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British Columbia's housing affordability notably improved but still has far to go, says RBC
1 k: y) A* T7 Z TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
- Z. O. w1 L6 r9 }+ x9 V8 Bmiddle of a significant correction that is partly reversing the extensive
% z7 I* q- g% Y# |gains of recent years and which is helping restore affordability conditions,5 V, T1 M) l- m! l
according to the latest housing report released today by RBC Economics.9 l! d+ H$ ]1 Z u
"The province's housing markets remain under heavy downward pressure,"
5 g' ]0 E9 m2 i4 y) vsaid Robert Hogue, senior economist, RBC. "While housing affordability is
5 C0 k% n2 U* q$ n! m, yimproving as the correction process runs its course. RBC's affordability
$ i. [# Z, [" T9 {; tmeasures for the province are still at levels far off historical averages."5 n0 m. W1 P0 P0 v8 G
RBC notes that the sharp rise in unemployment since last summer is! D. v! ^4 F! d
worrying households in the province and weighing down demand for housing,4 s7 p7 x7 k7 g) C. a8 V' h
which runs well short of available supply. Such weak market conditions have7 w) K6 u. V# `6 h8 r5 r
sustained the declining trend in prices for both existing and new homes.8 C1 ^8 f, e. E1 d! j
The RBC Affordability measure for British Columbia, which captures the" b3 K# r5 S5 Q6 a3 U
proportion of pre-tax household income needed to service the costs of owning a
# b- i9 X( ^( h1 c) ~ G2 Ahome, improved across all housing segments in the last quarter of 2008.) _ |- Q* Y1 L E
Affordability of detached bungalows in the province moved to 66 per cent, the8 w, e$ Q) } G& b+ ?, h* D
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and4 U, R& ? E- M" n$ }
the standard two-story home to 73.7 per cent.
1 g! T4 A2 G7 m! ~: Y+ J! J1 O% n0 K According to the report, there are signs that the B.C. housing markets4 b5 ?( e+ [, w
may be stabilizing as sales of existing homes appear to have bottomed out in) v, P- a, G: i, L/ _
the closing months of 2008 and the first two in 2009 - although at
: m; { B4 U* Ihistorically depressed levels.# W6 z; K" w5 e
Despite sharply declining house prices and lower mortgage rates, the cost0 C0 Z. Y4 l! t6 e- K R( f5 l
of homeownership in Vancouver is still the highest in the country. House
3 ?- u+ [3 R! A' qprices continue to rapidly decline and pricing power remains firmly in the
2 N# c$ P% u6 f( shands of buyers with the sales-to-new listings ratio at historical lows. "This
2 {. A& `& ?7 |4 w4 ?( E3 B- Q* F' q" R6 `enormous imbalance suggests that prices will likely further correct in the
) A" |! c A' j3 G! f; ]months ahead," added Hogue.0 y0 q1 g+ {9 r1 Y% \8 @
RBC's Affordability measure for a detached bungalow for Canada's largest1 A. C& @5 s" ]/ f% s" W. l
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary4 O m) z9 G& s
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.( B) [% F# L) z6 u; E( C) |
The report also looked at mortgage carrying costs relative to incomes for- D% Z6 I' }3 \% G8 @2 \
a broader sampling of cities across the country, including Victoria. For these9 [, s A; o, d6 R* {1 V0 m& f
cities, RBC has used a narrower measure of housing affordability that only
9 k, ?3 y9 `6 F6 Y( n @2 I4 U, O% Ttakes mortgage payments relative to income into account.' Y% C& I- R2 r9 A1 Y9 y
The Housing Affordability measure, which RBC has compiled since 1985, is
- P5 E1 R C, j# ]1 y, ybased on the costs of owning a detached bungalow, a reasonable property" q+ D- ]; b8 q; \. r8 @
benchmark for the housing market. Alternative housing types are also presented
9 r0 y! v& W5 e, xincluding a standard two-storey home, a standard townhouse and a standard6 o4 O1 ?6 N) n3 F# u, [. `: [! M
condominium. The higher the reading, the more costly it is to afford a home.
