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British Columbia's housing affordability notably improved but still has far to go, says RBC
' v# n: C/ u4 U7 H( h9 N5 D4 E TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
3 i- V! e1 J. h% Nmiddle of a significant correction that is partly reversing the extensive+ ~- v" {+ M8 q; H3 ^/ z) F
gains of recent years and which is helping restore affordability conditions,0 A. P( _# P6 b3 C+ ~- `+ _
according to the latest housing report released today by RBC Economics.
: O/ y$ }5 c' X1 M: u5 P+ v "The province's housing markets remain under heavy downward pressure,"
O* u. H f qsaid Robert Hogue, senior economist, RBC. "While housing affordability is% ~0 j1 y! N7 `$ B8 {! `
improving as the correction process runs its course. RBC's affordability
& V) b5 K! A7 s. @: n3 wmeasures for the province are still at levels far off historical averages."* M, |1 c! U1 I( @0 \. P
RBC notes that the sharp rise in unemployment since last summer is
O6 b8 e X, `+ C" Iworrying households in the province and weighing down demand for housing,
# t! X4 y# i- U0 Bwhich runs well short of available supply. Such weak market conditions have
; ~# `3 R5 F2 T2 |9 H" Tsustained the declining trend in prices for both existing and new homes." m- M: Z4 w3 T: d: W. Q' M
The RBC Affordability measure for British Columbia, which captures the
, n& W& G+ B% w0 xproportion of pre-tax household income needed to service the costs of owning a
: @" S3 M1 ~; U g" B# q& r3 ahome, improved across all housing segments in the last quarter of 2008.
+ x% ]# S) p* R1 ]Affordability of detached bungalows in the province moved to 66 per cent, the& H4 h1 |6 ?: t1 i" y6 V, f2 v
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and1 e/ g8 O3 P/ t6 }
the standard two-story home to 73.7 per cent.7 u) B `" u) i% s$ U% A+ u. v0 n
According to the report, there are signs that the B.C. housing markets
1 I$ V7 }+ _6 M7 }% emay be stabilizing as sales of existing homes appear to have bottomed out in
1 s7 \6 }% ]# t) \the closing months of 2008 and the first two in 2009 - although at1 a0 `) r% Y8 L1 T
historically depressed levels.
2 E4 k/ F' o3 [1 h& T Despite sharply declining house prices and lower mortgage rates, the cost( b( g9 ]$ Y4 ?4 {
of homeownership in Vancouver is still the highest in the country. House( s7 ~/ U$ R/ H) @0 b/ s! w
prices continue to rapidly decline and pricing power remains firmly in the) D$ M2 M( h5 ^ G3 P5 d
hands of buyers with the sales-to-new listings ratio at historical lows. "This
0 I& u. g+ ?/ V; N" _4 oenormous imbalance suggests that prices will likely further correct in the! O5 P. Y8 h1 S+ _ m8 T& |4 {
months ahead," added Hogue.
# v9 x$ }* D* w( S RBC's Affordability measure for a detached bungalow for Canada's largest; X6 r- U' e" N0 Y
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
! E A$ k" y; l |( R; `: m42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.# X' R0 E- U/ G# W
The report also looked at mortgage carrying costs relative to incomes for
s0 t+ J2 t; da broader sampling of cities across the country, including Victoria. For these
1 B7 S( ~: ]9 S4 Q. Rcities, RBC has used a narrower measure of housing affordability that only
8 E% l& s( b& H4 d vtakes mortgage payments relative to income into account.8 q' e! [! v* u- ^
The Housing Affordability measure, which RBC has compiled since 1985, is$ Z8 w6 `. S' x
based on the costs of owning a detached bungalow, a reasonable property+ z2 `: z# T; c) k2 ?
benchmark for the housing market. Alternative housing types are also presented
- `, I9 S) G/ l, z) Lincluding a standard two-storey home, a standard townhouse and a standard
/ F! H( L# i8 G9 a9 S) b- V) w Ccondominium. The higher the reading, the more costly it is to afford a home.8 e* z* H2 [3 W- w
For example, an Affordability reading of 50 per cent means that homeownership
a$ B. ~) N1 h* O* vcosts, including mortgage payments, utilities and property taxes, take up 50# j8 A' W& [* j$ t. ^
per cent of a typical household's monthly pre-tax income.
