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British Columbia's housing affordability notably improved but still has far to go, says RBC
/ l/ K7 ~# O! I; C% ~ TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the2 [& D' X* `7 Z) h% K$ W
middle of a significant correction that is partly reversing the extensive: V) Q! N- m, `
gains of recent years and which is helping restore affordability conditions,. M: |) G) Q; i9 H3 B: `6 s* ~$ V% G
according to the latest housing report released today by RBC Economics.- B* k9 o) ~9 c; r; K( [% P
"The province's housing markets remain under heavy downward pressure,"
7 b1 b9 ?% F; a* Q. nsaid Robert Hogue, senior economist, RBC. "While housing affordability is
/ y3 u" L2 z% O1 S) y* ]5 I7 _/ fimproving as the correction process runs its course. RBC's affordability
& ]' O* V3 R3 L( z0 rmeasures for the province are still at levels far off historical averages."
9 H7 H' l1 `( S* Z0 X0 D, B RBC notes that the sharp rise in unemployment since last summer is0 ^7 c+ W/ g% q* m
worrying households in the province and weighing down demand for housing,
" Y1 u- j/ ~& e- S; O5 ~& |8 q. ^; ywhich runs well short of available supply. Such weak market conditions have
, g8 A$ r& e5 t7 _/ F* m: E0 osustained the declining trend in prices for both existing and new homes.
1 | J5 ]9 o, E1 O- Q The RBC Affordability measure for British Columbia, which captures the7 V" } V5 s! S8 @
proportion of pre-tax household income needed to service the costs of owning a9 @; B, g6 d* h; m( G& G
home, improved across all housing segments in the last quarter of 2008.
; ]# W0 }' m: _. T8 g/ m" AAffordability of detached bungalows in the province moved to 66 per cent, the
1 s9 S( h. V5 Y5 qstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
1 l2 H1 V! a1 x1 c* I/ L% kthe standard two-story home to 73.7 per cent.
5 z8 @0 w5 p0 _' O* T" Q, c According to the report, there are signs that the B.C. housing markets
D% y! r2 k: c' q# W# n2 Lmay be stabilizing as sales of existing homes appear to have bottomed out in
" h! s1 n' U5 l8 G8 {, C& Zthe closing months of 2008 and the first two in 2009 - although at
x/ a8 X6 a6 o( shistorically depressed levels.
+ p$ W: f5 r. Y9 Q Despite sharply declining house prices and lower mortgage rates, the cost
2 k* S8 p7 Y, i& r, fof homeownership in Vancouver is still the highest in the country. House
: ~* p% `) P/ @& ~# e3 T! [prices continue to rapidly decline and pricing power remains firmly in the {! M1 w( m+ i
hands of buyers with the sales-to-new listings ratio at historical lows. "This
( q* Q1 v2 ~% f: ?3 u2 A# Q4 Z6 menormous imbalance suggests that prices will likely further correct in the& q# k+ r) R4 ?0 l, ]$ r0 A
months ahead," added Hogue.
4 w! _' [* ]2 {. [" e; ?- ?& {/ g RBC's Affordability measure for a detached bungalow for Canada's largest
4 D# {4 ^8 T2 S" ]& g" q* y$ Z: ecities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary8 p+ V3 n1 c9 S2 t! ]
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
+ j$ V* m/ {5 C5 ~+ D The report also looked at mortgage carrying costs relative to incomes for
$ z9 f9 \4 a2 [' x1 g' v Y' T# ua broader sampling of cities across the country, including Victoria. For these( |- \$ d) p3 S2 p1 W% O8 _
cities, RBC has used a narrower measure of housing affordability that only
( d+ P$ r8 h) W3 X1 s; D5 Mtakes mortgage payments relative to income into account.
