Affordability of property in Canada rises

The cost of owning a property in
Canada became more affordable in the most recent quarter making homes in the
country more appealing to overseas buyers. The Royal Bank reports that a slight
decline in house prices and a rise in Canadian household incomes reduced the
cost of owning a property.

With Canada’s bank chief set to
take over as the Governor of the Bank of England in 2013, we look at the stable
and affordable property market in Canada.

Edmonton the most affordable
place to buy property in Canada

The Royal
Bank of Canada’s affordability index for a detached bungalow stood at 42 per
cent of income nationally in the second quarter. This means that an owner would
need to spend 42 per cent of pre-tax annual income to pay for mortgage
payments, utilities and property taxes. This represents a 1 per cent fall from
the third quarter of 2011.

CBC News
reports that the index fell even more for two-storey homes, by 1.2 percentage
points to 47.8 per cent and eased 0.6 percentage points to 28 per cent for
condos.

The bank
attributes the increase in affordability to low interest rates, although it
reports that the amount of income that households need to service home
ownership costs continues to be higher than the long-term average.

“The broad
affordability picture has been somewhat stationary over the last two years,
alternating between periods of improvement and deterioration, resulting in an
affordability trend that is, on net, essentially flat,” said RBC chief economist Craig Wright.

“The
cost of owning a home took a smaller bite out of household pocketbooks in the
third quarter as home prices fell — most notably in the Vancouver area, though
it remains the least affordable market in Canada by a wide margin,”
explained Wright.

If you’re
looking to buy a property in Canada, Edmonton is the most affordable city
according to the RBC data. The index in Vancouver stood at 83.2 per cent of
income, followed by Toronto at 52.4 per cent, Montreal 40.2 per cent, Ottawa at
38.7 per cent, Calgary at 38.3 per cent and Edmonton at 31.1 per cent.