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British Columbia's housing affordability notably improved but still has far to go, says RBC
8 ^. q' \- i: _ TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the; w7 d! `$ v6 S' f" ]4 n2 c
middle of a significant correction that is partly reversing the extensive& c, C: t6 Y0 i* h5 O' y u
gains of recent years and which is helping restore affordability conditions,( {% H$ n: b" Y6 o; U$ }/ r
according to the latest housing report released today by RBC Economics.
0 E2 o5 H5 K: l" o2 Y0 u "The province's housing markets remain under heavy downward pressure,"
+ x* {( D2 F, \% A% k; a" O8 Q# _said Robert Hogue, senior economist, RBC. "While housing affordability is! s/ v- A0 V% [' D
improving as the correction process runs its course. RBC's affordability
: J' C+ t$ {3 cmeasures for the province are still at levels far off historical averages."3 _8 R, F/ s/ t# d1 K2 z% Y) d* o$ {
RBC notes that the sharp rise in unemployment since last summer is$ T- z3 x* Q2 z! d( m
worrying households in the province and weighing down demand for housing,) I4 I# ^) x- Q" K' ~: {: ` P& K
which runs well short of available supply. Such weak market conditions have% k6 Z0 g0 v8 T1 m8 h4 [6 |
sustained the declining trend in prices for both existing and new homes.
9 u6 J+ v. s; A, y The RBC Affordability measure for British Columbia, which captures the
$ {. }5 S' r, f q( Oproportion of pre-tax household income needed to service the costs of owning a" n( G( K/ ]" A& z5 y$ v& e
home, improved across all housing segments in the last quarter of 2008.
. e( v) l- d' l+ s1 T& g& z) ?Affordability of detached bungalows in the province moved to 66 per cent, the/ A( u5 C' b) \9 P
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and5 A2 O5 \' [8 ?- o- B% i) j
the standard two-story home to 73.7 per cent.$ k& K5 m6 f8 u0 t ~) W
According to the report, there are signs that the B.C. housing markets
% u$ \, U% s3 I A: }" xmay be stabilizing as sales of existing homes appear to have bottomed out in- u- J: u2 J9 ]! G; r) G
the closing months of 2008 and the first two in 2009 - although at0 V6 d+ ?# r1 Q% I
historically depressed levels.0 O1 _& b) b7 d
Despite sharply declining house prices and lower mortgage rates, the cost5 `$ l4 H! @1 G% S' {# S* N
of homeownership in Vancouver is still the highest in the country. House
6 v7 ^( R9 `# t% {+ [prices continue to rapidly decline and pricing power remains firmly in the8 ^5 A y5 u* Y: D0 [7 z9 o- E
hands of buyers with the sales-to-new listings ratio at historical lows. "This' J! ~( B( `; M7 @5 o
enormous imbalance suggests that prices will likely further correct in the
5 f- ], s9 m3 Cmonths ahead," added Hogue.8 A. o# y4 w( Z( T, f" Y
RBC's Affordability measure for a detached bungalow for Canada's largest
. i- y2 p- ^" ~* [" p: n# xcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary0 N3 t! ]: g9 G3 z; u0 A- R
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.' e- ^0 @9 g6 }- i
The report also looked at mortgage carrying costs relative to incomes for9 | K) W& i9 B( x# n5 m2 |1 ^" ?
a broader sampling of cities across the country, including Victoria. For these: G& D# n/ _7 K |/ V: D
cities, RBC has used a narrower measure of housing affordability that only, @7 ^; e3 p- H4 l( y: l5 e: O( G
takes mortgage payments relative to income into account.
y/ L! x0 i4 Q2 r) |; j5 Q& s The Housing Affordability measure, which RBC has compiled since 1985, is# ~/ B: `8 f8 H a
based on the costs of owning a detached bungalow, a reasonable property! i) {# d& x; H' _7 \
benchmark for the housing market. Alternative housing types are also presented
. N2 l, ~) I& i2 m7 N) rincluding a standard two-storey home, a standard townhouse and a standard
9 ~- m2 z/ j1 c( Econdominium. The higher the reading, the more costly it is to afford a home.9 ~& ?' F' v3 [2 [
For example, an Affordability reading of 50 per cent means that homeownership
5 P6 w' M o* B5 U3 @# Q, Kcosts, including mortgage payments, utilities and property taxes, take up 50- j2 b3 [( l/ ~2 ?# A& Q
per cent of a typical household's monthly pre-tax income.
