RBC Financial Strategy and Performance
Canadian housing market risks remain localized
RBC
■ The stress test introduced on January 1st 2018 for uninsured mortgages, had a cooling impact across Canada. The
stress test, along with increases in interest rates, caused home resales to decline for a second-straight year by 11% in
2018. In 2017, regulatory changes at the federal and provincial levels in BC and Ontario contributed to a nearly 5%
decline in home resales in Canada. To a large extent, this is a 'soft landing' engineered by policy makers
Demand-supply conditions, however, remain balanced nationally and in most local markets including Toronto where
prices have now stabilized after softening in 2017 on the heels of Ontario's Fair Housing Plan. Property values are
generally on a modest rise in Canada except in Vancouver and oil producing regions where market conditions are
currently weak
■ Solid population growth, household income gains and low unemployment rates lower the risk of a downward spiral
■ Poor housing affordability is being skewed at the national level by severe conditions in Vancouver and Toronto.
Affordability is in line with historical norms in most other markets across Canada, albeit the trend is deteriorating
Canada's household debt service ratio showed a small uptick in 2018 — and is poised to rise further going forward
▪ Lenders maintaining strong underwriting discipline and require extensive documentation
Most mortgages held on balance sheet and conservative lending policies have led to low delinquency rates
Sales-to-New Listings Ratio (1)
(Residential unit sales to new residential listings)
16
Household Debt Service Costs (2)
(Mortgage & non-mortgage principal & interest
payments as a % of household disposable income)
1.00
0.90
0.80
Seller's market
14
0.70
12
12
0.60
0.50
Balanced market
10
0.40
8
0.30
Buyer's market
0.20
6
0.10
4
ד
ד
0.00
T
91 92 93
94 95 96
97
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
1996 1998
2000
2002 2004 2006 2008 2010 2012 2014 2016
2018
Canadian Housing Market
(1) Canadian Real Estate Association, RBC Economics Research. (2) Statistics Canada, RBC Economics Research. PDI: Personal Disposable Income.
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