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British Columbia's housing affordability notably improved but still has far to go, says RBC
9 Y6 S; Z( _: ]& V TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
+ K6 s1 Y4 M0 o/ N( j3 y1 y' c' Emiddle of a significant correction that is partly reversing the extensive
$ M+ n6 p, L# k* ]5 Cgains of recent years and which is helping restore affordability conditions,0 c7 j8 P c, Y- a( X. `& q
according to the latest housing report released today by RBC Economics.6 F% U" R2 E1 B5 n
"The province's housing markets remain under heavy downward pressure,"
+ T$ ?6 V- Y1 j& P1 tsaid Robert Hogue, senior economist, RBC. "While housing affordability is
3 a+ l" `, Q8 v: W* @, ?improving as the correction process runs its course. RBC's affordability! \. z6 t- p* j6 \1 H, c
measures for the province are still at levels far off historical averages."" a1 U: c: |- [( f4 V3 U" o
RBC notes that the sharp rise in unemployment since last summer is
/ m5 B5 A. _ w' ~6 Z4 Kworrying households in the province and weighing down demand for housing,, t/ n4 A+ H; @9 i+ n7 n0 r/ }" z
which runs well short of available supply. Such weak market conditions have
" }1 \0 Z! @( ` q; m! D* {, ?sustained the declining trend in prices for both existing and new homes.6 m3 ?6 ]2 f: H3 u p7 P) |% Z
The RBC Affordability measure for British Columbia, which captures the+ a* R( J9 |. Y0 d6 N/ Z! ?* G
proportion of pre-tax household income needed to service the costs of owning a7 r3 `7 d0 R; _" c/ u" U
home, improved across all housing segments in the last quarter of 2008.5 J4 a$ l9 W5 E2 y$ O* X
Affordability of detached bungalows in the province moved to 66 per cent, the
# E# a- S4 U; s- Astandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
4 S7 K6 {1 Y! ?& |; m# F4 ?2 Q) M8 Dthe standard two-story home to 73.7 per cent.+ d0 y; n5 o+ u6 r1 h% _; l% L
According to the report, there are signs that the B.C. housing markets) v- C; g0 G3 z: L+ F
may be stabilizing as sales of existing homes appear to have bottomed out in. B! U' S2 f; b
the closing months of 2008 and the first two in 2009 - although at
7 w; w7 l* @3 M5 P) | A5 `8 Uhistorically depressed levels.
4 X% z- U/ r# y1 O5 i4 M" Z2 a8 Y Despite sharply declining house prices and lower mortgage rates, the cost
( {0 x& |7 S4 h+ ]! n Kof homeownership in Vancouver is still the highest in the country. House
7 O( q0 q- X( | cprices continue to rapidly decline and pricing power remains firmly in the
+ V' J. [( v5 M8 W! ?9 U$ F7 shands of buyers with the sales-to-new listings ratio at historical lows. "This
0 N7 Q. `1 t% |- L) ~1 jenormous imbalance suggests that prices will likely further correct in the% j s- X- a- y7 U- t) M
months ahead," added Hogue.
' t" X* }/ b8 O$ ?7 E RBC's Affordability measure for a detached bungalow for Canada's largest
+ B+ ?3 N) W M# b/ K6 E. hcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary. @+ x- X0 _; B0 D1 \ K9 e
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent. W+ B, L5 ?7 l8 `
The report also looked at mortgage carrying costs relative to incomes for
. j& p! [& _; e4 x1 W, t) @a broader sampling of cities across the country, including Victoria. For these
4 T3 S1 A% s0 W6 lcities, RBC has used a narrower measure of housing affordability that only+ i0 J) N9 Q2 H' [& ~! ^
takes mortgage payments relative to income into account.: A+ m: @. k( l# v& h- z! q1 Y+ @
The Housing Affordability measure, which RBC has compiled since 1985, is7 V3 t; g" V+ N" |2 o4 { G
based on the costs of owning a detached bungalow, a reasonable property
0 t }* v( N2 `+ nbenchmark for the housing market. Alternative housing types are also presented$ o7 ~& H9 r6 H' R4 q' x. f
including a standard two-storey home, a standard townhouse and a standard) f, e. }6 \3 {) t) U5 x
condominium. The higher the reading, the more costly it is to afford a home." Q8 V! |9 v: {/ f( W9 H( |3 H
For example, an Affordability reading of 50 per cent means that homeownership/ j. a- g* D+ D. a
costs, including mortgage payments, utilities and property taxes, take up 50, ]/ ? \! X& k. L( _
per cent of a typical household's monthly pre-tax income.
