Canadian Homeownership Costs Continue to Rise

Homeownership costs north of the U.S. border in Canada have now been rising for three quarters in a row, according to a Royal Bank of Canada economics expert. Affordability in the first quarter was moderately above the long-term average but below peak levels, according to RBC senior economist Robert Hogue. The RBC Housing Affordability index, which measures the proportion of income needed to service the cost of homeownership, shows an increase on a national basis for all property types in the first quarter. For detached bungalows the index rose by 0.9 of a percentage point to 41.1%, for standard townhouses it was up 0.4 of a percentage point to 33%, for standard condominiums it jumped by 0.5 of a percentage point to 28.2% and for standard two-story homes it climbed by 0.6 percentage points to 46.8%. Affordability is expected to continue to deteriorate through 2010 and 2011 due to anticipation that the Bank of Canada will move to raise what have been exceptionally low central bank rates in the second half of this year and in 2011, Hogue said. But the extent of the deterioration is likely to be limited by a balance between supply and demand and it is not expected to exceed 2008's peak levels.