Cost of Living is Too Expensive, and Vancouver is to Blame

The Housing Trends and Affordability report was released today by RBC Economics Research and it proved once again what many have been murmuring about for months now – that the cost of home ownership in Vancouver is so high, it’s skewing the picture for the entire country. The report showed that for the second straight quarter in 2011, Vancouver homeowners could expect to spend 92.5% of their income on the cost of home ownership. This doesn’t just include their mortgage payments, but also utilities and taxes associated with the property. The report was also conducted based on incomes before taxes were deducted; and the numbers mean that residents in the B.C. city have less than 10% of their pre-tax earnings to spend on things like food, entertainment, car payments, and other necessities. But, there is some good news.
Craig Wright, senior vice-president and chief economist with RBC, said that Canadians needn’t worry about any housing market crash in Vancouver or anywhere else because the Bank of Canada is going to keep interest rates low until at least 2012. This, Wright believes, is going to be enough to keep confidence in the housing market and keep buyers out there purchasing properties. But, this may be a double-edged sword. Wright also sees the potential for the low interest rate to keep buyer’s interest up so much that it’s enough to keep prices higher for longer. But still, Wright remains hopeful saying that the “Canadian market won’t deteriorate by as much, or as quickly, as we previously expected.”
And there is some other good news to be gained from the report too. Even though the cost of home ownership has gone up, the report also notes that the average income within those pricey cities has also gone up. Which means that even if you do have to pay a little more to get that home, you’ll be making the money to help you do so. To go along with that, the report also found the majority of Canadian housing markets to be “affordable” or “slightly unaffordable.” In fact, housing markets across the country sit at what Wright calls “historical norms.” It’s just that one city that is knocking everything off. And while Vancouver isn’t the only city to blame for that big picture, it does make up 1/3 of it – which is a pretty big piece of the pie.
Canadians that are looking at other cities to blame for the higher cost of home ownership for the quarter will find them in: Toronto, Montreal, Ottawa, Calgary, and Edmonton.