As a Realtor, I Know The New Truth About Housing Affordability

Thursday Jul 03rd, 2014


One of the most important discussions I have with my clients includes "what can you afford” but it’s much more than how much you can spend on buying a home. "Affordability" goes way beyond purchasing power. It's about what the cost of owning your home really means: mortgage payments, property taxes, utilities, maintenance, insurance etc. so that you can have a life and not be house poor.

The Royal Bank of Canada's "Affordability Index" is one of the definitive sources I rely upon to give you up-to-date statistics. The Royal Bank's Affordability Index uses the percentage of pre-tax household income to measure what's needed to 'service' owning your home at the market's current prices . RBC cites that its Affordability Index has deteriorated even more in Q1 of 2014, than in the decline of each of the last 3 quarters reported during 2013. And, with its rising prices, Toronto’s waning index (along with Vancouver & Calgary) has been affected more than any other.  

Toronto's index specifically rose by 0.2 points to a high of 56.1%. This means that 56.1% of your pre-tax income will be allocated to affording your home. It's very important that you ask your Real Estate Agent to provide you with this crucial kind of information and informed enough to keep on top of it. Actually, I feel it is crucial for your Realtor to offer this info since they should be helping you decide what's in your best financial interests.

In Ontario the measure of affordability for 2 storey homes topped out at 51% and at 44.9% for bungalows - a 24 year high! Vancouver’s index rose to an enormous 82.4% while Calgary was significantly better at 34.5%.  

Across Canada the "average" Affordability Index rose 0.1 points to 43.2% for detached bungalows and by 0.3 points for 2-storey homes, to 49.0%. Condos dipped 0.1 points to 27.9%.

Despite all these numbers and decreases in affordability, RBC is saying there's no immediate threat to the Canadian Real Estate Market. The Bank of Canada is not likely to contemplate higher interest rates until mid - late 2015 (if even then) - economists predict the Bank won't act until 2016. 

Recognized in the top 1% of all Toronto Real Estate Board's sales and properties sold in 2012-2014, Nancy Biderman is a respected Toronto Real Estate Agent providing extraordinary Full Service. Nancy has over 15 years of trusted Real Estate expertise. Her integrity, dedication to her clients' financial goals and overwhelming success is consistently reward with repeat clientele and referrals to their friends, families and associates. Nancy has also been awarded the Harvey Kalles Real Estate Ltd., Director's Circle accolade from 2000-2014.

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