Vancouver Registers Worst Affordability Levels Ever Recorded In Canada

Despite the continued decline of Vancouver’s detached housing market, which witnessed sales sink to a 27 year low for the first quarter of 2018, housing affordability remains at crisis levels. Per the Royal Bank of Canada’s April report on housing trends and affordability, The re-acceleration of home prices since the middle of last year put housing affordability back at the top of the list of concerns in the Vancouver area. “Vancouver-area buyers experienced the most significant deterioration in RBC’s aggregate affordability measure in Canada in the fourth quarter, rising by 1.8 percentage points. In light of such challenging affordability trends, it wasn’t a surprise to see the BC government announce further housing policy initiatives to cool the market in its 2018 budget.” RBC summarized current conditions as “the worst affordability levels ever recorded anywhere in Canada. The costs of owning a home at today’s prices would have represented an astounding 85.2% of a typical household’s income in the fourth quarter.”

Vancouver detached homes reached 116.5 on the affordability index, registering a 2.1% quarter over quarter increase. This marked the worst affordability reading in Vancouver history, ticking in at 69% above the historical average dating back to 1985. Vancouver condo affordability hit 48.9 on the index, a 1.5% increase quarter over quarter, and 25% above the historical average. Affordability pressures could squeeze homebuyers even further. Market participants are now driving up the last bit of affordability, one bedroom condos. Per the Real Estate Board of Greater Vancouver, the median sales price of a one bedroom condo in the lower mainland reached a record high of $540,000 in March. A 27% increase year over year.

Based on the average household income of $79,000, the typical household in Greater Vancouver can no longer afford a one bedroom condo. Per CMHC’s recommended guidelines, “monthly housing costs should be no more than 32% of your average gross monthly income. Your monthly debt load should be no more than 40% of your average gross monthly income.”