An RBC report says housing affordability in Canada worsened in the first quarter, ending a one-quarter reprieve, the first in two and a half years.
The proportion of median pre-tax household income needed for mortgage payments, property taxes and utilities rose 0.4 percentage points from the fourth quarter to 48.4 per cent.
The move reversed a 0.3 percentage point drop in the fourth quarter.
Mortgage rates increased in the previous two quarters, but a drop in home prices mainly in the Greater Toronto Area, trimmed ownership costs modestly.
The report added that an expected one percentage point increase in the Bank of Canada’s overnight rate to 2.25 per cent by the first half of 2019 is poised to worsen housing affordability.
Home ownership costs in the Greater Vancouver Area reached a record high of 87.8 per cent in the first quarter, rising 1.5 percentage points in the quarter to what is considered a crisis level. Victoria was also high at 62.7 per cent.
The Greater Toronto Area saw affordability improve slightly to 74.2 per cent as a dip in home prices counteracted higher interest rates.
Affordability eroded modestly in most other Canadian markets as higher interest rates outpaced stable housing prices.
Saskatoon, Ottawa, Halifax and St. John’s, N.L., saw the largest deteriorations in affordability in more than a year, but housing costs remained low at between 27 and 36.6 per cent.
The report says stress may be building in the Greater Montreal Area, which saw costs reach their highest point since 2011 at 43.7 per cent.