Newspaper article The Canadian Press

Canadian Homes Slightly More Affordable in Third Quarter: RBC Index

Newspaper article The Canadian Press

Canadian Homes Slightly More Affordable in Third Quarter: RBC Index

Article excerpt

Homes slightly more affordable in summer

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TORONTO - The cost of home ownership became more affordable in the most recent quarter due to a modest decline in home prices and gains in Canadian household incomes, according to a Royal Bank study.

RBC's affordability index for a detached bungalow stood at 42 per cent of income nationally in the third quarter.

That means an owner would need to spend 42 per cent of pre-tax annual income to pay for mortgage payments, utilities and property taxes -- one percentage point lower than in the second quarter of 2012.

That assumes an average home price of $362,100 and an average qualifying income of $78,100, but those measures varied widely from market to market.

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 costs of owning a home at current market prices took a smaller bite of household budget in all major markets in Canada in the third quarter of 2012," the report said.

The bank, which publishes the index on a quarterly basis, says ultra-low interest rates have been the key factor in keeping affordability levels from reaching dangerous levels in recent years.

Still, top government officials have warned that low interest rates are encouraging some buyers to spend beyond what they'll be able to afford when rates inevitably rise. Household debt stands at a record 163 per cent of income. That means for every dollar Canadians earn, they owe $1.63 in debt.

Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages.

RBC notes that Canada's housing market cooled further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance. …

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