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British Columbia's housing affordability notably improved but still has far to go, says RBC
& r8 u! N" q6 k ]; U' D TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the3 P5 }" [3 B& a
middle of a significant correction that is partly reversing the extensive9 O: |* G4 v2 \
gains of recent years and which is helping restore affordability conditions, i9 W8 x$ W! F5 {/ `
according to the latest housing report released today by RBC Economics.7 N4 f, _9 ?# x# r$ j; v
"The province's housing markets remain under heavy downward pressure,"
3 V" A" l- M. `* msaid Robert Hogue, senior economist, RBC. "While housing affordability is1 |& x+ y* F) s0 Q! M5 m
improving as the correction process runs its course. RBC's affordability7 e3 W+ r% b3 u
measures for the province are still at levels far off historical averages."3 t) j/ i9 v& ]5 U& m& V+ b* b
RBC notes that the sharp rise in unemployment since last summer is) [- F6 |& x: i7 h* R
worrying households in the province and weighing down demand for housing,) s$ w( i8 t3 N
which runs well short of available supply. Such weak market conditions have
o8 a5 P, A8 M* [sustained the declining trend in prices for both existing and new homes.
0 Q( R7 N$ X: g# d8 Z. C a0 P; F5 I N The RBC Affordability measure for British Columbia, which captures the
9 ^+ b" u: j5 g8 Tproportion of pre-tax household income needed to service the costs of owning a
9 { [! {' L' p2 Qhome, improved across all housing segments in the last quarter of 2008.
& u+ l! g+ h2 W9 x0 b/ L; AAffordability of detached bungalows in the province moved to 66 per cent, the/ K' R$ F, l( r5 R/ v( p4 x, [9 u
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
3 E- V( {, t* athe standard two-story home to 73.7 per cent.
: O4 e$ Z: d2 T According to the report, there are signs that the B.C. housing markets8 J9 p; N* ~* S2 L S/ p
may be stabilizing as sales of existing homes appear to have bottomed out in _; x T4 N( d4 T2 p# R
the closing months of 2008 and the first two in 2009 - although at
& T5 D0 \5 t6 `% p+ Jhistorically depressed levels.
9 z1 G6 M* q5 v Z0 ?; Z Despite sharply declining house prices and lower mortgage rates, the cost1 D m J* J% R2 h( J7 r
of homeownership in Vancouver is still the highest in the country. House7 u. b9 q! F' k: g: n0 K, q
prices continue to rapidly decline and pricing power remains firmly in the7 l( N; V" d+ \ a8 L9 M
hands of buyers with the sales-to-new listings ratio at historical lows. "This2 G6 `. G F6 A/ X5 u! v: O$ o# n1 D
enormous imbalance suggests that prices will likely further correct in the
: G! f6 t5 h- E0 X8 Gmonths ahead," added Hogue.
E+ F& x4 ], @) S. s RBC's Affordability measure for a detached bungalow for Canada's largest
2 I0 A" w( p* Kcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary0 Y9 C) q& x' B+ [" P6 X6 S
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
* m- J+ l0 k, ~& c8 L& j" k The report also looked at mortgage carrying costs relative to incomes for" Q( X. _( o0 c V: K6 ~; `' T2 q
a broader sampling of cities across the country, including Victoria. For these- z! n9 t- p0 g& N2 `
cities, RBC has used a narrower measure of housing affordability that only
: u$ ^; j& V, W9 h2 M t9 x& T5 ?* N+ ktakes mortgage payments relative to income into account.9 |2 L$ E6 c) s: ^' l4 D# D
The Housing Affordability measure, which RBC has compiled since 1985, is
4 X) Y2 J4 }3 x8 @8 u# V% e' Ibased on the costs of owning a detached bungalow, a reasonable property, O: }. R" W" z; S
benchmark for the housing market. Alternative housing types are also presented. K# e8 W0 G. m( I
including a standard two-storey home, a standard townhouse and a standard$ `$ A% R, Z# ?5 a+ {1 J& t; O" C
condominium. The higher the reading, the more costly it is to afford a home." J: E5 s. r4 t. e. g) I
For example, an Affordability reading of 50 per cent means that homeownership; g/ m4 `5 q2 R* E$ K
costs, including mortgage payments, utilities and property taxes, take up 50
. d9 ^# e' M9 v) D; Dper cent of a typical household's monthly pre-tax income. F. j, W% K" [, ?+ P: |
0 q7 u2 x- J9 {! i' ^& C! ^ <<
% g% f3 e% I2 M Highlights from across Canada:
6 p& n4 F& {" i, ]0 P
* t% H# `: C1 G/ y- s7 |# R4 Q - Alberta: Since last fall, the declining Alberta economy has
6 k; R- {% n8 |, ?; T9 j intensified the downdraft on the province's housing markets, causing
& `1 \, i: n" r' I8 Q" i home resales to drop to a 12-year low at the end of 2008 and rebound
$ M! B5 x8 X8 [; L' e) c only modestly since. Affordability has been on an improving track
' A2 S/ G0 G; S. O since about the middle of 2007.9 I7 i" D( Y# F, e$ l% B
- Saskatchewan: Market activity has cooled considerably from the% \: }0 `$ t8 p2 [+ i
frenzied pace from 2006 to early 2008 and prices have begun to
/ e2 H9 s3 O6 H, Z6 \ decline. Nonetheless, economic and demographic fundamentals are still
: a1 ~- ]9 M0 K9 E" K2 V: { largely supportive of the housing market and overshadow extremely
; {0 y) S2 k( I, m7 K3 f& M/ j poor affordability levels.
6 M7 n+ R' U7 d2 s1 k4 p0 v - Manitoba: Manitoba's housing markets have fared much better than the# `+ k9 U' I" m4 B* r
vast majority in Canada: resale activity has slowed moderately and
" o' M& g& n# j: D; s, ? prices have either held their own or edged down just slightly.$ `1 i3 \% ~ s% x# C. g
Affordability has been kept out of the danger zone, helping to
* v x! D1 b8 d minimize any downside risks.
) ?" P0 w4 d: @; S, B7 ~) \6 _) j2 A6 V - Ontario: With the recession pounding many communities, housing market. e2 J. ~9 N) s; n6 Z1 e
conditions have deteriorated considerably. However, the impact is% M9 F0 r0 p- S. l& ^
unlikely to develop into an all-out rout similar to that of the early
! O$ Q) A( t' q+ z 1990s. Affordability, while still causing some stress, is quickly
% e, y( I+ B4 j6 n* H being restored to levels closer to long-term averages.
; z( c7 U4 @: O1 k - Quebec: The province's housing markets have been among the last in
- M1 s& n) ~: b& h X; b9 k! x Canada to yield to the weakening trend. The main sign of cooling thus
- g5 ?5 D1 a" ?9 c far has been a drop in resale activity, as prices have held up9 F1 |: q9 P* r; x F& Y/ Q
reasonably well. Some of the persisting market strength can be
7 ]' t3 Q3 z" \7 g ascribed to sensible affordability levels, which had eroded only' k6 \- Y( G- q! K
modestly in recent years.
* F u. C9 Q0 d! A7 P: i - Atlantic region: Markets have largely remained stable against the
! W5 x8 z! [8 b! |% A general housing downturn, with St. John's becoming the housing hot/ f) h$ ]1 g0 G O) }3 q& |
spot in Canada and Halifax and Saint John maintaining steady upward9 I6 @* z3 A* @' |/ e
price momentum. The region is benefiting from improving affordability2 G' m3 U) h0 J
following two years of deterioration.
6 U v3 ^0 Z9 N! l% h >> |
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