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British Columbia's housing affordability notably improved but still has far to go, says RBC
; K7 F! @ O# n! Y TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the1 S' }8 m9 z2 j3 ^) I
middle of a significant correction that is partly reversing the extensive
* a+ O" A: ~8 m1 p1 \/ o. |+ C) sgains of recent years and which is helping restore affordability conditions,
* z$ D; C3 [; W8 H" V$ |according to the latest housing report released today by RBC Economics.
2 l! L/ p& ]' _ "The province's housing markets remain under heavy downward pressure,"
* o; @: a. e$ k. B; R! L# F2 ksaid Robert Hogue, senior economist, RBC. "While housing affordability is& O4 u& E; C/ v( R: i
improving as the correction process runs its course. RBC's affordability7 n- Q+ m% K4 v2 q
measures for the province are still at levels far off historical averages."
8 A- f2 L( q) k; H2 A RBC notes that the sharp rise in unemployment since last summer is- v& x5 b* F. e* V. L, R
worrying households in the province and weighing down demand for housing,$ ~4 f1 x6 d/ S7 ?2 k5 Q
which runs well short of available supply. Such weak market conditions have* y0 F& P. y+ t; M) ]$ R3 ?. I/ E
sustained the declining trend in prices for both existing and new homes.
% ]8 p$ e7 k- W4 ?( @ The RBC Affordability measure for British Columbia, which captures the
2 h6 [7 W9 h: B+ N- _( U% [proportion of pre-tax household income needed to service the costs of owning a
) h( }' |# j# q' P k+ khome, improved across all housing segments in the last quarter of 2008.. ?7 K- |% M4 J4 A
Affordability of detached bungalows in the province moved to 66 per cent, the
2 n: i5 H+ ~$ k7 E& L* `standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and, V( y: n0 ]5 c. F; x$ C
the standard two-story home to 73.7 per cent.
N# |8 b9 r+ B/ T3 z According to the report, there are signs that the B.C. housing markets" n( [+ I, N4 o, E& s7 Y6 k$ G
may be stabilizing as sales of existing homes appear to have bottomed out in
6 R6 z7 \/ Z$ I6 ?- jthe closing months of 2008 and the first two in 2009 - although at
/ Y: i) r: w& x" [2 e% M) i Shistorically depressed levels.) ?* h( C Y+ o
Despite sharply declining house prices and lower mortgage rates, the cost5 M& G# p* Y b5 i1 o7 m7 S
of homeownership in Vancouver is still the highest in the country. House v0 \; ]5 ^3 x# G% b
prices continue to rapidly decline and pricing power remains firmly in the
, S! U# {- Q% q( F- D- Q* r G7 ihands of buyers with the sales-to-new listings ratio at historical lows. "This, c3 I& n* S% N
enormous imbalance suggests that prices will likely further correct in the! \ v; m& R. j$ l2 |1 U
months ahead," added Hogue.# b) L" x% a' r4 y! y
RBC's Affordability measure for a detached bungalow for Canada's largest
' ~6 u+ D1 J* w) e- ecities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
6 h/ O2 w' w3 t# _" M) E% ~1 W42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
9 `2 b9 [# O6 D& _, p The report also looked at mortgage carrying costs relative to incomes for. Z( j6 U% l& W& d7 e
a broader sampling of cities across the country, including Victoria. For these: n* y! l0 C: M' ^4 f# H7 S3 T* W
cities, RBC has used a narrower measure of housing affordability that only
0 _6 C% h# D, S. O% ztakes mortgage payments relative to income into account.) v! k" X, [3 D0 L4 \
The Housing Affordability measure, which RBC has compiled since 1985, is) j7 i( ~4 d' u7 C0 F0 S* g5 {
based on the costs of owning a detached bungalow, a reasonable property" L% r6 {6 t I6 P
benchmark for the housing market. Alternative housing types are also presented- A, w/ L" h5 M0 E+ W! z9 i
including a standard two-storey home, a standard townhouse and a standard
A$ j+ t/ d6 r9 b" Z$ Ocondominium. The higher the reading, the more costly it is to afford a home.3 E; _. {$ l/ u I8 O5 N5 O0 `* A7 L! R
For example, an Affordability reading of 50 per cent means that homeownership% l, B! f7 V+ X x' S/ [1 j! ]2 G% @
costs, including mortgage payments, utilities and property taxes, take up 50
- ?9 f3 z! D! ^9 Jper cent of a typical household's monthly pre-tax income.