* t/ I8 ^, X3 E% m7 N: P2 S" O
+ {, w: `$ V* p. S6 w) g <<& [( f. K( E# }, S6 i+ k% [
Highlights from across Canada:5 g1 J' P# r' J
: M* ~# @, R. [2 x3 C5 u0 {
- Alberta: Since last fall, the declining Alberta economy has5 {: H& {6 }: M1 k! y& G$ u
intensified the downdraft on the province's housing markets, causing7 J# w' h/ X3 e" p: g: c- `4 `
home resales to drop to a 12-year low at the end of 2008 and rebound) L% t- Q. ~0 o
only modestly since. Affordability has been on an improving track
0 @5 T( @$ W) j1 M* R: v# }+ P since about the middle of 2007.
9 G/ }4 x. F: j; B: C - Saskatchewan: Market activity has cooled considerably from the
6 ], p7 ~7 ]; j- } frenzied pace from 2006 to early 2008 and prices have begun to
6 }7 K2 z, |3 B% w) t9 v0 J decline. Nonetheless, economic and demographic fundamentals are still
( y$ m3 }% i3 {+ N* i1 i9 R' z largely supportive of the housing market and overshadow extremely
; }( D2 x# u% P poor affordability levels.1 g5 q* I7 F% ~6 S% o7 ]
- Manitoba: Manitoba's housing markets have fared much better than the0 O* q# O% \# R' M$ e. V: X
vast majority in Canada: resale activity has slowed moderately and1 F4 h) r4 `* H2 D( S7 w
prices have either held their own or edged down just slightly.* ~/ i% @3 ^/ C. s: A- u' z2 }( R0 Z% u
Affordability has been kept out of the danger zone, helping to( V0 |2 D# ?3 h# s6 @
minimize any downside risks.+ R1 r: z1 m) C0 s
- Ontario: With the recession pounding many communities, housing market
! J' z9 P5 O+ w( E: M conditions have deteriorated considerably. However, the impact is; e& Q% E0 t4 S, u4 @) D
unlikely to develop into an all-out rout similar to that of the early
% `) y+ ?' h, \( @9 Q( V1 I 1990s. Affordability, while still causing some stress, is quickly* g: @% n% L" i8 o7 ]. C; u
being restored to levels closer to long-term averages.
) t, f$ m: {/ P" F6 @$ P - Quebec: The province's housing markets have been among the last in* ~8 W+ P$ F. @
Canada to yield to the weakening trend. The main sign of cooling thus1 n! D( A9 s. w1 M
far has been a drop in resale activity, as prices have held up
0 p e+ T: w) I reasonably well. Some of the persisting market strength can be
" J' [: _7 k% v* I ascribed to sensible affordability levels, which had eroded only
. R4 V7 s5 L3 g% _ modestly in recent years.
4 y! H6 k7 j% K9 N8 a3 S: Z - Atlantic region: Markets have largely remained stable against the
9 K6 V. z% z) ]$ j9 ^% m general housing downturn, with St. John's becoming the housing hot
: E9 b v; J7 A' u1 b" Q spot in Canada and Halifax and Saint John maintaining steady upward
5 N+ i0 u- b$ z7 r- V, y price momentum. The region is benefiting from improving affordability& V+ j5 v V0 T! U4 |% m
following two years of deterioration.& A2 W- S0 q, z
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