The latest housing market report from Royal Bank of Canada says there is a “low probability” for a major downturn in Canada’s housing market in the next 12 months but signals the country’s two biggest cities as areas of concern for overheating.
Though the report shows a somewhat healthy outlook for Canada, the affordability of housing nationwide showed that Canadians may be dealing with a “greater-than-average” market stress for home buyers.
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Single-detached homes in Canada’s largest markets are where affordability is the most strained, though the condo market is healthy with little stress in this regard.
Though the condo market showed normal rates in recent affordability, the record high numbers of condo units being built pushed the figures for housing under construction into the “high risk zone.”
However, most of these units are being built in Toronto (34 per cent) and Vancouver (17 per cent) and the construction of condos in these markets can be seen as a reaction to the low affordability in those cities. Because condos are generally the least expensive option of home ownership, more condos available may bring some relief to those markets right now.
READ MORE: Inflated housing market making investors edgy, RBC report warns
Those markets were the main area of concern in the report, both being flagged red on affordability.
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Toronto’s housing prices have continued to rise throughout 2016, especially for single detached homes, which remain in short supply. The report points that these accelerating housing costs have led to “rapidly eroding affordability” and flagged the city as “significantly outside historic norms”.
According to the RBC’s report, Vancouver’s housing market is in even more dire straits.
The report was blunt in calling Vancouver’s market as “extremely poor” and “rapidly deteriorating” with affordability as major vulnerability. The “mind-boggling” rates of home prices and the new 15-per-cent tax on homes purchased by foreign nationals added a layer of risk. The report called the tax “without precedents” and raises uncertainty for the housing market in the short term.
READ MORE: Is B.C.’s foreign buyers tax cooling Vancouver’s housing market? Too early to tell, say experts
Calgary was also flagged for some areas of concern.
The recession the province is still recovering from has led to surging unemployment in the city. Because of this, the number of unsold multi-unit dwellings and unoccupied rental vacancies are considered high risk and are “outside historic norms.”
The report went on to point out that home resales have recovered somewhat since hitting a multi-year low at the start of 2016
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