The cost of home ownership is rising across Canada, and British Columbia is leading the way.
B.C. and Vancouver posted the biggest increases in housing costs in Canada, according an RBC report released Wednesday.
RBC measured the proportion of household income, before taxes, required to cover the costs of owning a home. It found that affordability dropped across each of five categories of housing.
According to the report, B.C. home ownership costs rose between 1.7 and 4.3 percentage points during the third quarter of 2009.
Costs still remain below long-term averages, however, after falling for five consecutive quarters.
Rising mortgage rates and higher property values were behind the trend, RBC said. Demand for housing has also outstripped supply, making the market more competitive and pushing up home values.
"With such strong momentum in the housing market and the cyclical low in mortgage rates behind us, it seems unlikely that affordability will improve in the near future," said RBC senior economist Robert Hogue.
"The housing market still faces obstacles, as mortgages have become more difficult to handle for many Canadians amid challenging labour conditions. This is likely to persist until the economic recovery is well established and job creation is sustained next year."
Homes in all of the provinces and in each major city became more expensive. The trend was most pronounced in Vancouver, though Calgary and Toronto also posted "notable increases."
The affordability of housing will likely hold steady or continue to deteriorate in the coming months, the bank said. That could hurt the recovery, if mortgage-holders are pushed into arrears in greater numbers.
"One of the challenges of the housing market's resurgence amid still-poor labour market conditions is that mortgage obligations are becoming more difficult to meet for a growing number of Canadian households," the report said.
Highlights of the report, by province:
- Alberta: Home ownership costs increased for the first time since late-2007, in the third quarter, thanks to more expensive mortgages rather than an increase in housing values.
- Saskatchewan: Mortgage rates and property values both grew modestly, making housing more expensive for the first time in a year.
- Manitoba: Recorded the smallest increase in the cost of owning a home, although demand is expected to grow over the coming year.
- Quebec: Housing values reached new heights in many areas of the province, thanks partly to the drop in mortgage rates.
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Atlantic Canada: The housing market remained one of the country's most affordable. Property values rose modestly, in step with a slim increase in home-ownership costs.
