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British Columbia's housing affordability notably improved but still has far to go, says RBC
2 w6 I% z' D z8 W' q' h TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the" _+ }- l# `; Y2 H! M! v/ |0 _
middle of a significant correction that is partly reversing the extensive3 `; ^4 F6 M; U0 i. d
gains of recent years and which is helping restore affordability conditions,' |8 ?! l2 o# h- X0 P# x; S: \& m4 }
according to the latest housing report released today by RBC Economics.
" x G: m1 j- ^* A5 o% C "The province's housing markets remain under heavy downward pressure,"0 R; ]/ _7 u0 o3 ~
said Robert Hogue, senior economist, RBC. "While housing affordability is, x% K: ~" a% G0 v3 e. r$ i
improving as the correction process runs its course. RBC's affordability
1 i1 Q8 S7 n; B. v dmeasures for the province are still at levels far off historical averages."
& U3 ]9 G. V) {. I. F' K RBC notes that the sharp rise in unemployment since last summer is
, T0 |7 b3 V" h! u' fworrying households in the province and weighing down demand for housing,, M( t; U" y$ f; F) t
which runs well short of available supply. Such weak market conditions have9 T( Z) i! n) R/ z& j
sustained the declining trend in prices for both existing and new homes.$ y* q) C, M# l6 H8 \
The RBC Affordability measure for British Columbia, which captures the' V' ?5 p$ X! ~. E9 z0 x
proportion of pre-tax household income needed to service the costs of owning a P, t6 O6 t* ^7 @! D f0 r% |
home, improved across all housing segments in the last quarter of 2008.
3 m7 n2 z y+ t# a* f$ GAffordability of detached bungalows in the province moved to 66 per cent, the. z- f: E+ w1 R& l4 h/ \6 Y0 u
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
/ j" G' i9 n1 {# z( X4 wthe standard two-story home to 73.7 per cent., H l9 S) V' `+ y8 U
According to the report, there are signs that the B.C. housing markets$ r. k5 F2 d& p: z+ k- h+ ]- S3 I
may be stabilizing as sales of existing homes appear to have bottomed out in
$ e, X* [3 r+ G- J3 m, L" I3 s) Dthe closing months of 2008 and the first two in 2009 - although at# d" S7 U5 ~2 V% p! V2 i
historically depressed levels.6 p# Y% {9 ^, s* b. ?
Despite sharply declining house prices and lower mortgage rates, the cost
# D/ z! J) G0 ?, p8 \of homeownership in Vancouver is still the highest in the country. House- A' H7 w6 A: U$ \0 `9 Y |
prices continue to rapidly decline and pricing power remains firmly in the
7 d- L$ d5 H3 h1 U) l' `7 R5 |hands of buyers with the sales-to-new listings ratio at historical lows. "This- H# V5 b, C7 o* y3 O
enormous imbalance suggests that prices will likely further correct in the
; i( S# Z2 `) smonths ahead," added Hogue.' \ {2 t. c% [9 o( n5 {! I& m
RBC's Affordability measure for a detached bungalow for Canada's largest, [& B8 L F" R, U# f
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary# {5 _" v- E- e& b( R
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.$ K! G* s3 u+ E/ j
The report also looked at mortgage carrying costs relative to incomes for" P; ?; n# a% \8 t: D: Y) M
a broader sampling of cities across the country, including Victoria. For these
+ i7 A: {. e4 S& ncities, RBC has used a narrower measure of housing affordability that only' T1 `! y' U: J s5 l! v. w
takes mortgage payments relative to income into account.
