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British Columbia's housing affordability notably improved but still has far to go, says RBC
8 x9 I$ C8 v# y7 j TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the5 W l9 r7 N: }
middle of a significant correction that is partly reversing the extensive% I# c4 v J% z( B
gains of recent years and which is helping restore affordability conditions,2 u. ~( I$ h- c `8 @/ r
according to the latest housing report released today by RBC Economics.
; u. w4 `% m" M# M "The province's housing markets remain under heavy downward pressure,"
7 @/ A/ h6 @6 |said Robert Hogue, senior economist, RBC. "While housing affordability is, u8 O( Z: u M$ N; |) F ~
improving as the correction process runs its course. RBC's affordability
" j9 i6 a' T) T; ^2 z2 ymeasures for the province are still at levels far off historical averages."' a. A6 ~; [9 B& p% p8 N7 b
RBC notes that the sharp rise in unemployment since last summer is
0 |. V9 r. G7 B) U' d& ~worrying households in the province and weighing down demand for housing,
( X. w0 H+ E7 T, A1 g" Z3 wwhich runs well short of available supply. Such weak market conditions have% X& @/ {! \, k" `- R# g
sustained the declining trend in prices for both existing and new homes.
7 p5 P' L Q; @8 w The RBC Affordability measure for British Columbia, which captures the- N c; p9 J) }0 G% x
proportion of pre-tax household income needed to service the costs of owning a; ~& z! A. G; m; b' e/ N: i- X
home, improved across all housing segments in the last quarter of 2008.- v- Q& ?; |, p
Affordability of detached bungalows in the province moved to 66 per cent, the; n+ f0 @% s4 f! ]' y! p5 J
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and1 ?8 x1 I( ~ R* g( w+ v- T6 \: E
the standard two-story home to 73.7 per cent.6 K' W6 Y, U/ S* \
According to the report, there are signs that the B.C. housing markets/ c: {( X7 D- K3 d: A5 @
may be stabilizing as sales of existing homes appear to have bottomed out in+ [" L6 f3 m) [9 ?$ L, }; Y; x
the closing months of 2008 and the first two in 2009 - although at
2 @3 Z) S3 J( M7 D) bhistorically depressed levels.
m1 e, a l! x+ y Despite sharply declining house prices and lower mortgage rates, the cost& H2 k% t0 k/ S5 m6 o' C `
of homeownership in Vancouver is still the highest in the country. House2 _' {( |% e( t
prices continue to rapidly decline and pricing power remains firmly in the* h$ F$ h4 |5 h+ ?( M
hands of buyers with the sales-to-new listings ratio at historical lows. "This5 v1 c0 {& o; G4 F2 S* ?% O) q
enormous imbalance suggests that prices will likely further correct in the
# H" _$ o1 ?/ A, i# M5 k( xmonths ahead," added Hogue.
& c# Q1 B# S1 ^. g3 A+ `- v RBC's Affordability measure for a detached bungalow for Canada's largest) S0 e- x& V2 C+ B% a1 F
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary; a) A6 A" {3 b; C% s5 }/ a i
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
" m }1 O+ Z$ l' R The report also looked at mortgage carrying costs relative to incomes for
' w% B9 w/ x7 h8 w; _a broader sampling of cities across the country, including Victoria. For these+ |3 C; e) \9 M5 R- H
cities, RBC has used a narrower measure of housing affordability that only w) w0 l5 F8 Q
takes mortgage payments relative to income into account.+ _3 Z( J/ O) V, x- s% z- W
The Housing Affordability measure, which RBC has compiled since 1985, is
$ P! D$ F/ ~5 t9 ]7 Q" H! I. d: ybased on the costs of owning a detached bungalow, a reasonable property8 t; h! x+ r5 [
benchmark for the housing market. Alternative housing types are also presented m Y8 \% ]1 \- K8 e! K2 l
including a standard two-storey home, a standard townhouse and a standard$ Q9 `% w/ @% v3 |/ L4 I' y
condominium. The higher the reading, the more costly it is to afford a home.
& U4 L5 z* y4 U& s* v v. BFor example, an Affordability reading of 50 per cent means that homeownership
& k; J, ^! w; V/ b+ vcosts, including mortgage payments, utilities and property taxes, take up 50 x5 o, ]5 [5 i$ O- q
per cent of a typical household's monthly pre-tax income.
9 ^ \9 Q- V8 x' `6 v' E, ?4 A+ I2 \: k! u
<<
' i3 b1 d. u; [ Highlights from across Canada:6 S* |/ r: [0 J. O' \. T2 A
; S/ F# T2 n9 S3 e! _/ u
- Alberta: Since last fall, the declining Alberta economy has
+ {0 ~+ K% q/ _9 T intensified the downdraft on the province's housing markets, causing
4 m& n/ G& d% M# [+ j home resales to drop to a 12-year low at the end of 2008 and rebound& n' J$ U/ g9 {8 g! O. s
only modestly since. Affordability has been on an improving track
5 J9 y) a+ P+ G- A$ D# q! ~# } since about the middle of 2007.( R! j6 r# g- r3 O$ R( I! j$ {
- Saskatchewan: Market activity has cooled considerably from the
3 d1 y* {7 o4 o7 C1 t4 y1 l0 m R2 g frenzied pace from 2006 to early 2008 and prices have begun to
/ T( q# I/ C! [. h, Q3 f decline. Nonetheless, economic and demographic fundamentals are still
; Q# M+ Z$ q0 s' c( H) J$ Z largely supportive of the housing market and overshadow extremely
4 `/ U# Y" l4 t( v9 P poor affordability levels.
" j; Q# N8 Y# E; ~ - Manitoba: Manitoba's housing markets have fared much better than the7 N, m2 d1 `" {
vast majority in Canada: resale activity has slowed moderately and- M! X( O+ z& c u
prices have either held their own or edged down just slightly., V0 O+ o: u$ S c( W, T9 N
Affordability has been kept out of the danger zone, helping to
; Z8 N9 L A* s: t2 c0 `- ^0 r" a minimize any downside risks.
# ~. X' L. v! k% v - Ontario: With the recession pounding many communities, housing market9 R) x' T3 A6 n1 R
conditions have deteriorated considerably. However, the impact is* R; ^ X8 y6 o
unlikely to develop into an all-out rout similar to that of the early
) [" _" R$ Y5 d 1990s. Affordability, while still causing some stress, is quickly
% M0 |, p( T' Q" T7 ` being restored to levels closer to long-term averages.! J3 v8 F5 d- g- P" B* v( e8 ~( i
- Quebec: The province's housing markets have been among the last in1 T" f, K8 c- D
Canada to yield to the weakening trend. The main sign of cooling thus
: r$ W: w4 i0 b) t far has been a drop in resale activity, as prices have held up
7 `- k# \; ^# O reasonably well. Some of the persisting market strength can be
( R4 U5 N* l n& T5 m ascribed to sensible affordability levels, which had eroded only- O$ J3 X" @: o2 i: c1 \* |3 f
modestly in recent years.
$ q6 g( h% Q2 S2 q& j - Atlantic region: Markets have largely remained stable against the
; F m% x/ w! Z! h! M r$ r L general housing downturn, with St. John's becoming the housing hot
) z6 }! ?* g5 u1 ~$ V spot in Canada and Halifax and Saint John maintaining steady upward+ t- _( K- c, K+ ]
price momentum. The region is benefiting from improving affordability$ W1 G# s1 \. z
following two years of deterioration.
7 y. q5 ?+ q, b8 @. v' E >> |
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