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British Columbia's housing affordability notably improved but still has far to go, says RBC
; e; U' e3 f# j2 v+ s' f! K TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the0 E1 h, `& u, D6 d* U' I
middle of a significant correction that is partly reversing the extensive
1 @6 P" L: X& N/ |# \gains of recent years and which is helping restore affordability conditions,5 g1 P ?: @$ l
according to the latest housing report released today by RBC Economics.6 g8 [ k& j( l8 b
"The province's housing markets remain under heavy downward pressure,"* D9 `8 {' @4 J% C- l
said Robert Hogue, senior economist, RBC. "While housing affordability is, [( j8 d; x/ U, [
improving as the correction process runs its course. RBC's affordability
5 T1 o1 P; w/ x4 Y; |measures for the province are still at levels far off historical averages."
, B8 U, n' _+ a7 k( f4 U) _0 ^- ~ RBC notes that the sharp rise in unemployment since last summer is* J/ M0 n# I4 t1 A- t- T
worrying households in the province and weighing down demand for housing,
0 h; u. x ?2 mwhich runs well short of available supply. Such weak market conditions have
+ o. g" Y9 z+ ~# L* Nsustained the declining trend in prices for both existing and new homes.
* X' A. }" v3 E U% g The RBC Affordability measure for British Columbia, which captures the
2 |9 F- r; A5 _7 Q% M2 Z/ w7 cproportion of pre-tax household income needed to service the costs of owning a8 A0 j, l: R# g; o }, }
home, improved across all housing segments in the last quarter of 2008.
2 M a' ^4 a, lAffordability of detached bungalows in the province moved to 66 per cent, the
& r: F# h6 P/ ]5 D4 Ustandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
7 B$ y N$ _& z- [the standard two-story home to 73.7 per cent.
7 J+ I1 q+ U6 d; u According to the report, there are signs that the B.C. housing markets
; U+ a2 E: `: M/ D, m- N. d8 S+ Vmay be stabilizing as sales of existing homes appear to have bottomed out in5 o9 t0 |/ X/ l0 x
the closing months of 2008 and the first two in 2009 - although at) `: q. U1 J7 j7 o/ Q& X
historically depressed levels.( ^, x/ P( C3 t4 K/ U
Despite sharply declining house prices and lower mortgage rates, the cost
J' h. t8 g z- Dof homeownership in Vancouver is still the highest in the country. House
0 E" J. |, ?! ?- _( eprices continue to rapidly decline and pricing power remains firmly in the% ]$ y" H/ S2 U% Z; z
hands of buyers with the sales-to-new listings ratio at historical lows. "This5 n& i7 Y7 G' P
enormous imbalance suggests that prices will likely further correct in the+ X) I; Q/ o0 ]1 a# q0 Z
months ahead," added Hogue.4 D0 j, ?0 |3 w g' M. i& j
RBC's Affordability measure for a detached bungalow for Canada's largest$ K7 W( _& `8 T) o- Z% S3 {9 g
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary4 _ h0 [, I2 ^5 W" Z* [
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
9 U: e( Y4 L) u. h$ s: _ The report also looked at mortgage carrying costs relative to incomes for. Z0 h6 a" r+ P1 W8 I; w7 a3 ^
a broader sampling of cities across the country, including Victoria. For these) ^6 I0 {4 u! [$ m6 q# c C9 }
cities, RBC has used a narrower measure of housing affordability that only
# S) s% C h/ p" @6 ^( K" qtakes mortgage payments relative to income into account.
% b2 I% S( g1 b( r9 [; w. W- a The Housing Affordability measure, which RBC has compiled since 1985, is1 W" }+ k5 |' h4 t Q {
based on the costs of owning a detached bungalow, a reasonable property
' c3 g, z) a: y) O7 o! }6 F3 g( zbenchmark for the housing market. Alternative housing types are also presented/ z' g" g- F6 t
including a standard two-storey home, a standard townhouse and a standard
* a7 ?" |) P5 T; T% ~condominium. The higher the reading, the more costly it is to afford a home.
: U* X. g+ M# @7 @+ Q, {For example, an Affordability reading of 50 per cent means that homeownership! B" s9 f0 Z$ ]/ i; G- g
costs, including mortgage payments, utilities and property taxes, take up 50
; Z R$ P) ]8 M) q: }7 zper cent of a typical household's monthly pre-tax income.
9 v: w4 i+ p3 u
+ z& h( Z' _5 P! b/ z& f/ y- S <<1 ]9 o0 I( e8 M! r
Highlights from across Canada:' W9 \* X# Y: N# ]9 r
' p, s9 f' x( l$ d
- Alberta: Since last fall, the declining Alberta economy has) T# K/ G3 _+ b3 b
intensified the downdraft on the province's housing markets, causing/ n U) U# m" E8 P. Y
home resales to drop to a 12-year low at the end of 2008 and rebound8 T. f3 W) e0 R; e, }) O
only modestly since. Affordability has been on an improving track5 B. C" X2 @/ i. {: q7 U) B
since about the middle of 2007.
9 L0 E2 l3 W8 d3 f6 F - Saskatchewan: Market activity has cooled considerably from the& h* g& @% ?* w! w1 m9 B' k
frenzied pace from 2006 to early 2008 and prices have begun to( @/ ~) l: r' t4 P/ c) B' p
decline. Nonetheless, economic and demographic fundamentals are still9 b5 {3 L+ Q V
largely supportive of the housing market and overshadow extremely
0 c. P5 C# i, ?2 G, ]- S poor affordability levels.
" N4 A5 S# R% h5 D7 W; j: D - Manitoba: Manitoba's housing markets have fared much better than the
! B" b/ t, R( w( U5 j0 p vast majority in Canada: resale activity has slowed moderately and1 X' z- G" m6 W4 P
prices have either held their own or edged down just slightly.; x; T+ w, j$ B! R: Y+ P1 \, j
Affordability has been kept out of the danger zone, helping to$ V+ U' e* Y+ c# H8 Z L$ ~( e
minimize any downside risks.
$ W: v& K* R. {; A - Ontario: With the recession pounding many communities, housing market" f, Q- a+ O, V, z! _$ \; q" e
conditions have deteriorated considerably. However, the impact is
* T2 b+ c, w8 s7 u2 x- e unlikely to develop into an all-out rout similar to that of the early! V# i" B9 q& q' X1 m" E4 o% J
1990s. Affordability, while still causing some stress, is quickly: u) v5 n' o/ @$ K
being restored to levels closer to long-term averages./ B; S# p' A* `( x' ?( k- I
- Quebec: The province's housing markets have been among the last in) [: t; v I. h2 A K
Canada to yield to the weakening trend. The main sign of cooling thus
?; g6 ~5 i2 K9 c- A( I4 f9 m far has been a drop in resale activity, as prices have held up- o. K7 l+ t1 {* f
reasonably well. Some of the persisting market strength can be
0 O: l, t, E7 k) f3 F) e; Q$ l; ? ] ascribed to sensible affordability levels, which had eroded only+ ]! |1 S$ X' K; c- v# M
modestly in recent years.
6 [) W) X0 j: Q) {' B9 d& P0 x - Atlantic region: Markets have largely remained stable against the
' v9 Z0 e# O, l1 B5 C8 `8 \7 V general housing downturn, with St. John's becoming the housing hot
0 g! d2 U/ Y- J: {5 } spot in Canada and Halifax and Saint John maintaining steady upward
4 |' Y4 i. \: |. b5 b price momentum. The region is benefiting from improving affordability: O3 y- u9 ?- D& h2 D
following two years of deterioration.
8 x2 @2 o( }$ ~$ q >> |
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