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British Columbia's housing affordability notably improved but still has far to go, says RBC
! e# F* B: v2 L TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
/ F& X/ O& B, x6 V' Smiddle of a significant correction that is partly reversing the extensive
/ F7 J8 j$ j2 V0 ~5 q& a! Ogains of recent years and which is helping restore affordability conditions,- e, }. U, A" d1 T. Q! t8 U5 n
according to the latest housing report released today by RBC Economics.
* g# v8 x5 p/ ?! i1 v% ` "The province's housing markets remain under heavy downward pressure,"0 G% k3 A- d5 D% b
said Robert Hogue, senior economist, RBC. "While housing affordability is
6 ^4 w9 x$ T' x" B/ j( s8 |improving as the correction process runs its course. RBC's affordability
: X$ s4 c* q" m8 W4 V9 ^measures for the province are still at levels far off historical averages."
6 D. k z2 t1 R* J RBC notes that the sharp rise in unemployment since last summer is }5 H% \7 a8 Q: f4 |
worrying households in the province and weighing down demand for housing,0 n; }$ o& ?- Y6 _7 e8 k/ Y
which runs well short of available supply. Such weak market conditions have) R0 e/ P; E+ L: B2 l4 D- m3 t
sustained the declining trend in prices for both existing and new homes.1 W, ~+ o, ]4 X9 G5 P' F
The RBC Affordability measure for British Columbia, which captures the* Q; z2 y7 t6 p
proportion of pre-tax household income needed to service the costs of owning a
. y) u1 a$ @( N' }( L7 Chome, improved across all housing segments in the last quarter of 2008.! g/ d& X8 Z6 h$ E
Affordability of detached bungalows in the province moved to 66 per cent, the' S3 P6 O- X* f$ L. N
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
& b0 l2 Q! ?7 g" Z* ]3 A. B4 lthe standard two-story home to 73.7 per cent.3 Q' w4 q" }' }5 j) u
According to the report, there are signs that the B.C. housing markets2 G0 T/ S/ Q9 g3 g8 E! l
may be stabilizing as sales of existing homes appear to have bottomed out in9 [: h: h; Z" v( ^
the closing months of 2008 and the first two in 2009 - although at& N* [2 N! B% }# E
historically depressed levels.; ^8 s5 Q& L& T r8 ?0 Q4 K
Despite sharply declining house prices and lower mortgage rates, the cost
: }4 f( o' M2 p2 r" I* Eof homeownership in Vancouver is still the highest in the country. House, ~2 v# S/ b' v$ f! Z6 j0 o
prices continue to rapidly decline and pricing power remains firmly in the T5 @8 t2 e L, Z
hands of buyers with the sales-to-new listings ratio at historical lows. "This8 y) l+ B6 ^6 j7 E( {
enormous imbalance suggests that prices will likely further correct in the
1 O9 U/ G( V* Y" ~% \; ^3 Zmonths ahead," added Hogue.
, y, f- f0 v ?' e9 P' t: R RBC's Affordability measure for a detached bungalow for Canada's largest
. r9 G; G! x; @' t: rcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
% M' l T0 Y/ q3 m2 M$ J42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.3 T7 {% M5 A n1 [+ a- A
The report also looked at mortgage carrying costs relative to incomes for
, c" \5 Z% q+ ?; ha broader sampling of cities across the country, including Victoria. For these' e6 l% E* \$ I
cities, RBC has used a narrower measure of housing affordability that only
4 ^ r4 t& q Z1 |0 _takes mortgage payments relative to income into account.
: B4 f5 l# h/ S; D: Q The Housing Affordability measure, which RBC has compiled since 1985, is- N' ?1 |- ~* N$ l; f$ _, n( W3 O3 ~
based on the costs of owning a detached bungalow, a reasonable property
! O8 C' ?$ {' C: y" u- [! jbenchmark for the housing market. Alternative housing types are also presented
+ S) `6 r$ q0 K+ ^$ Hincluding a standard two-storey home, a standard townhouse and a standard6 V# k: m; G0 q9 n) Y5 @; m
condominium. The higher the reading, the more costly it is to afford a home.* `, b- Q: z9 r7 L2 G% C5 D
For example, an Affordability reading of 50 per cent means that homeownership
0 S8 K/ z5 M9 i) Q$ Scosts, including mortgage payments, utilities and property taxes, take up 50
% y, C" b: N/ o9 L7 T/ k% w2 pper cent of a typical household's monthly pre-tax income.
! ~. g! R2 ^1 ~0 {3 N- k: x x& `7 `$ B
<<
. m9 g3 l! x4 p, S Highlights from across Canada:
4 h, N3 S. Q- ~/ r/ d1 N7 g0 T0 n. x( D B
- Alberta: Since last fall, the declining Alberta economy has& a; R$ B* @: \2 J6 b
intensified the downdraft on the province's housing markets, causing4 _1 n9 r3 i0 u# i9 e
home resales to drop to a 12-year low at the end of 2008 and rebound
$ N3 y8 l1 q g: ~+ z only modestly since. Affordability has been on an improving track
+ U9 k. |$ s4 L since about the middle of 2007.
% h7 \* x- l7 r1 ] - Saskatchewan: Market activity has cooled considerably from the1 v: `+ X& f! K# v, l; |$ H& H5 [
frenzied pace from 2006 to early 2008 and prices have begun to6 b. V5 D* ? l/ Q( f
decline. Nonetheless, economic and demographic fundamentals are still
- i1 r& @& G: d$ }; [1 U$ x) t largely supportive of the housing market and overshadow extremely
/ f3 q+ f! c' p- N5 r poor affordability levels.
! p- J b6 c! D3 ?& A - Manitoba: Manitoba's housing markets have fared much better than the
2 Z0 Z6 {7 t v ~- q8 h vast majority in Canada: resale activity has slowed moderately and1 m% t# V, V" j( h: r' k* r
prices have either held their own or edged down just slightly.
0 U) P+ H5 f+ x6 Y- H& L$ l Affordability has been kept out of the danger zone, helping to
. S) t6 H0 i$ { `' m- \" v5 b' e minimize any downside risks.; i6 I1 i% L$ s* Q, [5 I
- Ontario: With the recession pounding many communities, housing market
( _/ J4 I0 i8 k8 t conditions have deteriorated considerably. However, the impact is
7 @- q/ Q/ _, y( }% P unlikely to develop into an all-out rout similar to that of the early7 v5 x5 M" [. w7 e
1990s. Affordability, while still causing some stress, is quickly4 m6 e# v! d4 @' l' ]
being restored to levels closer to long-term averages./ Q& B$ K. U% d6 s/ H. p
- Quebec: The province's housing markets have been among the last in$ B p( D& F) V- _) ~
Canada to yield to the weakening trend. The main sign of cooling thus
}; ~( S$ w: I6 g d3 j& _' \ far has been a drop in resale activity, as prices have held up* Z2 r8 W) M- P( T. P
reasonably well. Some of the persisting market strength can be& O0 O& D8 F; s) f7 K+ r2 V
ascribed to sensible affordability levels, which had eroded only
- i; }! f' F/ \' u modestly in recent years.
& s' t0 _, ~4 [ - Atlantic region: Markets have largely remained stable against the" s# N- w2 ~6 `+ H
general housing downturn, with St. John's becoming the housing hot. H; y6 Q) q3 W! D7 g; M& m% Y
spot in Canada and Halifax and Saint John maintaining steady upward" m& b7 x q6 C" w5 z
price momentum. The region is benefiting from improving affordability" f& V. Q6 c9 h
following two years of deterioration.
! U5 S. `9 U( V/ N/ J5 f- K >> |
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