* n% p8 ]4 C# v5 F7 p& Y' |& x" F/ ]/ g' C
<<
& ~9 ^' `& y! Y Highlights from across Canada:
, f+ A, \& T; i+ a) X' G5 R0 }- V- v1 O
9 P' F; S5 S2 T) ~5 ~' I1 L - Alberta: Since last fall, the declining Alberta economy has
- [2 f A6 s6 t1 u2 M* k& N intensified the downdraft on the province's housing markets, causing
% V E( a9 c' `2 D+ n# b home resales to drop to a 12-year low at the end of 2008 and rebound4 E) l; I: i: H+ D
only modestly since. Affordability has been on an improving track& V j7 L% N/ P9 ~. {9 |
since about the middle of 2007.7 _- f8 s: C& C3 O5 p5 ?, r1 ?" s
- Saskatchewan: Market activity has cooled considerably from the
# z) `8 c$ n: i) f5 I' X- G/ k frenzied pace from 2006 to early 2008 and prices have begun to4 V0 Z) _. W$ v [, z
decline. Nonetheless, economic and demographic fundamentals are still
* w. D2 H2 h1 S largely supportive of the housing market and overshadow extremely- ?# o' I' u7 l, \2 A3 d
poor affordability levels.
6 Y7 ?1 G, w, t% U+ K - Manitoba: Manitoba's housing markets have fared much better than the0 d: d& p3 E- L# J
vast majority in Canada: resale activity has slowed moderately and# S( i- S$ e" x/ G$ w2 ^$ y
prices have either held their own or edged down just slightly.
: l, ~* m4 [8 D' ^! n ?, c& ? Affordability has been kept out of the danger zone, helping to. k" P6 l8 w: F0 @
minimize any downside risks.: l' Q4 x" G" D& u2 h
- Ontario: With the recession pounding many communities, housing market) N" L, j& z2 o
conditions have deteriorated considerably. However, the impact is, M3 C. B5 N: w. k1 [
unlikely to develop into an all-out rout similar to that of the early
9 X7 H3 A; V( h. L! A. z) d. r 1990s. Affordability, while still causing some stress, is quickly
- z9 e; _0 d1 i1 A being restored to levels closer to long-term averages.# l5 n, x1 _3 \ w% o! c
- Quebec: The province's housing markets have been among the last in) ], E9 {7 Q1 A) Y/ g
Canada to yield to the weakening trend. The main sign of cooling thus1 v0 L7 q p$ F8 T, S
far has been a drop in resale activity, as prices have held up; }3 L) ?7 J+ v9 r' y
reasonably well. Some of the persisting market strength can be
9 R9 O" D$ ]2 T7 N- c ascribed to sensible affordability levels, which had eroded only
( E. V$ w) O8 B G% h+ D modestly in recent years. h, y" Y$ Z: W: I) w; @- O
- Atlantic region: Markets have largely remained stable against the5 [$ }# E Y- L5 C# I/ r
general housing downturn, with St. John's becoming the housing hot9 u7 B! C* g* m" g' y4 k! Y
spot in Canada and Halifax and Saint John maintaining steady upward
0 t8 ]: a- o/ T8 Y: L# n- [3 Q& m price momentum. The region is benefiting from improving affordability5 e8 z c& |. A( L& E
following two years of deterioration.
6 t: F- e B7 ?9 X( t6 G >> |
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