# m9 y5 Z8 K% @4 |
) R& {: M z- |( \1 u+ I7 t <<
) I% P- G, E% S/ t# V/ ^ Highlights from across Canada:
' h4 O0 Y/ r3 @9 r/ W9 n: X, S* R W% i) k+ q9 X+ S
- Alberta: Since last fall, the declining Alberta economy has
" U# U4 K4 l$ ~9 C. D' e intensified the downdraft on the province's housing markets, causing! O( T$ B) I$ J! O
home resales to drop to a 12-year low at the end of 2008 and rebound& p8 P5 T, [7 `0 L. C$ }
only modestly since. Affordability has been on an improving track
, O9 x* ]% j- ?& _4 j3 P+ ~ since about the middle of 2007.
; G0 @1 N1 {' K2 l4 u2 X - Saskatchewan: Market activity has cooled considerably from the9 V8 F, d. j2 _3 q! [+ J- c
frenzied pace from 2006 to early 2008 and prices have begun to5 y4 \1 j7 J9 ?9 ~: i( ~1 O
decline. Nonetheless, economic and demographic fundamentals are still
! M* r( K* `1 d ?, a7 d. T. q4 X1 _' H largely supportive of the housing market and overshadow extremely3 d1 V4 [4 y4 K( p. y/ x/ B' {4 g
poor affordability levels.; P, o1 l( u: b$ |" B3 A8 w
- Manitoba: Manitoba's housing markets have fared much better than the
0 c- f3 [. \1 ~ vast majority in Canada: resale activity has slowed moderately and( g; i& ^5 V$ u! h1 D
prices have either held their own or edged down just slightly.
* k7 t$ _* u5 }, o% | f0 M4 E Affordability has been kept out of the danger zone, helping to
5 `! M# f7 U7 e5 k9 p minimize any downside risks.2 M2 n4 B! G" j& Z6 ]( X
- Ontario: With the recession pounding many communities, housing market% F) C7 T2 ~9 j1 k6 {6 o) i, m- k% B
conditions have deteriorated considerably. However, the impact is- c1 y5 m0 H6 c% `8 ]( m7 q9 a( @
unlikely to develop into an all-out rout similar to that of the early
3 o7 I9 G: g3 P 1990s. Affordability, while still causing some stress, is quickly
# F# p$ \( ^) t% U1 y) p being restored to levels closer to long-term averages. i, [5 x: a6 `6 D. |
- Quebec: The province's housing markets have been among the last in1 U; k* k1 ~: C: ?! ?6 ^
Canada to yield to the weakening trend. The main sign of cooling thus
+ G+ {. D h2 Y2 { far has been a drop in resale activity, as prices have held up k% g( n; n& R7 j3 ?" a K
reasonably well. Some of the persisting market strength can be: }* J0 ]7 {, Z
ascribed to sensible affordability levels, which had eroded only* v: Q8 J# Y3 Q
modestly in recent years.
, H4 q" S- G7 v" u: w6 C, y. M% u - Atlantic region: Markets have largely remained stable against the( ~4 K0 A' z) G4 u7 Y
general housing downturn, with St. John's becoming the housing hot8 z0 E# Y: e! b! i6 b% r8 x2 g9 m
spot in Canada and Halifax and Saint John maintaining steady upward; P% G; o6 z/ a: y
price momentum. The region is benefiting from improving affordability, }4 [2 K- S1 G6 H% Q- [6 y2 p
following two years of deterioration.
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