Home ownership became more affordable for the average Canadian in the last quarter of 2010, with the most significant improvement in Alberta, says the Royal Bank. The bank's housing affordability measure shows costs associated with owning a home in comparison to income slightly declined in the last three months of last year.
That's mostly because mortgage costs were slightly lower and house prices rose only minimally, while in some markets prices even dropped.
RBC said affordability improved the most for detached bungalows, falling 0.8 percentage points to 39.9 per cent of pre-tax household income.
The respite is likely to be short-lived, however, the Royal Bank says in its latest housing report.
It notes that recently financially institutions raised posted mortgage rates by a quarter-point to 5.44 per cent, in the case of a five-year fixed term, and that the Bank of Canada is expected to start hiking short-term rates later this spring.
But the bank stresses that while it will become harder to buy a home as rates rise, the impact on affordability will only increase moderately.
First, interest rates are expected to appreciate slowly, and their impact is being offset by rising incomes and job creation growth.
In the last three months of 2010, affordability improved the most in Alberta, due to falling home prices.
The bank said home prices inched higher in most of the country in the last quarter, with the exception of Alberta and condominium segments in British Columbia and Saskatchewan.
The Toronto market sustained a rebound in the latter part of last year, with affordability improving except for the two-storey home category.
