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British Columbia's housing affordability notably improved but still has far to go, says RBC
/ y, v7 n' |; E7 @" T4 o: q: Q6 ? TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
$ q0 M( w7 V7 h: p5 bmiddle of a significant correction that is partly reversing the extensive4 s1 w# f& H8 T) Q; _5 ]
gains of recent years and which is helping restore affordability conditions,; J' z& r. s T3 j1 S
according to the latest housing report released today by RBC Economics.6 v: M/ b( k8 q' ]
"The province's housing markets remain under heavy downward pressure,"
6 b0 I w+ ?# C* S( F+ ^said Robert Hogue, senior economist, RBC. "While housing affordability is% V) X0 N; m1 a5 }$ f* @
improving as the correction process runs its course. RBC's affordability+ V8 M# p k4 a* [1 U! b
measures for the province are still at levels far off historical averages.". J- l0 s" c; b" w' p4 B, v
RBC notes that the sharp rise in unemployment since last summer is
6 e3 l" @5 t1 ]worrying households in the province and weighing down demand for housing," {9 C* G- z. [, p- [
which runs well short of available supply. Such weak market conditions have; W F8 m: J$ g( {3 v
sustained the declining trend in prices for both existing and new homes.
) M% A+ L4 I7 f% z H7 B The RBC Affordability measure for British Columbia, which captures the' e B8 A6 {6 g+ B! [7 _1 [
proportion of pre-tax household income needed to service the costs of owning a$ d. Y, s1 T. j( @
home, improved across all housing segments in the last quarter of 2008.
5 s# ?+ K: h e6 e+ R F m/ DAffordability of detached bungalows in the province moved to 66 per cent, the
) l+ w9 X% p1 k' {! E! S* astandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and4 S% P' a4 L* u8 ^4 n
the standard two-story home to 73.7 per cent." ~2 K3 z* _3 L$ i, O
According to the report, there are signs that the B.C. housing markets& t8 J$ g( o6 P2 J# G, F5 A4 a
may be stabilizing as sales of existing homes appear to have bottomed out in
: _" } m" e/ Z+ H) athe closing months of 2008 and the first two in 2009 - although at5 z+ o) @2 j0 n/ [* {
historically depressed levels.$ D- }) b9 n) l! n) \: v
Despite sharply declining house prices and lower mortgage rates, the cost, h1 G9 _# o4 I5 A6 V& j! A* L# X
of homeownership in Vancouver is still the highest in the country. House
; z* \1 ^# v4 s Yprices continue to rapidly decline and pricing power remains firmly in the
: h" e9 R C2 Lhands of buyers with the sales-to-new listings ratio at historical lows. "This
) w3 h2 s0 s1 L* L( B( aenormous imbalance suggests that prices will likely further correct in the7 v; Y" L3 d! W* e! i
months ahead," added Hogue.
4 O% U$ u, b8 _3 C RBC's Affordability measure for a detached bungalow for Canada's largest/ N/ \! J4 d: D: J& p& w" y' r
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary2 i$ K0 `, S) q: Y, M
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.1 r5 l# @0 v5 X( H8 v" H
The report also looked at mortgage carrying costs relative to incomes for
. z" Z2 H. v, ?a broader sampling of cities across the country, including Victoria. For these: v* a# p' i2 E! o; s. x# i3 H" x
cities, RBC has used a narrower measure of housing affordability that only
. l% z& t- c7 ~# L6 j5 \takes mortgage payments relative to income into account.6 F. t8 C8 e4 W0 [ q0 P
The Housing Affordability measure, which RBC has compiled since 1985, is
4 \6 K6 M2 H$ V X- R; Nbased on the costs of owning a detached bungalow, a reasonable property
* R& Z( O# B6 m+ _1 }benchmark for the housing market. Alternative housing types are also presented
% t1 G; J; U) pincluding a standard two-storey home, a standard townhouse and a standard
% i/ k% w" i, x0 }7 r/ D/ _( j& zcondominium. The higher the reading, the more costly it is to afford a home.
1 \. H8 z+ f' I8 G1 UFor example, an Affordability reading of 50 per cent means that homeownership- q" n. f7 S! x
costs, including mortgage payments, utilities and property taxes, take up 50
1 T3 z8 |/ r# H2 _# F" W+ Dper cent of a typical household's monthly pre-tax income.+ l6 L! K; D$ C; E+ q) w
5 I/ I# B" {3 x& G" q <<& Z& b5 {1 L$ J; a5 F, M5 q
Highlights from across Canada:
2 h% Z- P5 e' d7 l* `) `( S" l$ o; N; k; `& z0 W
- Alberta: Since last fall, the declining Alberta economy has* W5 I; E1 s3 A4 o- z+ _1 K0 ~
intensified the downdraft on the province's housing markets, causing
- I3 X- `. Y, p3 @' E* c home resales to drop to a 12-year low at the end of 2008 and rebound# P0 V- Y$ f& V
only modestly since. Affordability has been on an improving track7 |5 x! [& A' z0 k7 h2 n
since about the middle of 2007.
8 \$ ]$ K' n! ~ C - Saskatchewan: Market activity has cooled considerably from the8 R* G( ^+ W8 U6 f! D% v
frenzied pace from 2006 to early 2008 and prices have begun to; u7 ]/ `5 ~2 V
decline. Nonetheless, economic and demographic fundamentals are still
* D6 v) p) _( j4 B largely supportive of the housing market and overshadow extremely$ A3 W* t% P8 w1 C# E
poor affordability levels.9 U t- o$ W" M0 X( `& ]
- Manitoba: Manitoba's housing markets have fared much better than the
( d$ O3 R# `$ R. i0 c9 U$ x vast majority in Canada: resale activity has slowed moderately and9 {6 ]8 [: M. i* r, z8 X
prices have either held their own or edged down just slightly.
% q: m: G! ~% `& l Affordability has been kept out of the danger zone, helping to6 l0 A* q4 F$ C* t% T/ u
minimize any downside risks.
: C7 y7 c* v+ I+ h - Ontario: With the recession pounding many communities, housing market
j" M _0 T: S* [' V7 M conditions have deteriorated considerably. However, the impact is& J9 V. q8 ~6 i7 f6 V' J; N
unlikely to develop into an all-out rout similar to that of the early9 l( q8 m2 ^# X# l
1990s. Affordability, while still causing some stress, is quickly/ l3 Q$ D' T- w) R! {
being restored to levels closer to long-term averages.
& F4 `! W, A: n I% c) Z - Quebec: The province's housing markets have been among the last in
( w$ F& D2 \# B. v" x7 x* ]* a$ c Canada to yield to the weakening trend. The main sign of cooling thus
) S! [; y+ U. ^5 o far has been a drop in resale activity, as prices have held up! ]& Y! s5 p, `, v
reasonably well. Some of the persisting market strength can be- S s1 _$ x9 I0 t. n3 Q# [
ascribed to sensible affordability levels, which had eroded only* `3 N- ^ J& g; W4 j; d' |
modestly in recent years.
( o& h2 [/ h) B3 L( \ - Atlantic region: Markets have largely remained stable against the
& N/ n' X& j( n' L, O general housing downturn, with St. John's becoming the housing hot4 P: ~. a& s# Q; u4 L0 G, u
spot in Canada and Halifax and Saint John maintaining steady upward
( L$ s' N! Q5 ^7 q( r price momentum. The region is benefiting from improving affordability
) w V: o ]; Z0 T1 ]& Q8 B following two years of deterioration.0 v1 _6 Q- C% g; q! U9 A5 |
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