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British Columbia's housing affordability notably improved but still has far to go, says RBC
+ G/ n# D: p7 N( t0 B TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
% Q' T* ]1 `; l6 r' @: J0 u7 Nmiddle of a significant correction that is partly reversing the extensive
8 C* y9 u8 a& [0 T* _gains of recent years and which is helping restore affordability conditions,+ r3 @( J; D) ^- N
according to the latest housing report released today by RBC Economics.
$ q0 |5 b6 N/ K8 s# S; x "The province's housing markets remain under heavy downward pressure,"/ [/ ?' P1 \) B% q+ {3 v
said Robert Hogue, senior economist, RBC. "While housing affordability is
0 t. ^8 [* d/ Q3 L' d4 n% D( zimproving as the correction process runs its course. RBC's affordability
" O9 j& `' j U, z5 [. Imeasures for the province are still at levels far off historical averages."( @# l. l# x j0 Y' N. a5 E$ V. y
RBC notes that the sharp rise in unemployment since last summer is
+ l' P: P+ z! \1 t: f4 m) lworrying households in the province and weighing down demand for housing,0 Y/ ]2 i6 ], X: A3 B* [
which runs well short of available supply. Such weak market conditions have
8 A0 e: b% b) l$ L9 o$ }# ~sustained the declining trend in prices for both existing and new homes.5 G# O. k9 j0 c4 ?( L2 {- F
The RBC Affordability measure for British Columbia, which captures the
( C1 u! I& d# c" F V. Qproportion of pre-tax household income needed to service the costs of owning a+ V$ O$ ?$ `4 _/ J6 I/ n
home, improved across all housing segments in the last quarter of 2008.' L3 d2 i3 _1 C- M0 l9 X/ z1 ?1 j
Affordability of detached bungalows in the province moved to 66 per cent, the
9 H* ?) B# K3 |3 S: X$ p+ Hstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and; c" c( \* [4 h9 d1 g. e( I
the standard two-story home to 73.7 per cent.4 f$ x. W/ B( d, L9 [' O
According to the report, there are signs that the B.C. housing markets
& f. D8 @% r4 Z6 tmay be stabilizing as sales of existing homes appear to have bottomed out in
. i4 J- @) w: h' h$ @) |the closing months of 2008 and the first two in 2009 - although at
$ K( U, n' C4 shistorically depressed levels.# |1 Q8 \7 ?" ^4 D- t- e- ]& d5 N- R
Despite sharply declining house prices and lower mortgage rates, the cost. q7 h% E; W. G% S7 {
of homeownership in Vancouver is still the highest in the country. House6 t* @2 Y% }) { x; J9 D7 @
prices continue to rapidly decline and pricing power remains firmly in the1 Z2 J$ O" ?' ~3 L
hands of buyers with the sales-to-new listings ratio at historical lows. "This
}/ } z. W/ A4 T; o% I9 d; p1 |enormous imbalance suggests that prices will likely further correct in the! N- z& p9 g H+ q. L- P
months ahead," added Hogue.
/ |9 x g, p* y& L RBC's Affordability measure for a detached bungalow for Canada's largest- N+ x8 J6 S& e+ _) u4 n' e( @; k( |
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
1 n, N- r+ v5 Q' ~& B2 ?8 S42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent. ?- _9 ?8 Z/ {3 W
The report also looked at mortgage carrying costs relative to incomes for5 A4 x4 U2 H9 S* @7 b( O2 |. k
a broader sampling of cities across the country, including Victoria. For these
9 n, i( N3 M) z% e: L. k( p$ }) Rcities, RBC has used a narrower measure of housing affordability that only
& B$ @8 @! O; ltakes mortgage payments relative to income into account.
( a8 ^. n+ _3 N$ G; v The Housing Affordability measure, which RBC has compiled since 1985, is
2 T$ H$ C J+ u. N# t! y$ Mbased on the costs of owning a detached bungalow, a reasonable property
5 g7 d U! ]% y0 j5 T/ j/ U$ Kbenchmark for the housing market. Alternative housing types are also presented: y3 V. M% \3 T9 J+ y: L8 B
including a standard two-storey home, a standard townhouse and a standard
$ t+ @- @6 k$ `# M" r) Lcondominium. The higher the reading, the more costly it is to afford a home.
