According to the newest Housing Trends Affordability Report from RBC, home price increases were seen in many of Canada’s biggest markets during the first quarter of 2014, making homeownership a bit less affordable.
“Prices for single-family homes in Calgary, Toronto and Vancouver had considerable upward momentum during the first quarter, and led to the strongest annual price gains nationally in nearly two years,” said the senior vice president and chief economist for RBC, Craig Wright. “This stood in the way of any widespread improvement in affordability conditions across Canada.
However, there is no immediate threat to the housing market in Canada according to RBC.
He continued, “We expect the rest of the spring season to offer a pick-up in housing activity, largely owing to fixed mortgage rates that recently eased to historical lows. This strength will be short-lived, as we believe that there is limited pent-up demand in the first place, and that longer-term interest rates will start to rise by the third quarter of this year.”
“We expect the Bank of Canada to gradually raise the overnight rate starting in the middle of 2015, which will cause bond yields to drift gently upward. This should mitigate the risk that higher rates will unhinge affordability levels.”