% o4 ^6 ~0 b! ]* \ The Housing Affordability measure, which RBC has compiled since 1985, is- h/ d6 [0 V0 G
based on the costs of owning a detached bungalow, a reasonable property3 e8 f7 W3 x* f5 }
benchmark for the housing market. Alternative housing types are also presented, ^; _* J- A0 l0 u( {, w
including a standard two-storey home, a standard townhouse and a standard
! I" j$ p3 z: [9 ~ @2 Jcondominium. The higher the reading, the more costly it is to afford a home.2 W9 Q8 | x' @' C% u
For example, an Affordability reading of 50 per cent means that homeownership4 }- u1 Q- N, X1 v# j) J. D
costs, including mortgage payments, utilities and property taxes, take up 50
+ ?8 c4 _# v0 R0 w+ dper cent of a typical household's monthly pre-tax income.
3 \5 ~( w6 \/ y+ W C, Z: N6 l
7 D7 A! Z3 X ?. @ <<
& f" _; t; J- \' T& C$ Q6 R Highlights from across Canada:
0 ]& J2 T; E; Z5 e* @8 u. w7 D* @" U) j9 `) w
- Alberta: Since last fall, the declining Alberta economy has
- w, M3 ~6 |& ~8 ~# l% P8 | g intensified the downdraft on the province's housing markets, causing6 C0 U7 O/ Y1 v
home resales to drop to a 12-year low at the end of 2008 and rebound
Z: F6 i3 P) \, F: G, \1 G" N only modestly since. Affordability has been on an improving track
" k% \ ?! w8 p+ p& Z! b; U5 c since about the middle of 2007.
O9 ?# H; J7 _2 K' \$ a - Saskatchewan: Market activity has cooled considerably from the' X' [; H5 V" U
frenzied pace from 2006 to early 2008 and prices have begun to! C$ M- ?( l% n- }* a
decline. Nonetheless, economic and demographic fundamentals are still
- T) q( D, b4 O% n largely supportive of the housing market and overshadow extremely
. i$ g. y8 n6 ` poor affordability levels.: ~ i s6 [( J
- Manitoba: Manitoba's housing markets have fared much better than the
5 ^0 G6 L* N$ V& A# Z vast majority in Canada: resale activity has slowed moderately and! m( u0 m' d6 z9 P9 i
prices have either held their own or edged down just slightly.
0 a g' c x% }6 p Affordability has been kept out of the danger zone, helping to
$ ]/ C# |, _% X3 v* b' L minimize any downside risks.
) R: u/ F- w! e0 \) f8 g f - Ontario: With the recession pounding many communities, housing market
9 _9 Q* e4 t+ i* t5 F& r, x& K conditions have deteriorated considerably. However, the impact is/ d; r( t) ? g+ G9 g. s
unlikely to develop into an all-out rout similar to that of the early% @& j* a. B9 p* c
1990s. Affordability, while still causing some stress, is quickly
+ t- o* P8 m& x1 c: s& Z being restored to levels closer to long-term averages.
" @. a$ q5 z6 v& m - Quebec: The province's housing markets have been among the last in- \9 M5 b& |) g X4 Z; T0 i, m+ j* z
Canada to yield to the weakening trend. The main sign of cooling thus3 G1 k- b7 s8 D* x- `* j
far has been a drop in resale activity, as prices have held up
% b0 L. q0 f2 Q reasonably well. Some of the persisting market strength can be- e# k% t; I( e2 Q; J
ascribed to sensible affordability levels, which had eroded only
" g9 d: O: Q" ?! E- a: O& p modestly in recent years.& g7 @5 f4 a3 t
- Atlantic region: Markets have largely remained stable against the
- X. i3 h1 G- m s2 r* M; O general housing downturn, with St. John's becoming the housing hot
0 S' |* P: a1 p( u spot in Canada and Halifax and Saint John maintaining steady upward, w0 u+ l, L7 Y' U! [
price momentum. The region is benefiting from improving affordability- I+ S! B6 R- y2 w/ D
following two years of deterioration.
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