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British Columbia's housing affordability notably improved but still has far to go, says RBC
. I9 K3 e/ D* f9 q$ {/ ? TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the( f8 }0 d) T7 ~9 K0 i
middle of a significant correction that is partly reversing the extensive2 I" G5 R, e4 h0 W6 f) L
gains of recent years and which is helping restore affordability conditions,& N! M; H7 d% ?1 B
according to the latest housing report released today by RBC Economics.
' }6 B+ t, C7 Z, [; c6 C" ? "The province's housing markets remain under heavy downward pressure,"
. p4 {. F8 F$ k5 u3 f5 Ysaid Robert Hogue, senior economist, RBC. "While housing affordability is- Z% j* ]- l% o r6 g+ k/ l
improving as the correction process runs its course. RBC's affordability9 u$ ~3 a- v! _$ s
measures for the province are still at levels far off historical averages."
, Y8 t- M* B1 n( h RBC notes that the sharp rise in unemployment since last summer is( J/ b* j, h! B4 \# q7 t
worrying households in the province and weighing down demand for housing,( x" A: H" f9 D7 V
which runs well short of available supply. Such weak market conditions have
* x. x0 [: ]( wsustained the declining trend in prices for both existing and new homes.7 ~! Z Q# a* r3 m1 N
The RBC Affordability measure for British Columbia, which captures the
) ~* ]4 T- Q$ U$ x6 yproportion of pre-tax household income needed to service the costs of owning a% J' [* r: T& C5 D$ M' `. C! G
home, improved across all housing segments in the last quarter of 2008.
4 D- r& l; @+ j$ bAffordability of detached bungalows in the province moved to 66 per cent, the2 p4 D' q* f f/ I& r, J
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and2 z/ {. B5 v8 M+ n% M
the standard two-story home to 73.7 per cent.' Y4 z0 m% K- C2 s
According to the report, there are signs that the B.C. housing markets
1 {: ]! }' S2 h$ T4 [4 @- n- Dmay be stabilizing as sales of existing homes appear to have bottomed out in1 W X/ ~/ |; w _& }) p
the closing months of 2008 and the first two in 2009 - although at
' E# I# p9 V! ?4 b7 j/ s' Ghistorically depressed levels.
% S3 B6 F# l/ u* ^ Despite sharply declining house prices and lower mortgage rates, the cost
# \, u. ]& S# F0 p! n; m0 Rof homeownership in Vancouver is still the highest in the country. House5 i2 Q/ }' i( C+ {) t
prices continue to rapidly decline and pricing power remains firmly in the* d$ W2 J8 G5 R1 H/ s8 }3 t
hands of buyers with the sales-to-new listings ratio at historical lows. "This
" c4 r6 v: ?0 D7 I/ K- Wenormous imbalance suggests that prices will likely further correct in the5 G/ j, |: L' p! {% y B
months ahead," added Hogue.
1 L% \5 e* u" {+ e( O( D% U RBC's Affordability measure for a detached bungalow for Canada's largest
3 j1 V! i- E2 A, ~& D% @cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary8 E. V% ]& E: u+ S/ B
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
" N0 ?& W( I: D) L, | The report also looked at mortgage carrying costs relative to incomes for
/ K& w W, P( |2 p7 |a broader sampling of cities across the country, including Victoria. For these
y5 P# G$ k% Q) o3 D) r; A8 dcities, RBC has used a narrower measure of housing affordability that only
! g& e6 [9 q& l5 i6 S; @9 Ptakes mortgage payments relative to income into account.
, V& [3 [. ~, h7 o! f The Housing Affordability measure, which RBC has compiled since 1985, is
1 i* {( @6 F( W$ H+ Mbased on the costs of owning a detached bungalow, a reasonable property
( r0 j- s$ w" Q" u( ibenchmark for the housing market. Alternative housing types are also presented
+ F6 {' o9 x/ j7 Hincluding a standard two-storey home, a standard townhouse and a standard4 L# H, T! J; e- Z8 T! ?, a6 Q( q
condominium. The higher the reading, the more costly it is to afford a home.
