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Housing affordability has improved for the second straight-quarter in Canada in the first quarter of 2019, according to the latest RBC Economics Housing Trends and Affordability Report. Modest price drops in both Atlantic and Western Canada and rising household income contributed to improved affordability.

At its core, much of the improved affordability can be traced to "policy-engineered market downturns" that have helped lower property values in a number of Canadian markets. Though neither Toronto or Vancouver are near the levels that ordinary Canadian households can afford, policy makers should be encouraged at the overall progress toward repairing home affordability across the country, according to Robert Hogue, Senior Economist, RBC.

"There's a high proportion of ownership-capable families in Canada's most affordable markets—Saint John, St. John's, Regina, Quebec City and Halifax," said Hogue.

"However, only one in eight families earns the income necessary to manage ownership costs in the Vancouver area, and one in five families in both the Toronto area and Victoria."

Buying a more affordable condo apartment opens the field to more families. Yet still just one-quarter of them would be able to cover the condo ownership costs in Vancouver, and only one-third of them in Toronto. In most other markets, buying a condo apartment is within the reach of close to two-thirds of families.

RBC's national aggregate affordability measure declined by 0.3 percentage points to 51.4 per cent in the first quarter of 2019. The measure is calculated as a share of household income. A lower number means that buying a home is more affordable.

With interest rates no longer poised to increase and a still-positive outlook for household income, RBC expects a further slight improvement to Canada's overall housing affordability picture in the near term. However, any improvement is likely to be incremental – especially as Toronto's housing market continues to rebound.

Toronto home ownership remains elusive for most buyers

Despite a small break in affordability in the past year, the bar to home ownership remains as high as ever in Toronto. RBC's aggregate measure for the area was 66 per cent in the first quarter—still near historically high levels. With prices heading in a modest upward trajectory, RBC sees little prospects for meaningful improvement in the near term.

Montreal housing isn't cheap but activity remains on an upswing

Home resales in Montreal were up 7 per cent from a year ago in the first five months of 2019. While the city remains much more affordable than both Toronto and Vancouver, home ownership isn't cheap. RBC's aggregate affordability measure, at 44.3 per cent in the first quarter (unchanged from the fourth quarter), is near a decade-high point and markedly above the long-run average of 38.6 per cent

Vancouver affordability improves but still at crisis levels

After a rough couple of years, Vancouver resale activity finally ended its steep slide this past spring. Unfortunately for prospective buyers, housing affordability remains at crisis levels for the area. This will continue to weigh heavily on homebuyer demand for the foreseeable future. RBC's aggregate measure eased for a third-straight time in the first quarter, down 1.9 percentage points to 82.0 per cent.

Source: RBC