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British Columbia's housing affordability notably improved but still has far to go, says RBC
- k+ B, N3 J% w8 e TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the+ c0 }+ O+ `+ \% r, l) A
middle of a significant correction that is partly reversing the extensive' ?) u0 G( S5 S$ A- ~
gains of recent years and which is helping restore affordability conditions,
0 Y. _1 W2 J2 |+ z+ I2 vaccording to the latest housing report released today by RBC Economics.
- h; W( J' Z' i% K; [7 | "The province's housing markets remain under heavy downward pressure,"
4 L6 r# y7 w9 q) m0 s0 M: [/ dsaid Robert Hogue, senior economist, RBC. "While housing affordability is
8 k5 p. b; O, a) uimproving as the correction process runs its course. RBC's affordability5 S; B+ d8 Q; H$ z1 N3 c: e) o
measures for the province are still at levels far off historical averages."
# |" i" s9 {" Q RBC notes that the sharp rise in unemployment since last summer is# n* E; Z; C9 Y
worrying households in the province and weighing down demand for housing,5 M+ G# ]# g5 A: |* D* g# k# G
which runs well short of available supply. Such weak market conditions have
2 L! x% F. f0 q: e; R5 csustained the declining trend in prices for both existing and new homes.
" r* Y$ z' o; i/ z) p" g The RBC Affordability measure for British Columbia, which captures the
- N% Q9 T9 u, \% x5 ?0 {proportion of pre-tax household income needed to service the costs of owning a; A ?3 @+ u- x) v8 i
home, improved across all housing segments in the last quarter of 2008.+ S d+ X7 i- ^+ Z7 Y4 k
Affordability of detached bungalows in the province moved to 66 per cent, the: B2 b# E% L% V$ V0 K
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
, _2 \/ I/ Z! g' ithe standard two-story home to 73.7 per cent.; \7 Q5 Q0 Y( c- D9 h6 h, q
According to the report, there are signs that the B.C. housing markets; T: a( m7 w# {2 _
may be stabilizing as sales of existing homes appear to have bottomed out in0 s1 U. E( y8 |0 h2 c. l' P
the closing months of 2008 and the first two in 2009 - although at6 f' A- m" {. q! U0 N) G3 }. R% K
historically depressed levels.( I2 k' z( O$ v& a# @ {# e% G
Despite sharply declining house prices and lower mortgage rates, the cost
, B! H! i4 @% u# D# I, e7 R0 Y5 R; E* xof homeownership in Vancouver is still the highest in the country. House. W7 Q7 D( H0 u+ G4 v
prices continue to rapidly decline and pricing power remains firmly in the3 G7 R: `% Z" E! _& W$ B9 b) X. |" I
hands of buyers with the sales-to-new listings ratio at historical lows. "This
& C: M0 \7 ^* @1 B: \enormous imbalance suggests that prices will likely further correct in the$ p- T7 ?1 n% C, A1 v) R, V* {& S" q
months ahead," added Hogue.
* W! c3 k) `# B8 p6 o RBC's Affordability measure for a detached bungalow for Canada's largest8 e( C0 r7 i1 \. n- y* s1 {8 T
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
0 V2 P) P! z' p( w: g42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
D0 }" t4 R2 Y" ` The report also looked at mortgage carrying costs relative to incomes for2 I+ }! S, e9 C$ q1 ]
a broader sampling of cities across the country, including Victoria. For these, L0 q. m: p; h" G& w2 @& m
cities, RBC has used a narrower measure of housing affordability that only
3 p" q: S9 w! R# G/ V7 o: Ctakes mortgage payments relative to income into account.
# ?) |/ }, m/ C" r The Housing Affordability measure, which RBC has compiled since 1985, is
3 j" y4 ~* v4 Z% L- fbased on the costs of owning a detached bungalow, a reasonable property
5 o- w( q: W3 p2 j5 Ebenchmark for the housing market. Alternative housing types are also presented7 P- P4 f1 C) V
including a standard two-storey home, a standard townhouse and a standard! D4 r4 F1 F' b4 _
condominium. The higher the reading, the more costly it is to afford a home.
