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British Columbia's housing affordability notably improved but still has far to go, says RBC
9 O9 U7 v0 [1 z/ [4 z TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
0 n3 B4 o7 B4 Cmiddle of a significant correction that is partly reversing the extensive& V8 Y* } }+ F, J7 e
gains of recent years and which is helping restore affordability conditions,
; O V1 u. e+ L# r: _& Naccording to the latest housing report released today by RBC Economics.( c9 D3 F( f5 H, ], h7 Z
"The province's housing markets remain under heavy downward pressure,"
0 \& Z/ O3 ` z. |said Robert Hogue, senior economist, RBC. "While housing affordability is
6 y& g* {, S3 H4 E9 Qimproving as the correction process runs its course. RBC's affordability
! N, D3 r9 L" ?measures for the province are still at levels far off historical averages."3 d" e4 q8 {/ _+ V g$ M
RBC notes that the sharp rise in unemployment since last summer is% K4 b- b' `+ g* s# D
worrying households in the province and weighing down demand for housing,0 Q: k2 i$ n" q8 ~
which runs well short of available supply. Such weak market conditions have0 i) ~( x: C+ g6 }6 b5 R
sustained the declining trend in prices for both existing and new homes.
4 n$ I2 d1 Q, n The RBC Affordability measure for British Columbia, which captures the
0 C0 @% Q0 N) S( @ T0 hproportion of pre-tax household income needed to service the costs of owning a
+ `8 W4 `* n% ^3 u) w" Jhome, improved across all housing segments in the last quarter of 2008.( B( X- A* d: _7 h7 h7 l
Affordability of detached bungalows in the province moved to 66 per cent, the3 L' r2 Z2 O/ x+ ]) b
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and$ v' b- s! ~+ Z6 D
the standard two-story home to 73.7 per cent.' m! N9 Z2 p/ g- y9 j
According to the report, there are signs that the B.C. housing markets
4 g2 j7 W: M$ {! r4 {may be stabilizing as sales of existing homes appear to have bottomed out in; A' m7 }3 w. q: Y
the closing months of 2008 and the first two in 2009 - although at
+ k+ m( {+ d& U0 rhistorically depressed levels.& b; f0 a+ u u5 j
Despite sharply declining house prices and lower mortgage rates, the cost4 F+ {4 _* ]7 t/ _! z5 L
of homeownership in Vancouver is still the highest in the country. House
5 N( o0 S" o8 eprices continue to rapidly decline and pricing power remains firmly in the) J- Y# K1 k/ ]0 V! U; j
hands of buyers with the sales-to-new listings ratio at historical lows. "This1 P3 f$ J' x" X" j4 Y9 r' Y
enormous imbalance suggests that prices will likely further correct in the
) g, @+ s7 ^5 H& E0 Umonths ahead," added Hogue.1 k5 q; I/ P ^8 m2 T2 d. Z
RBC's Affordability measure for a detached bungalow for Canada's largest
" G$ L* T) `; l1 w" T8 g+ p- ccities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
+ d7 O% a6 I+ k- f( T* U42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.& B+ j' K/ d' h' i3 w# Y0 U
The report also looked at mortgage carrying costs relative to incomes for
( r8 e, Q9 c/ }% }1 i2 {0 Za broader sampling of cities across the country, including Victoria. For these
5 \( S# ~5 c" b& ], Zcities, RBC has used a narrower measure of housing affordability that only) R% M# N2 y- v. }3 q
takes mortgage payments relative to income into account.
