There is an old adage that you should never spend more than 30% of income on housing. While that does not hold today, it is still the case that Canadians are spending too much on their homes. The Royal Bank of Canada issued a report on Thursday that shows housing affordability is continuing to be a problem in the country.
In Vancouver and Toronto, the aggregate percentages average Canadians are paying for housing ae 79.7% and 72% respectively. The data is clear, many residents in these cities are paying close or above three quarters of their income on housing. Across the country, the aggregate decreases to a more manageable 45.9%. However, even this latter figure is historically high.
Across the nation, people are paying too much on homes. In Vancouver and Toronto, they are being financially squeezed out of the market.
RBC complies its report measuring home ownership as a percentage of median household income.
While Vancouver remains Canada’s most expensive place to live, it did actually become more affordable during the first quarter of 2017. Spending on homes decreased by 1.2 percentage, but it is a token drop when Canadians are paying so much. Indeed, there is no indication that this will be a trend that will bring dramatic decreases in coming years.
For financers and industry experts, the worry is now that the market could break and how it will manage a rate hike, which is mooted for as early as July 12. RBC says even a one percentage increase on the interest rate would see home costs rise 3.5% nationwide and 5.5% and 6.5% in Toronto and Vancouver respectively.
In these two cities, there is now a real worry about the personal economy of Canadians. If they are paying so much on their homes, how much is left for necessities?