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British Columbia's housing affordability notably improved but still has far to go, says RBC 7 E0 }6 a0 k5 t; e& S3 [9 t
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
8 C0 d" ?1 p# E4 Lmiddle of a significant correction that is partly reversing the extensive
. [9 P2 t1 `- K2 \; Rgains of recent years and which is helping restore affordability conditions,7 y, s6 o0 N* f
according to the latest housing report released today by RBC Economics.# ]" c7 X$ Z Z w* Y& W8 O; n
"The province's housing markets remain under heavy downward pressure,"
: _6 l' C( y m& |( q/ D5 i. Qsaid Robert Hogue, senior economist, RBC. "While housing affordability is, d4 `1 |" a: A x4 C$ Z1 h4 I( _$ B
improving as the correction process runs its course. RBC's affordability( u( W, r0 b. I3 z+ O- ]+ q
measures for the province are still at levels far off historical averages."$ R/ T7 p( i ?1 V% ?; D' |; M. T
RBC notes that the sharp rise in unemployment since last summer is
& E; y* _5 D: v+ C+ [5 Fworrying households in the province and weighing down demand for housing,( ?- ?/ m b( |3 e# j
which runs well short of available supply. Such weak market conditions have
; Y2 Z E' N' u0 \9 Ssustained the declining trend in prices for both existing and new homes.
i' E$ q' A' Y; D The RBC Affordability measure for British Columbia, which captures the& Z% {9 l/ C% c6 b
proportion of pre-tax household income needed to service the costs of owning a0 @- c1 {* o4 K/ j2 L
home, improved across all housing segments in the last quarter of 2008.% \' F4 q' [2 O- s
Affordability of detached bungalows in the province moved to 66 per cent, the6 v# Q% D$ I1 z8 e0 M, j, Z$ K
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and1 D1 g: v7 a' A1 `1 M" V, Z c
the standard two-story home to 73.7 per cent.2 ^ [* _3 _6 H+ @: V* J8 Z* T
According to the report, there are signs that the B.C. housing markets- g* q4 E& r+ P1 a, t6 M
may be stabilizing as sales of existing homes appear to have bottomed out in
w$ A4 c w9 A. ^the closing months of 2008 and the first two in 2009 - although at
# P# z, X' K& S" F6 G# Ahistorically depressed levels.
6 g, g6 U; O, v6 Z( i Despite sharply declining house prices and lower mortgage rates, the cost
2 h. j ?6 u7 |3 yof homeownership in Vancouver is still the highest in the country. House! n/ A6 m1 C" |2 m& Q1 s4 e/ v7 V
prices continue to rapidly decline and pricing power remains firmly in the4 V2 |6 d, I3 t3 n/ f
hands of buyers with the sales-to-new listings ratio at historical lows. "This
( [% d8 C; Z' F2 Ienormous imbalance suggests that prices will likely further correct in the
, Y7 }' b6 }4 B4 b, @* Umonths ahead," added Hogue.
& \/ k5 E a: x. A H, A" p RBC's Affordability measure for a detached bungalow for Canada's largest) O- h9 c, E4 z. h# c2 y
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
' ?6 J* M: `4 W8 g, e42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
! H2 ~8 [8 L4 [% L4 c The report also looked at mortgage carrying costs relative to incomes for
+ R, I8 `/ w. b/ m. R* Ha broader sampling of cities across the country, including Victoria. For these# A1 ^8 \3 H, \& U1 q. s
cities, RBC has used a narrower measure of housing affordability that only
& f A/ o- |! a" j4 Y4 vtakes mortgage payments relative to income into account.- [4 ^% x4 N, K
The Housing Affordability measure, which RBC has compiled since 1985, is
5 c) u. V5 S" o; ]- dbased on the costs of owning a detached bungalow, a reasonable property
2 F3 D4 d$ h3 u3 ?+ M( S" Hbenchmark for the housing market. Alternative housing types are also presented
( _2 j5 [! e% ^, L4 {2 ~( Uincluding a standard two-storey home, a standard townhouse and a standard
D- j' m( W% Fcondominium. The higher the reading, the more costly it is to afford a home.5 g. l' U3 o1 j
For example, an Affordability reading of 50 per cent means that homeownership& O- x" T$ |- ~; h3 e! M
costs, including mortgage payments, utilities and property taxes, take up 501 X+ T# F" j6 w3 c [
per cent of a typical household's monthly pre-tax income.2 t r1 |& B& w. ?% s0 T
* u' p; b# o! a
<<$ Z; V- z' x/ l1 @3 ]0 `( y
Highlights from across Canada:
5 p1 a& v E& ?, a# ` y
w* V* v5 u+ @" ?1 F/ w3 d( [ - Alberta: Since last fall, the declining Alberta economy has, I# X9 t$ [. g3 t! w1 n- {% t
intensified the downdraft on the province's housing markets, causing! {# B- ^( ]4 j
home resales to drop to a 12-year low at the end of 2008 and rebound# a+ ^+ @0 u* e7 D: s
only modestly since. Affordability has been on an improving track
5 Q0 {* `7 O# d1 i: L since about the middle of 2007./ P% m! D% Y* ?4 W' T3 J- ]
- Saskatchewan: Market activity has cooled considerably from the
g1 ` J' @' {" J8 i frenzied pace from 2006 to early 2008 and prices have begun to# s" E. o5 G J( }& N! B
decline. Nonetheless, economic and demographic fundamentals are still! x- f2 A& E- W& S& N& }" l
largely supportive of the housing market and overshadow extremely
% @2 i+ @' o0 [: Z: W poor affordability levels.
3 H- Z. F% }( W. Q) K. _& z - Manitoba: Manitoba's housing markets have fared much better than the J, G3 j f+ W$ r; j( u! S8 j% U
vast majority in Canada: resale activity has slowed moderately and
! }( n, p8 H0 x4 F# e prices have either held their own or edged down just slightly.
; d: I+ d& o: z* ? Affordability has been kept out of the danger zone, helping to
0 s$ |* Q. j- m/ B; Y. o minimize any downside risks.
0 |7 {. A! M ?& y4 ^, k6 B - Ontario: With the recession pounding many communities, housing market7 {/ Y3 z5 }- J
conditions have deteriorated considerably. However, the impact is
9 o' e; }6 T* ~# i unlikely to develop into an all-out rout similar to that of the early
* h0 K' z ^! M1 J, V/ T) L; @; d4 S 1990s. Affordability, while still causing some stress, is quickly
& g6 q. [$ l2 M! G1 ~ being restored to levels closer to long-term averages.7 h9 d' _$ H3 ^# ^2 x6 F
- Quebec: The province's housing markets have been among the last in6 O4 b! V, m1 \9 }0 l
Canada to yield to the weakening trend. The main sign of cooling thus
/ V4 T* M+ @ S far has been a drop in resale activity, as prices have held up- n H V) \# {6 V1 \
reasonably well. Some of the persisting market strength can be% J2 F4 R& I1 u7 p0 e
ascribed to sensible affordability levels, which had eroded only" y8 A% Y1 ?* |$ o
modestly in recent years.
% F( a9 d/ X; O - Atlantic region: Markets have largely remained stable against the3 @; B1 ], G; I$ L
general housing downturn, with St. John's becoming the housing hot# I/ J2 G! }1 F& \
spot in Canada and Halifax and Saint John maintaining steady upward
+ |. x, u$ D- \6 Y; d0 ?- U0 S price momentum. The region is benefiting from improving affordability$ f: ]4 Z4 Q4 _( c' D, m
following two years of deterioration.7 o# c- N6 b; K
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