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British Columbia's housing affordability notably improved but still has far to go, says RBC
E$ b9 v k* a( J, ~) ? TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
5 s+ a0 ~( B% z k8 K1 vmiddle of a significant correction that is partly reversing the extensive
3 \6 B, B, Z+ A) Ogains of recent years and which is helping restore affordability conditions,
1 X+ n/ W# u4 k; Xaccording to the latest housing report released today by RBC Economics.
8 i$ R7 R/ x2 O% o "The province's housing markets remain under heavy downward pressure,"
9 n7 m- D: t0 H3 g7 l' Asaid Robert Hogue, senior economist, RBC. "While housing affordability is# F1 ~2 @! j. i8 D" o% {& X
improving as the correction process runs its course. RBC's affordability# r5 b) h$ [( A! s& y
measures for the province are still at levels far off historical averages."
* M5 W3 R+ V5 @* Q3 `- |( K' V! k RBC notes that the sharp rise in unemployment since last summer is& z: r" Y) n+ h1 Q
worrying households in the province and weighing down demand for housing,( ?' y0 G C$ b; k; b X
which runs well short of available supply. Such weak market conditions have
% ?* _. \1 T2 N& j* S- X% tsustained the declining trend in prices for both existing and new homes.7 W$ ^3 l; f8 Y
The RBC Affordability measure for British Columbia, which captures the/ c/ a" @% _" k! p
proportion of pre-tax household income needed to service the costs of owning a
+ c d7 Q# P0 N+ v7 khome, improved across all housing segments in the last quarter of 2008.
0 X8 {; Z; f, v5 O% {4 w: jAffordability of detached bungalows in the province moved to 66 per cent, the
% M8 ^( Z/ i9 o7 ^! C$ m7 a, istandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and4 Z$ F8 X7 P. b2 Y% I
the standard two-story home to 73.7 per cent.
- {6 Q. R, t/ M7 c, ~ According to the report, there are signs that the B.C. housing markets, `- ^' G8 W4 G8 ?) j1 Q
may be stabilizing as sales of existing homes appear to have bottomed out in2 w2 Y0 A4 \0 j. [
the closing months of 2008 and the first two in 2009 - although at
# [2 O8 H( T* Ohistorically depressed levels.. ^( x4 }% s& a5 v+ f6 y
Despite sharply declining house prices and lower mortgage rates, the cost
6 P. W ^5 y. X- Z# Rof homeownership in Vancouver is still the highest in the country. House
+ ?2 V# ]5 b5 h4 ~9 i, Mprices continue to rapidly decline and pricing power remains firmly in the
* p( u6 a/ X0 w7 [4 a$ B% ?hands of buyers with the sales-to-new listings ratio at historical lows. "This
}) ]- P/ _7 B4 L2 G& _8 Penormous imbalance suggests that prices will likely further correct in the
' |# F4 F8 ], H* r1 u8 \" ~months ahead," added Hogue.
) I' M9 |5 N* I5 J( }6 e1 y RBC's Affordability measure for a detached bungalow for Canada's largest
0 P6 N/ X( \, D4 R8 _+ ocities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary+ q, p5 ^" W; G: j2 r' p5 `
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent." k8 k, K. K! V" z
The report also looked at mortgage carrying costs relative to incomes for, I! J0 v; l5 c2 j# _
a broader sampling of cities across the country, including Victoria. For these2 w% B8 P% }2 `
cities, RBC has used a narrower measure of housing affordability that only& C9 e, Q! e+ Z
takes mortgage payments relative to income into account.