) r; m. Y- y9 W; y& F- u; uFor example, an Affordability reading of 50 per cent means that homeownership! Z! w# F/ J& ^) j: l' \
costs, including mortgage payments, utilities and property taxes, take up 50
8 L$ m B) A2 [4 J- Gper cent of a typical household's monthly pre-tax income.2 F3 d0 W2 Q. ?" q
7 h0 S. ?" }7 i5 ~* a- v; c
<<
% ]6 h, g& N j5 \ Highlights from across Canada:
; I! r6 A) P3 ?- \( v6 p
; m$ P0 n! c! T - Alberta: Since last fall, the declining Alberta economy has5 _# Q- a6 I& l% t1 Z {
intensified the downdraft on the province's housing markets, causing4 c" Y) m+ S7 ^0 S6 Q7 |- t
home resales to drop to a 12-year low at the end of 2008 and rebound
$ \% h. \& \; {% W# Q" |6 L) S9 M$ U3 z$ A only modestly since. Affordability has been on an improving track2 B4 v1 N# c& {/ g* E( Z
since about the middle of 2007.6 R" i1 ~" [9 ~
- Saskatchewan: Market activity has cooled considerably from the
& v* M: E# n- q2 z+ V" I! Y frenzied pace from 2006 to early 2008 and prices have begun to
) K7 c! X7 g# M9 q$ ?# V decline. Nonetheless, economic and demographic fundamentals are still
% M0 H" _% A3 d& L. G largely supportive of the housing market and overshadow extremely
2 Q3 u# A' S j( O1 y poor affordability levels.
% A- X$ C: S$ ?7 Y# E - Manitoba: Manitoba's housing markets have fared much better than the
/ T2 u9 z' |+ ^1 X7 P2 T) p vast majority in Canada: resale activity has slowed moderately and
8 A) {9 X5 L, a/ H( S/ d0 p prices have either held their own or edged down just slightly.
' ^. R/ R4 O; z: m2 q Affordability has been kept out of the danger zone, helping to* w7 A1 C! P$ l" Y' Z( l' L
minimize any downside risks.
4 `( v. O3 [4 D& y7 Z2 X - Ontario: With the recession pounding many communities, housing market
2 h# {8 ]/ |3 W; C) T' b# I conditions have deteriorated considerably. However, the impact is
1 ]; e1 G1 y, p. ` c5 t unlikely to develop into an all-out rout similar to that of the early, b; s2 o4 T4 o. B7 P) U, I- \
1990s. Affordability, while still causing some stress, is quickly( X# i6 p% f2 z0 N7 I" o- i) e7 A! F
being restored to levels closer to long-term averages.) k* S. ~! U% M
- Quebec: The province's housing markets have been among the last in
$ M2 \- |5 c p# w Canada to yield to the weakening trend. The main sign of cooling thus
x1 p: v4 u5 F+ P3 m! n. U far has been a drop in resale activity, as prices have held up" N6 G9 {% ]/ V4 b h3 s9 {
reasonably well. Some of the persisting market strength can be
9 n% V% H& }4 D! F% ~ ascribed to sensible affordability levels, which had eroded only
, O) v# _# U( T" G modestly in recent years.
" A- f# U" N Q) B6 o" t1 z - Atlantic region: Markets have largely remained stable against the$ `" }4 e6 ^. m6 k9 V7 \6 `
general housing downturn, with St. John's becoming the housing hot
/ `, X% k8 L) V6 j+ i2 f) B spot in Canada and Halifax and Saint John maintaining steady upward
! k3 J/ h0 J$ x9 K! J5 j( a9 R6 f ^ price momentum. The region is benefiting from improving affordability2 r& ~. v1 O: {* @4 W: B4 P: b
following two years of deterioration.
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