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British Columbia's housing affordability notably improved but still has far to go, says RBC
* G( M. c8 n/ U! @1 K TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
) ]. c1 J2 h& e; Smiddle of a significant correction that is partly reversing the extensive
+ e( n$ N% Y- \* i7 Vgains of recent years and which is helping restore affordability conditions, |: J; v$ i$ Y. S4 Q
according to the latest housing report released today by RBC Economics.
) }2 K) m8 K7 j P "The province's housing markets remain under heavy downward pressure,"4 e& o1 w/ F1 V2 w0 k
said Robert Hogue, senior economist, RBC. "While housing affordability is. G7 U0 {" \# x4 f! e
improving as the correction process runs its course. RBC's affordability
4 J+ f0 \+ s2 H6 N, m& O& _measures for the province are still at levels far off historical averages."
. W' ?3 W e3 p; u7 w) Q RBC notes that the sharp rise in unemployment since last summer is- @( @' T/ ~! f& h! s" n3 ^
worrying households in the province and weighing down demand for housing,4 C) h( Y: ?/ e$ B2 W$ k
which runs well short of available supply. Such weak market conditions have" K7 i% Q% {" E( G1 E* U
sustained the declining trend in prices for both existing and new homes.
7 [) q* S; _. b% i- Y The RBC Affordability measure for British Columbia, which captures the; q& i% Q8 r# W
proportion of pre-tax household income needed to service the costs of owning a
8 s/ |: [! U; Q; B/ y( |, m* Mhome, improved across all housing segments in the last quarter of 2008.
/ p* t& M6 U9 A5 `, X' R! QAffordability of detached bungalows in the province moved to 66 per cent, the
* { j) r6 {- H: h( u% Lstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
2 P1 t# @/ f6 r7 e! Bthe standard two-story home to 73.7 per cent.
( q* [9 U6 ]* \- y- s7 L According to the report, there are signs that the B.C. housing markets
# M0 t1 g* O1 j$ V [& \may be stabilizing as sales of existing homes appear to have bottomed out in! r/ ^8 k" v& [5 Q
the closing months of 2008 and the first two in 2009 - although at a; X% b. \( J$ i3 `
historically depressed levels.
# m' z B& } d8 o Despite sharply declining house prices and lower mortgage rates, the cost
2 z: _ O+ E' f9 t4 T, ^of homeownership in Vancouver is still the highest in the country. House
* T% X [% O" B( Jprices continue to rapidly decline and pricing power remains firmly in the Y! R! z6 j4 `" r7 g9 R
hands of buyers with the sales-to-new listings ratio at historical lows. "This+ \" c$ E) L* C
enormous imbalance suggests that prices will likely further correct in the
3 P9 Y6 s, v: s- m! V; b- {8 I; Z1 |months ahead," added Hogue.. n! f3 ?7 l0 w+ G/ W: Z
RBC's Affordability measure for a detached bungalow for Canada's largest
, j2 {- q& V1 T1 d( \' gcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary1 \, X$ T# R/ {2 `, I% e; F
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.' a; k) n# I1 q5 R
The report also looked at mortgage carrying costs relative to incomes for
, `* s- v5 z/ h: L4 Pa broader sampling of cities across the country, including Victoria. For these5 p' L. O6 e! o) D
cities, RBC has used a narrower measure of housing affordability that only
; @- F! X+ P+ T' gtakes mortgage payments relative to income into account.+ S0 O G) H6 I1 @; C
The Housing Affordability measure, which RBC has compiled since 1985, is
2 |# l7 G0 k# l6 |4 V3 r, D* z1 W4 }based on the costs of owning a detached bungalow, a reasonable property1 Z0 g2 E& f- v4 }
benchmark for the housing market. Alternative housing types are also presented0 {6 w4 f9 z# s3 ]1 N
including a standard two-storey home, a standard townhouse and a standard; I# j& E3 n; s0 v
condominium. The higher the reading, the more costly it is to afford a home.7 X4 \) Q& m9 m+ R( V5 L0 h9 G4 k
For example, an Affordability reading of 50 per cent means that homeownership r" p. m- i5 j
costs, including mortgage payments, utilities and property taxes, take up 50, W' p) D4 I0 c
per cent of a typical household's monthly pre-tax income.) ]3 n- Z/ g& H/ ~
- Q5 m+ g' v- o; v3 P <<! e6 X0 O2 k* r1 v& f: o$ C; R
Highlights from across Canada:8 `& C" }8 J, O( A" f
) C4 z' c. S9 h s1 f
- Alberta: Since last fall, the declining Alberta economy has
! o+ j4 r3 x5 K9 M9 I8 u intensified the downdraft on the province's housing markets, causing8 r6 ]- @# Z2 X! E
home resales to drop to a 12-year low at the end of 2008 and rebound& F: `7 o, ~% e
only modestly since. Affordability has been on an improving track
( Q& t% e' v) m3 \1 T4 o( I6 X since about the middle of 2007.
' v2 v; x1 m' V. t0 v( q% j - Saskatchewan: Market activity has cooled considerably from the
9 t* p$ D6 H& Y2 J) m7 W frenzied pace from 2006 to early 2008 and prices have begun to. p! s. ^% {! @' l' V) }% N" A! L
decline. Nonetheless, economic and demographic fundamentals are still
, }( d6 B( u1 Z: W# m$ N( y+ X largely supportive of the housing market and overshadow extremely
# c! q( `& E5 K! w# N5 |! T4 _ poor affordability levels.2 _/ b" f0 M% `. Q" @
- Manitoba: Manitoba's housing markets have fared much better than the# B: `- d0 d7 ~1 O* v7 r
vast majority in Canada: resale activity has slowed moderately and
2 W' |- K) T0 y5 a2 a5 o$ c/ f prices have either held their own or edged down just slightly.
) L! F7 U I' y* P. Z5 a$ D8 n Affordability has been kept out of the danger zone, helping to
n% o& o, {, t; ^" I minimize any downside risks.
d' T$ X+ _0 G - Ontario: With the recession pounding many communities, housing market
/ n1 N) h1 Y, N* F6 K) C conditions have deteriorated considerably. However, the impact is/ O" m" Y, Q. P/ H* @
unlikely to develop into an all-out rout similar to that of the early
* J! p, G' d4 }! Q 1990s. Affordability, while still causing some stress, is quickly
* c! j7 j- M" m% u5 S% u) B being restored to levels closer to long-term averages. @6 J( \$ z& Z
- Quebec: The province's housing markets have been among the last in
+ q& N( O9 ]" ] Canada to yield to the weakening trend. The main sign of cooling thus+ b7 \; C* T! |6 R5 u
far has been a drop in resale activity, as prices have held up
: I6 G$ O$ W* W3 } reasonably well. Some of the persisting market strength can be3 o0 V- \- B2 ]2 w. _1 b+ e v" I
ascribed to sensible affordability levels, which had eroded only( T( Y2 Z+ k. N1 y7 U
modestly in recent years.
" m$ e- B8 z5 c' q9 K2 l* H - Atlantic region: Markets have largely remained stable against the
6 @+ K0 B( T, ~+ d+ w5 D6 T1 N C general housing downturn, with St. John's becoming the housing hot
! ^6 H+ {4 ^" U+ c! q1 ]; S1 ?: r* J spot in Canada and Halifax and Saint John maintaining steady upward
: p6 l4 Y! W( v& P$ } price momentum. The region is benefiting from improving affordability
) a, U B3 ?9 G( C+ ` following two years of deterioration.
9 Y# e; d! I% J$ ` d >> |
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