Hot labour markets give Canadian businesses plenty of headaches, but households aren't complaining about what it means for their own bottom lines.
As employers compete for talent, wages are rising a little faster, and that certainly helps to cope with life’s many expenses. For Canadians looking to buy a home, stronger income gains improve their chances of finding something they can afford.
This was the main theme emerging from RBC Economics’ latest Housing Trend and Affordability report. It found the growth in income in the past year (averaging more than $180 per month for the average Canadian household) exceeded the rise in home ownership costs (just $6 a month). It meant that for a typical household, the costs of owning an average home bought in the third quarter would have taken up a smaller proportion of income—1.6 percentage points to be precise—compared to a year ago. That’s welcome news for sure, but at 50.7% of income, this share still remained disappointingly high. The situation is most severe in Vancouver, Toronto and Victoria, where the dream of owning a home is next to impossible for many millennials.
There’s reason to worry these income gains may not keep pace with ownership cost increases in the period ahead. The rebound in Canada’s housing market since spring has firmed up demand-supply conditions and put home prices on a re-accelerating course—including in Toronto, Victoria and, soon, Vancouver. So this year’s affordability relief could well be short-lived.
Robert Hogue is a member of the Macroeconomic and Regional Analysis Group, with RBC Economics. He is responsible for providing analysis and forecasts for the Canadian housing market and for the provincial economies. His publications include Housing Trends and Affordability, Provincial Outlook and provincial budget commentaries.
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