Homebuyers in Toronto are still motivated despite a loss of affordability, according to the RBC Housing Trends and Affordability report released this week.
The report, published by RBC Economics Research, says during the second quarter of the year Toronto home sellers continued to drive the prices because of the somewhat limited number of for-sale homes in the market.
"Tight market conditions set the stage for multiple offers and bidding contests, and this resulted in higher prices for sellers," says the report.
However, buyers continued to keep the demand levels in the market, likely due to the fact that affordability levels are still within reasonable range in the Toronto area, says the report.
"The RBC measures are just slightly above their long-term averages—more substantially so in the case of the two-storey home category—and are nowhere near the peaks reached in 1990."
The report says Canada's housing affordability has again slipped in the second quarter of the year due to higher home prices and increased mortgage rates. Most areas in Canada however still remain to be affordable, with the exception of Vancouver where the affordability is extremely poor.
"Vancouver's housing market is without a doubt the most stressed in Canada and is facing the highest risk of a downturn," Craig Wright, RBC senior vice-president and chief economist, said in a statement.
Ontario, Quebec, and Saskatchewan also had worsening affordability in the second quarter of the year, but Alberta remained a good location for home buyers.
"We expect that robust economic growth and rising employment will shore up confidence in Alberta’s housing market," says the report.
In Ontario, despite the worse performance in affordability compared to the second half of last year, homes still remain affordable.
"The RBC measures are still generally close to long-term averages," says the report, noting, however, that "the reading for the two-storey home category is beginning to look somewhat elevated, and any further deterioration would likely weigh on homebuyer demand going forward.