: k, H1 M% n: V0 \4 P5 M- tFor example, an Affordability reading of 50 per cent means that homeownership
8 H' Z+ C9 D0 V) Icosts, including mortgage payments, utilities and property taxes, take up 50
2 Z( M* [4 `3 A2 F* q& Mper cent of a typical household's monthly pre-tax income.' D* b; y) f( `
3 t. D8 j& q3 \" K# c2 C- w6 k; H <<% v0 P V; N V, u+ _& N9 x* [- t
Highlights from across Canada:/ v: e; c2 h1 a. K% }
+ e) f, P, D, E2 L" P - Alberta: Since last fall, the declining Alberta economy has- `+ G6 R9 @2 r6 _* c
intensified the downdraft on the province's housing markets, causing' e4 K- b/ Q/ D
home resales to drop to a 12-year low at the end of 2008 and rebound, N' W3 ?0 R: L& L0 [
only modestly since. Affordability has been on an improving track/ x- E1 f3 _1 z# a9 Q
since about the middle of 2007.3 C% Q' ?) U; w
- Saskatchewan: Market activity has cooled considerably from the
0 A( x! Z8 a9 V! O- B# P. z# x& f frenzied pace from 2006 to early 2008 and prices have begun to
8 F7 G* V; S. m: l decline. Nonetheless, economic and demographic fundamentals are still7 N6 g5 c' K% T( I/ i
largely supportive of the housing market and overshadow extremely
8 Q# M' S$ _4 B* r3 n: d* Q7 B poor affordability levels.$ @6 Y) L' Q, M; V; v0 O: ]: w6 e" g
- Manitoba: Manitoba's housing markets have fared much better than the/ M0 X; Q/ _, o" m# [0 v1 H6 v
vast majority in Canada: resale activity has slowed moderately and
* k& E+ |- D% z2 I. F5 l' t prices have either held their own or edged down just slightly.; Z: [# F2 `+ o$ I- @- e
Affordability has been kept out of the danger zone, helping to8 ]( u3 e6 l; R" S/ S, B
minimize any downside risks.3 T: ~. A: R- p$ A% w7 f8 y
- Ontario: With the recession pounding many communities, housing market P8 u$ I6 G5 W+ g3 T2 Q& O
conditions have deteriorated considerably. However, the impact is
2 k+ _7 r, V/ `) w2 T unlikely to develop into an all-out rout similar to that of the early
+ d% t0 m `7 i$ `6 O 1990s. Affordability, while still causing some stress, is quickly
* Y/ H: c" Z$ ~! A, J/ j) F3 {9 y being restored to levels closer to long-term averages.
9 m- h- X; \2 W0 V' r6 f - Quebec: The province's housing markets have been among the last in0 `/ Q' v/ x' S! o1 Q
Canada to yield to the weakening trend. The main sign of cooling thus8 N3 b8 b% Z8 H
far has been a drop in resale activity, as prices have held up* Z3 S! o2 U" c# O( z' `/ b- `1 b
reasonably well. Some of the persisting market strength can be
, g' M0 b W. _ ascribed to sensible affordability levels, which had eroded only
- t4 R4 S) J- B7 E$ r5 g+ y modestly in recent years.7 r* {" q2 w& I" s
- Atlantic region: Markets have largely remained stable against the% H: x* g" u9 m! _
general housing downturn, with St. John's becoming the housing hot: h8 w9 G5 q- W7 [( w; \# }* s
spot in Canada and Halifax and Saint John maintaining steady upward; b0 f4 m4 S/ f+ \- C
price momentum. The region is benefiting from improving affordability1 T. R* n7 z* `2 B$ b: g
following two years of deterioration.) N; h0 w( `# E8 l- y
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