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British Columbia's housing affordability notably improved but still has far to go, says RBC
1 ?& G9 i% f, ]9 L; l, O TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
) f& l# \2 H, @3 G# s0 d6 ?" tmiddle of a significant correction that is partly reversing the extensive" o @$ L) X2 X
gains of recent years and which is helping restore affordability conditions,
4 Q' i3 m1 ~, J$ e2 `according to the latest housing report released today by RBC Economics.3 B( C" n0 Z0 M) t
"The province's housing markets remain under heavy downward pressure,"1 M( {* e* u, ~4 L
said Robert Hogue, senior economist, RBC. "While housing affordability is& ?& z- e ?- G4 L+ A) U( z) v: C
improving as the correction process runs its course. RBC's affordability1 l0 u I I* P8 e: a
measures for the province are still at levels far off historical averages."
6 k4 @. G) K o8 c4 H; d RBC notes that the sharp rise in unemployment since last summer is2 X h. p- B" C8 I l) I
worrying households in the province and weighing down demand for housing,0 g9 W/ S! J l2 ^
which runs well short of available supply. Such weak market conditions have' n# y! k1 o p: e/ J. }
sustained the declining trend in prices for both existing and new homes.! S8 I- z# T G' B: N8 U1 q7 A
The RBC Affordability measure for British Columbia, which captures the
2 W# y+ \2 T0 S) D( j/ a$ hproportion of pre-tax household income needed to service the costs of owning a3 V3 Q9 d$ l' w9 x" T+ g
home, improved across all housing segments in the last quarter of 2008.+ c8 W4 o/ p- `" ~
Affordability of detached bungalows in the province moved to 66 per cent, the
0 h* z: W; g3 V4 [( f/ e4 ]standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and) Y$ G# y& |$ i0 ~6 j4 m
the standard two-story home to 73.7 per cent.
! R* k. J7 A: k" Z According to the report, there are signs that the B.C. housing markets
' u6 k3 T+ ]: {9 umay be stabilizing as sales of existing homes appear to have bottomed out in1 U' W# `3 d ~
the closing months of 2008 and the first two in 2009 - although at
. N: B2 Z5 k( J! H- o% f' Hhistorically depressed levels.$ g5 O2 }( Z% u
Despite sharply declining house prices and lower mortgage rates, the cost! O+ p1 H5 Y' \2 D. [; C: h
of homeownership in Vancouver is still the highest in the country. House
6 ?" @+ }% W3 k+ ^ K- n5 ]prices continue to rapidly decline and pricing power remains firmly in the2 m5 ~, t4 Z( R& V8 f5 v: d w
hands of buyers with the sales-to-new listings ratio at historical lows. "This$ N9 D4 ?5 b5 O3 r5 v+ _
enormous imbalance suggests that prices will likely further correct in the' B4 C: y' N6 |5 S2 `* b4 J$ P
months ahead," added Hogue.$ {. w1 [% H4 n# a* }
RBC's Affordability measure for a detached bungalow for Canada's largest
9 h5 p, Z7 [" r) I) p1 l Ccities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary8 K! |0 I/ x* ^0 p
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.) M v9 X/ N4 Z
The report also looked at mortgage carrying costs relative to incomes for& H9 m. n5 }+ Y6 X% [
a broader sampling of cities across the country, including Victoria. For these
& i; }% ~2 C/ Y9 H( scities, RBC has used a narrower measure of housing affordability that only0 c5 m4 h& n. G+ _# |
takes mortgage payments relative to income into account.* p% Y* O( v$ [& H
The Housing Affordability measure, which RBC has compiled since 1985, is1 t& q5 T" k5 [, l
based on the costs of owning a detached bungalow, a reasonable property3 K8 t I0 a! t: ]1 b+ v
benchmark for the housing market. Alternative housing types are also presented0 u6 o; {( G& I, E
including a standard two-storey home, a standard townhouse and a standard) Y Z' C- I, B2 J$ p+ Q% P
condominium. The higher the reading, the more costly it is to afford a home.
" t/ ~3 v- w( `1 K9 K( tFor example, an Affordability reading of 50 per cent means that homeownership5 u c @7 o4 r* S
costs, including mortgage payments, utilities and property taxes, take up 50
. o5 G5 P$ a- \: s6 _per cent of a typical household's monthly pre-tax income./ x- J8 N% a+ k% u$ x9 L
3 G% x6 v. p. R7 [, ]' T8 j3 b p
<<
0 s0 Y7 R& D0 @8 `, n Highlights from across Canada:
# Y5 C d$ R; m7 p+ H+ V' ]! r# r- p9 g: o- h. D8 l
- Alberta: Since last fall, the declining Alberta economy has
- n& S( ?! t; {# \ intensified the downdraft on the province's housing markets, causing
0 ?: W0 f0 ~' p5 [0 R home resales to drop to a 12-year low at the end of 2008 and rebound- C" U/ S# o; ]) [' g
only modestly since. Affordability has been on an improving track
; i5 V9 n0 l! @/ O0 R) u4 }+ C since about the middle of 2007.6 l1 P6 e' j# c' Z) o& V
- Saskatchewan: Market activity has cooled considerably from the3 y7 h3 k j# R. Y. t- c
frenzied pace from 2006 to early 2008 and prices have begun to
/ j" v. C& |% h decline. Nonetheless, economic and demographic fundamentals are still
& B$ R& v9 y" |0 o largely supportive of the housing market and overshadow extremely7 ?6 q9 ^% \5 x) f- f! o
poor affordability levels.
8 S5 [" H% x9 z5 V% N7 r - Manitoba: Manitoba's housing markets have fared much better than the- M8 P3 ^6 `& `% p- m" P
vast majority in Canada: resale activity has slowed moderately and
" h; t: ~% E4 O5 j* P% _0 M" m prices have either held their own or edged down just slightly./ R& J/ Y' ~; V2 U2 ^! r
Affordability has been kept out of the danger zone, helping to
+ ]9 J) [1 A, H0 W minimize any downside risks." g. p* F( \( f; ~
- Ontario: With the recession pounding many communities, housing market
% Y1 n$ V: s- q, {: g conditions have deteriorated considerably. However, the impact is
2 _( n1 E& B3 b& _5 U$ v3 q$ z unlikely to develop into an all-out rout similar to that of the early
* N7 V0 ?. B: e8 q$ {5 } 1990s. Affordability, while still causing some stress, is quickly$ f+ z" F, g' a0 C+ \
being restored to levels closer to long-term averages.
9 y+ y( i; S: X - Quebec: The province's housing markets have been among the last in, [$ N" D+ G( N0 W+ S! H
Canada to yield to the weakening trend. The main sign of cooling thus
0 ~: t/ E- ?# [( x0 @ far has been a drop in resale activity, as prices have held up% N5 I* T g5 L1 c9 ^
reasonably well. Some of the persisting market strength can be
3 D3 y& m9 t: G& T; w/ R ascribed to sensible affordability levels, which had eroded only
. U/ Q2 t& P. i4 t& t modestly in recent years.! c8 n0 f W' r2 T
- Atlantic region: Markets have largely remained stable against the3 E2 B2 v: \6 I S
general housing downturn, with St. John's becoming the housing hot
. W0 ~# o5 S4 K' [! x' } spot in Canada and Halifax and Saint John maintaining steady upward
- Y1 l& N" t, n; e# k: f price momentum. The region is benefiting from improving affordability
! f+ L/ r9 A& G3 s% L( l' m following two years of deterioration. o1 M! h+ `- i
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