; {. R# p+ M. K! R0 p& S The Housing Affordability measure, which RBC has compiled since 1985, is
6 z* ] Z7 Z. K8 cbased on the costs of owning a detached bungalow, a reasonable property
$ d& g% J& R' `benchmark for the housing market. Alternative housing types are also presented# @1 p2 w5 z0 m n2 V4 y/ |
including a standard two-storey home, a standard townhouse and a standard2 ? n2 U5 V0 l; `) d
condominium. The higher the reading, the more costly it is to afford a home.# k; N) b9 o$ T5 w+ @
For example, an Affordability reading of 50 per cent means that homeownership
& l+ O. W$ _' Q' h9 Ycosts, including mortgage payments, utilities and property taxes, take up 50
# N U2 I& b( g/ Y+ S7 Z: Qper cent of a typical household's monthly pre-tax income.
7 K: Y: l. ^ K0 a# L4 n1 @8 P- K0 R* s ^8 Y+ J' E0 b" W, B
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. A0 c7 Q: [& G: h: c# ] d3 O2 L- I0 y4 U Highlights from across Canada:# i$ z1 ]/ I$ k9 k' d8 A& |
z* {9 D+ S/ C4 I! R. \: ~ - Alberta: Since last fall, the declining Alberta economy has
0 R0 H. d8 g7 `$ _7 H intensified the downdraft on the province's housing markets, causing. f6 w; P a( g0 [1 f4 n* I; @
home resales to drop to a 12-year low at the end of 2008 and rebound; ^+ A/ `# P# ?6 I
only modestly since. Affordability has been on an improving track3 |! G# c3 w9 j) P2 X" Z9 Z0 x7 O3 ^
since about the middle of 2007.
2 f9 J( e( |: X n7 Z - Saskatchewan: Market activity has cooled considerably from the, m6 b6 G( f- c1 x8 T% r
frenzied pace from 2006 to early 2008 and prices have begun to2 E. N5 t& m3 B7 G" O2 T2 e
decline. Nonetheless, economic and demographic fundamentals are still& _/ H3 J, c" Z
largely supportive of the housing market and overshadow extremely. _5 Q) P; G; K; t# u3 w- K) @
poor affordability levels.
- W% E1 _4 L8 f4 v# S7 p/ a" t' E - Manitoba: Manitoba's housing markets have fared much better than the
# |9 Q( f1 ~* N; ? ^ z; R vast majority in Canada: resale activity has slowed moderately and2 _; N# @& [$ e3 }
prices have either held their own or edged down just slightly.3 K y4 ]" O/ \: d/ i; }
Affordability has been kept out of the danger zone, helping to6 Y+ _7 s: F# Y) c5 H0 Q5 C
minimize any downside risks.
4 g1 j. K3 ^# r }6 c" a - Ontario: With the recession pounding many communities, housing market+ R( F0 m4 u/ l
conditions have deteriorated considerably. However, the impact is8 l6 r$ u; B& \, f
unlikely to develop into an all-out rout similar to that of the early
- v$ b3 N+ o, n* G- e 1990s. Affordability, while still causing some stress, is quickly
9 v: Z Z) W% {/ P+ ^6 K# C being restored to levels closer to long-term averages.
! h; o# q: X: F, i7 W9 P - Quebec: The province's housing markets have been among the last in u6 G/ z& W) z* \$ S
Canada to yield to the weakening trend. The main sign of cooling thus& Y# }4 O/ y, w4 @1 y* W4 W
far has been a drop in resale activity, as prices have held up& n$ t9 X$ C( ~
reasonably well. Some of the persisting market strength can be
/ @% s$ [! o x2 q) \6 J ascribed to sensible affordability levels, which had eroded only4 p9 N& ]6 r1 E2 m$ F3 |
modestly in recent years.' u1 b9 x% @+ l% k |
- Atlantic region: Markets have largely remained stable against the
- y% W6 @ M# u% V# k. t general housing downturn, with St. John's becoming the housing hot
: M" y" I$ e4 t/ r" o. d spot in Canada and Halifax and Saint John maintaining steady upward8 g8 D* u V/ [% v u* Z z
price momentum. The region is benefiting from improving affordability
* m8 F5 B: D E6 u# w# |8 p following two years of deterioration." G3 J' L; u' S. w [5 a- m
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