The cost of owning a home in Ottawa eased during the most recent quarter, according to an affordability study by Royal Bank.
The average local owner of a detached bungalow spends 38.7 per cent of their pre-tax annual income on mortgage payments, utilities and property taxes. That’s down 40 basis points, according to the RBC study.
Similarly, the costs of owning a two-storey home fell 50 basis points to 40.6 per cent of the homeowner’s average annual income. Condos decreased 10 basis points to 26.9 per cent.
OBJ360 (Sponsored)
How to mitigate AI legal risks by asking the right questions
Does AI hallucinate? According to local employment law expert Zoriana Priadka of Emond Harnden, it does. Find out how to mitigate your risk as an employer.
Nokia joins forces with uOttawa to develop new business by investing in people
When tech giant Nokia wanted to embrace new business opportunities, they needed their team of engineers – and some advice from uOttawa’s BCI program – to succeed.
Owning a home in Ottawa takes up a larger share of household income than the 28-year average of 36.5 per cent.
RBC, which publishes the index on a quarterly basis, says ultra low interest rates have been the key factor in keeping affordability levels from reaching dangerous levels in recent years.
Despite the recent improvement in affordability, RBC said the amount of income to service home ownership costs continues to be higher than long-term averages.
RBC notes that Canada’s housing market cooled further in the third quarter, partially because of the effects of a fourth round of rule changes to government-backed mortgage insurance.
In Ottawa, home resales fell 5.4 per cent in the third quarter – the largest quarterly decline since mid-2010.
The bank expects the negative effect of the changes on home sales will ease by the end of the year and that resale activity will stabilize next year.
The July-September quarter fully reversed the mild erosion in affordability that occurred during the first half of 2012, said RBC chief economist Craig Wright.
“The broad affordability picture has been somewhat stationary over the last two years, alternating between periods of improvement and deterioration, resulting in an affordability trend that is, on net, essentially flat,” Mr. Wright said.
He said he expects the Bank of Canada to begin raising its overnight lending rate for banks – which affects bank’s prime lending rates – from the current one per cent in the second half of next year, assuming the euro crisis remains in check and U.S fiscal issues are addressed.
“This, along with the expected continued growth in household income, will lessen the risk of marked erosion in affordability,” he said.
As is often the case, Vancouver’s extremely expensive real-estate skewed the national figures.
“The cost of owning a home took a smaller bite out of household pocketbooks in the third quarter as home prices fell – most notably in the Vancouver area, though it remains the least affordable market in Canada by a wide margin,” explained Wright.
The index in Vancouver stood at 83.2 per cent of income, followed by Toronto at 52.4 per cent, Montreal 40.2 per cent, Ottawa at 38.7 per cent, Calgary at 38.3 per cent and Edmonton at 31.1 per cent.
Nationally, a detached bungalow stands at 42 per cent affordability, two-storey homes at 47.8 per cent and condos at 28 per cent.
– With files from the Canadian Press
