'Worst-ever' affordability levels: Only 22 per cent of Ont. households can afford a single-family home

Fewer than one-quarter of Ontario households actually have the income required to own a single-family home and affordability levels are now at or near “worst-ever” levels, a new report from RBC suggests.

The report, authored by RBC Economist Robert Hogue, shows that fewer than 50 per cent of Ontario households have “sufficient income” to own a condominium in the province amid “sky-high” prices and borrowing costs.

• Download our app to get local alerts on your device
• Get the latest local updates right to your inbox

But the report paints an even more stark picture when it comes to single-family homes.

It says that only about 22 per cent of Ontario households have the income required to own a single-family home, compared to 26 per cent of households nationally.

“There’s a very long way to go before affordability is meaningfully restored,” Hogue writes. “Buyers in many of Canada’s large markets will contend with extremely difficult conditions for some time. We expect home resale activity to stay especially quiet in Ontario and British Columbia until interest rates fall materially. And then, the recovery that will follow is likely to be gradual at first.”

The report notes that in Toronto about 84 per cent of the average household income would have went to home ownership costs in the third quarter, based on current real estate values.

That is less than in Vancouver where the number rises to 102.6 per cent.

Still, the report says that ownership costs in Toronto have reached “crushing levels” with an index RBC uses to track affordability levels surpassing the previous all-time low set at the end of 2022.

The good news is that Hogue believes “the latest bout of housing affordability deterioration has likely run its course” and the situation will improve in 2024 “as home prices drift lower or stabilize” and incomes rise.

But he says that housing affordability is unlikely to return to pre-pandemic levels anytime soon, even with the Bank of Canada likely to cut interest rates in the second half of 2024.

“The significant loss of affordability during the pandemic has shrunk the pool of homebuyers in Canada,” the report notes. “Close to 60 per cent of all households could afford to own at least a regular condo apartment in 2019 based on their income. That share has plummeted to 45 per cent in 2023.”

The average price of a home across all property types in the GTA peaked at $1,334,062 in February 2022, prior to the Bank of Canada’s first interest hike.

It eventually dropped to a low of $1,037,542 but prices have rebounded since then, with the latest data from the Toronto Regional Real Estate Board pegging the average cost of a home in the GTA at $1,125,928.