( X& y, g0 D8 l# C" w The Housing Affordability measure, which RBC has compiled since 1985, is
; j( @$ q+ `3 \7 Z$ Y- mbased on the costs of owning a detached bungalow, a reasonable property
% A0 g( p* _' Q: d5 w; t8 n N7 \benchmark for the housing market. Alternative housing types are also presented3 x2 |4 f% U8 U1 ?+ M5 h
including a standard two-storey home, a standard townhouse and a standard- G) d+ K- `* c6 A0 E$ g
condominium. The higher the reading, the more costly it is to afford a home.7 A! g q4 x% H( v
For example, an Affordability reading of 50 per cent means that homeownership
# z0 d3 w) m- D+ c- Tcosts, including mortgage payments, utilities and property taxes, take up 50
# {/ _( v T, l. Xper cent of a typical household's monthly pre-tax income.) B* i- t- Y' I( b T
, v3 i) m) T8 S+ C1 B
<<$ t$ F0 d# c7 n _
Highlights from across Canada:& B' ~1 i9 m# l
7 V4 {6 k9 A# M# i4 F- z5 S: V - Alberta: Since last fall, the declining Alberta economy has- p9 P6 I' ~1 w* `
intensified the downdraft on the province's housing markets, causing
* e- X% v J3 p8 e) ^1 Z$ q% z home resales to drop to a 12-year low at the end of 2008 and rebound
" Z( o: z/ [( k0 b* M7 I only modestly since. Affordability has been on an improving track8 v) h1 e+ O' y: {' M2 Z
since about the middle of 2007.) Y$ F5 ? U7 Q- r5 E, H4 ^: j+ H% x
- Saskatchewan: Market activity has cooled considerably from the
; s8 e- t1 z- D: ?) W8 |" E, m2 X, d frenzied pace from 2006 to early 2008 and prices have begun to
" \ v( O* | M3 ]8 K4 ? decline. Nonetheless, economic and demographic fundamentals are still
6 S2 j4 W/ s$ @+ W6 U3 Z# T largely supportive of the housing market and overshadow extremely
8 ~: D b) j5 j5 j$ |/ ^ poor affordability levels.- K" z- G' b9 D1 ]1 L/ V$ z+ S5 Q
- Manitoba: Manitoba's housing markets have fared much better than the( }9 m. a( v$ G4 L" {" e/ k
vast majority in Canada: resale activity has slowed moderately and0 R4 h8 _, a' ^0 e& ^
prices have either held their own or edged down just slightly.' q. P" j/ z3 o9 @4 g! Q% m
Affordability has been kept out of the danger zone, helping to& k$ X' S( ~8 y1 I
minimize any downside risks.% n1 ~$ e& r6 L0 w' v3 Y1 s
- Ontario: With the recession pounding many communities, housing market
+ k/ N7 Y5 a$ g conditions have deteriorated considerably. However, the impact is
- H! u' J. j# T N unlikely to develop into an all-out rout similar to that of the early
' n+ d. {( c+ t: {5 [! L 1990s. Affordability, while still causing some stress, is quickly
) Y' E2 \& _ w being restored to levels closer to long-term averages.
* z3 \' a" k: c5 \/ j - Quebec: The province's housing markets have been among the last in( m% Y. C: _ l7 f3 v
Canada to yield to the weakening trend. The main sign of cooling thus2 b2 ~$ _! T' s& d+ O' F
far has been a drop in resale activity, as prices have held up, ?! j1 E. Q9 x4 x3 r% }
reasonably well. Some of the persisting market strength can be3 Z. O; _$ H1 _. [% O9 S3 F( y
ascribed to sensible affordability levels, which had eroded only
0 d! U! X9 T1 H modestly in recent years.
" C) }% I( B) h" F - Atlantic region: Markets have largely remained stable against the8 N ]1 z& q0 B9 l8 C* S+ T& G# O
general housing downturn, with St. John's becoming the housing hot6 ?) e- k4 j+ j M9 C- ^
spot in Canada and Halifax and Saint John maintaining steady upward
* ~* b+ D0 w/ g price momentum. The region is benefiting from improving affordability
( G" M& P" N+ F) _; s following two years of deterioration.( [0 N3 R/ a" J& w/ Z
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