8 u$ [8 O0 e& t/ D4 J5 e- S; y+ d* I& I0 _
<<' E/ l* l$ Y9 o3 i4 x- G* w$ }2 }7 ?
Highlights from across Canada:( H* S4 c1 l( q, A/ K
" R ~+ d; ~3 y2 Y. p - Alberta: Since last fall, the declining Alberta economy has
1 r! n b# D9 }) H9 o; z: L intensified the downdraft on the province's housing markets, causing
8 M2 i; p/ R! f3 S home resales to drop to a 12-year low at the end of 2008 and rebound
# f2 [4 Q# x* L U5 N7 [4 _ only modestly since. Affordability has been on an improving track
8 o/ I6 @/ Z6 b) Z* o0 |7 ~5 C+ v since about the middle of 2007.
4 b* r! b F( o- q9 l - Saskatchewan: Market activity has cooled considerably from the1 T' }& L- i8 F' R5 s
frenzied pace from 2006 to early 2008 and prices have begun to/ a- d5 ?4 f, x
decline. Nonetheless, economic and demographic fundamentals are still
0 B _1 Z( L9 B largely supportive of the housing market and overshadow extremely
' ] ~+ T3 X- T4 G* u poor affordability levels., @1 C+ s( J( l6 j
- Manitoba: Manitoba's housing markets have fared much better than the8 i2 Q% L! _5 Q5 K
vast majority in Canada: resale activity has slowed moderately and: y: c( I# @! C' I8 V. G, {) L
prices have either held their own or edged down just slightly.$ I) h2 ~* h* |; c! M
Affordability has been kept out of the danger zone, helping to1 H/ N( e' K" W$ [
minimize any downside risks., v) I; G, L6 R2 b' x3 F
- Ontario: With the recession pounding many communities, housing market% Z1 e$ {% }6 ~! c, e. {
conditions have deteriorated considerably. However, the impact is
) y8 b6 K0 B9 R/ m unlikely to develop into an all-out rout similar to that of the early6 a7 f3 B( G! {, P; w9 }1 l
1990s. Affordability, while still causing some stress, is quickly- S/ V- O3 Z4 e( x1 c3 N1 H2 v( H
being restored to levels closer to long-term averages.
+ I0 K% G4 c( k - Quebec: The province's housing markets have been among the last in
8 W( c' _- | L4 T- J+ x% e/ ]1 ? Canada to yield to the weakening trend. The main sign of cooling thus* F6 O( ]) q# Y" G, |5 s4 K0 D
far has been a drop in resale activity, as prices have held up
; @/ R9 L; E" U( @ reasonably well. Some of the persisting market strength can be+ S* L3 N5 |) U9 w+ O8 R
ascribed to sensible affordability levels, which had eroded only0 ]9 @% W% i6 w2 W/ J/ [$ U% I
modestly in recent years.3 a! S" X; o- A
- Atlantic region: Markets have largely remained stable against the5 u8 [; r2 ]0 B
general housing downturn, with St. John's becoming the housing hot
) N+ s) `+ V: u% w& @3 z9 V spot in Canada and Halifax and Saint John maintaining steady upward" C V- v1 _3 \
price momentum. The region is benefiting from improving affordability
# J! P" p# I0 @) v: o6 |" F following two years of deterioration.. a: K; m! K0 n0 ^1 k3 k8 M- U; E
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