& ^. K0 [: l& Z The Housing Affordability measure, which RBC has compiled since 1985, is
. h" X3 {1 C/ Zbased on the costs of owning a detached bungalow, a reasonable property& W2 p* c* F8 f7 v4 ?2 e
benchmark for the housing market. Alternative housing types are also presented
$ n* A' ~( @) h% x& X2 gincluding a standard two-storey home, a standard townhouse and a standard
* `4 A9 t9 |9 g0 V. Dcondominium. The higher the reading, the more costly it is to afford a home.% |4 k& ^2 K6 b2 b: F4 i
For example, an Affordability reading of 50 per cent means that homeownership
0 n9 J; w8 g+ {1 K) B/ {/ gcosts, including mortgage payments, utilities and property taxes, take up 50) x/ V, _: ~6 d; y3 n
per cent of a typical household's monthly pre-tax income.
# e5 k0 V1 y8 d( j6 K# N! `5 z+ u9 `. B/ |/ [
<<
; H+ J5 P- \) ?# X. {* f Highlights from across Canada:) X6 o+ l. b: r$ I1 H
( Z. u6 y# z$ I; M
- Alberta: Since last fall, the declining Alberta economy has" c- q1 G$ F u' P) Z( T- P J& x
intensified the downdraft on the province's housing markets, causing
+ B" U- ? Q1 W home resales to drop to a 12-year low at the end of 2008 and rebound
: J6 ]% W3 o' S; ]) e! C only modestly since. Affordability has been on an improving track* C. f$ i F+ l
since about the middle of 2007.3 `$ P4 \2 F+ E B; R# j
- Saskatchewan: Market activity has cooled considerably from the1 l8 c# w, c# M8 b: Z
frenzied pace from 2006 to early 2008 and prices have begun to
! r# S; v* P$ G# q* P2 i decline. Nonetheless, economic and demographic fundamentals are still. y/ d& N2 |/ L2 J8 I1 b- Z* G7 i
largely supportive of the housing market and overshadow extremely; r' z6 `: U2 R" y1 y- n
poor affordability levels.4 u0 ]/ h: }) M+ W
- Manitoba: Manitoba's housing markets have fared much better than the
# c1 ~0 r8 |+ t( e6 H vast majority in Canada: resale activity has slowed moderately and' Q% V& A( {" v, C( v% ^5 C
prices have either held their own or edged down just slightly.* V" x& B9 ?: R5 q
Affordability has been kept out of the danger zone, helping to0 o+ u: x- _+ F4 t+ @; g
minimize any downside risks.
" G) X4 O( F0 M( U, d - Ontario: With the recession pounding many communities, housing market( `; R% E2 g V( t' Y! }
conditions have deteriorated considerably. However, the impact is0 [# N' L" ~" d! X: b5 S) c7 ]2 b
unlikely to develop into an all-out rout similar to that of the early
$ w! y, h, X) b6 D 1990s. Affordability, while still causing some stress, is quickly
+ U6 ?9 U9 J1 I2 ^ being restored to levels closer to long-term averages.
, T; |& W& u7 B9 U1 u8 Z - Quebec: The province's housing markets have been among the last in. Y6 o. m# c R B
Canada to yield to the weakening trend. The main sign of cooling thus6 Q9 {6 x. p' ^8 q2 E& H
far has been a drop in resale activity, as prices have held up
3 o7 u4 P, U1 D9 B0 }- b+ @0 G reasonably well. Some of the persisting market strength can be3 S3 f5 \2 |# _/ k5 D: P3 k0 H6 X
ascribed to sensible affordability levels, which had eroded only3 I8 [9 b( Q7 q; ]9 S) m
modestly in recent years.3 g i! Q8 r J/ P* a3 L7 e1 T
- Atlantic region: Markets have largely remained stable against the
# X$ i* x n" l9 n; }: [8 z6 Q4 P$ W general housing downturn, with St. John's becoming the housing hot
) D, m# j( I% e$ N1 d( u# C! Q spot in Canada and Halifax and Saint John maintaining steady upward
8 C) d5 D% c$ l. p4 l) g price momentum. The region is benefiting from improving affordability
9 G/ W4 I% q1 Q1 C- s6 Y1 d/ R following two years of deterioration.
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