELL IS THIS POSSIBLE???
Dope growers, drug dealers, foreign inverstors and all other money-laundering “enterpreneurs” are buying real estate for cash. So who is getting these mortgages??? The present owners with lots of equity in their present properties upgrading to the next level? But who is buying the houses they’re selling?
Dope growers?
I guess so.
September 20th, 2006 at 7:15 pm
1. Suites
2. Median income of recent SFH owner is probably much higher than median income overall. I highly doubt that the median income would buy the median SFH. Thus we are looking at apples and oranges. SFH in Vancouver are, will remain, and should be unaffordable to the median income. That is what the burbs are for, and I don’t mean that in a disrespectful way. Still a ridiculously high number though.
September 21st, 2006 at 1:39 pm
The phenomenon in 1 (suites) skews the affordability even worse, because you are getting less for the money. Instead of a SFH with a basement rec room, laundry room and storage, you are getting less sf to live in. You are buying 2 suites and living in one.
September 21st, 2006 at 2:14 pm
Others in the top ten include the seattlebubble blog, the socalbubble blog, the sonomahousingbubble blog, and the housingpanic blog.
September 21st, 2006 at 5:25 pm
September 22nd, 2006 at 8:55 am
http://tinyurl.com/m88nq
“Real estate price swings used to be local phenomena, he added, restricted to cities or regions. Now, such movements can affect entire countries and, in the case of the U.S., where the value of residential real estate held by households and non-profit organizations was an estimated $21.6-trillion at the end of 2005, influence the economies of other nations. While he mentioned no other countries by name, Canada is the largest U.S. trading partner.“
“Lower confidence translates into lower demand for home furnishings, construction materials and, in the worst case, interest rate cuts meant to stimulate demand but which have little effect as consumers sit on their wallets, he added.
That’s [U.S. States Federal Reserve Board chairman] Ben Bernanke’s worst fear — that you cut interest rates to zero and hit a liquidity trap,” Mr. Shiller said, adding that is a possibility, not a prediction.”
anonX
February 23rd, 2008 at 10:29 pm