1 }% a6 Z4 @! k9 `& M, {For example, an Affordability reading of 50 per cent means that homeownership
1 a% m7 W# H3 K+ Dcosts, including mortgage payments, utilities and property taxes, take up 50( M% _1 T/ z: Z; i9 T
per cent of a typical household's monthly pre-tax income.3 X. u1 w! p" R. v- L3 ^$ {, S
, }0 W2 b3 s9 X7 A- n8 V& l2 h <<
/ b0 {! n: J/ C: @0 N7 \& j Highlights from across Canada:4 b4 v" d! K/ F0 }9 ]$ L3 z* ?
3 F. n" g/ m7 P$ Y - Alberta: Since last fall, the declining Alberta economy has* C) m' Q- N3 D9 U3 m3 C* Z% g
intensified the downdraft on the province's housing markets, causing
4 p, M1 G# K% S6 u. w- d home resales to drop to a 12-year low at the end of 2008 and rebound# i2 J" P* a: e4 B! l) R
only modestly since. Affordability has been on an improving track$ z8 I1 M; ]" {+ T
since about the middle of 2007.
; V3 v9 @+ u; o+ f% q7 H: a - Saskatchewan: Market activity has cooled considerably from the! ] p# x8 ~# l' Z5 @
frenzied pace from 2006 to early 2008 and prices have begun to* F* M) h1 e8 L- E! v; H
decline. Nonetheless, economic and demographic fundamentals are still
+ c9 a* ^: H* r" e% Q! b# o) M* d largely supportive of the housing market and overshadow extremely
% P" r9 A5 V. { poor affordability levels.( O2 G+ z) S3 x; `& K
- Manitoba: Manitoba's housing markets have fared much better than the {' `$ Q1 P0 F4 ?! E- H
vast majority in Canada: resale activity has slowed moderately and
: Y& K2 \5 E) P# w8 i3 W prices have either held their own or edged down just slightly.
7 d* b! ?; H1 C X' w4 R% c' b+ H Affordability has been kept out of the danger zone, helping to7 I$ y2 c$ v6 z% P
minimize any downside risks.
. ]& ?5 [" v' j8 S. A# ~ - Ontario: With the recession pounding many communities, housing market( I' P* {7 r9 H) f4 c
conditions have deteriorated considerably. However, the impact is3 d# ?6 `6 p+ q$ b
unlikely to develop into an all-out rout similar to that of the early
5 N. U' f2 Q9 {8 { 1990s. Affordability, while still causing some stress, is quickly
4 x' V# F) r* E) j5 x being restored to levels closer to long-term averages.3 w4 F6 R7 O* P- Q0 }, Q |0 @8 r/ {
- Quebec: The province's housing markets have been among the last in
( w: E$ y9 o! P, k% p: r( G/ T& t L Canada to yield to the weakening trend. The main sign of cooling thus7 |4 C+ s! I) I! T+ A4 f0 d' D( n# C
far has been a drop in resale activity, as prices have held up
! o6 e1 E% Y' U! `2 i6 \/ { reasonably well. Some of the persisting market strength can be
! i2 l8 i1 A& @( i' N. W ascribed to sensible affordability levels, which had eroded only
; v" p4 G, b, u4 H! E modestly in recent years.
7 H, I5 E" a3 A4 I! g7 w7 G - Atlantic region: Markets have largely remained stable against the0 G( f9 _) k$ ]7 ^( Y
general housing downturn, with St. John's becoming the housing hot
2 Z- G' x% |5 e1 r. v9 g! V spot in Canada and Halifax and Saint John maintaining steady upward1 K8 j m5 d) Y; c' ]2 Q
price momentum. The region is benefiting from improving affordability" D0 C6 j8 E7 ?- K) E K" p! x
following two years of deterioration.
* K- ]% [0 R, {+ x3 x >> |
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