, y6 c! v% E" @" UFor example, an Affordability reading of 50 per cent means that homeownership
6 y4 @! g0 t. ?$ c2 E6 N) Ccosts, including mortgage payments, utilities and property taxes, take up 50
' E; z3 e, Z8 d/ W- p5 vper cent of a typical household's monthly pre-tax income.8 b% N" X6 R* ?7 Q
, b3 i. B9 p e7 A+ H( z( n7 } <<7 u% k; h6 P& B F' A
Highlights from across Canada:
2 `, W/ l0 }# \0 q6 ^$ K9 |1 N) X+ D, e5 d' A2 p& w8 G
- Alberta: Since last fall, the declining Alberta economy has
+ l8 H3 _8 r+ G$ `7 q4 f intensified the downdraft on the province's housing markets, causing4 J. O6 |2 F: H3 S, ^
home resales to drop to a 12-year low at the end of 2008 and rebound V- g+ f6 I4 [( m9 `/ H8 J
only modestly since. Affordability has been on an improving track1 P3 U9 L1 M! G8 W7 c i
since about the middle of 2007.
5 Q- W0 D' { ~4 ~ - Saskatchewan: Market activity has cooled considerably from the
% J$ J9 G$ o. m' x frenzied pace from 2006 to early 2008 and prices have begun to8 F N/ D' L* W# r- Q8 n
decline. Nonetheless, economic and demographic fundamentals are still" h# J) b9 f: b2 x6 ]0 D4 s z; }7 u
largely supportive of the housing market and overshadow extremely/ Q. D. z6 o2 I. [
poor affordability levels.
( V) ]+ E; G6 f J* O - Manitoba: Manitoba's housing markets have fared much better than the' D4 l$ w% I9 q2 B7 j: D8 J0 m
vast majority in Canada: resale activity has slowed moderately and, \0 \! u" [, P* Z4 }
prices have either held their own or edged down just slightly.
7 z* g! z2 j! `8 ?6 D5 i Affordability has been kept out of the danger zone, helping to6 {; [' i" |! w- b% D
minimize any downside risks.
5 [8 A0 M& Q f0 }3 r - Ontario: With the recession pounding many communities, housing market
+ H; q! T/ Z% j% q6 O conditions have deteriorated considerably. However, the impact is
, m( T- c* M | unlikely to develop into an all-out rout similar to that of the early1 Y2 M4 P# g+ w6 _
1990s. Affordability, while still causing some stress, is quickly$ M/ K) E! a( `5 L9 R. v( \
being restored to levels closer to long-term averages.6 C: W! Q# R' l# [. ?( U
- Quebec: The province's housing markets have been among the last in
% c! e8 Q$ ~ J* l, W1 }! S2 G Canada to yield to the weakening trend. The main sign of cooling thus9 i7 Q5 T+ j( u* g
far has been a drop in resale activity, as prices have held up
; `9 x$ V' b( u; s0 m reasonably well. Some of the persisting market strength can be- p2 y6 j) l7 i! i! ]$ t9 m
ascribed to sensible affordability levels, which had eroded only; B. h9 z: M! P" w. F1 E, G
modestly in recent years.
4 D! a8 ~" i( d: M6 I, ]. u - Atlantic region: Markets have largely remained stable against the1 V& j/ Y! w: d+ Y; B3 h: G
general housing downturn, with St. John's becoming the housing hot% Q2 B; E6 l2 ]8 O/ C$ [! o
spot in Canada and Halifax and Saint John maintaining steady upward
& I7 Q) w; B" `/ `" V: w- B price momentum. The region is benefiting from improving affordability
6 n3 r5 _8 T1 z/ e3 d0 c% e! b following two years of deterioration., a7 X6 I, {! @% B* A! _) o
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