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British Columbia's housing affordability notably improved but still has far to go, says RBC
Q$ r+ k! [7 \" a- b TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
, u4 L3 d+ G6 K2 @. j' ?+ n( g& Pmiddle of a significant correction that is partly reversing the extensive
1 h0 R: l. ]; q+ Mgains of recent years and which is helping restore affordability conditions,
1 S" v" e6 l5 S+ h, |& saccording to the latest housing report released today by RBC Economics.
, o, E# H+ T5 F; A& ]7 @1 X9 | "The province's housing markets remain under heavy downward pressure,"8 Z6 J+ p# |( D( c: W8 k4 c7 v/ w& z
said Robert Hogue, senior economist, RBC. "While housing affordability is
( ]/ r; z" ^2 Yimproving as the correction process runs its course. RBC's affordability% m* S6 \) `+ G# s
measures for the province are still at levels far off historical averages."2 l2 u. G3 C1 y( X) X' ^+ e7 {, S8 x
RBC notes that the sharp rise in unemployment since last summer is
G) h/ s: i7 H3 a& W/ r% x) u% Rworrying households in the province and weighing down demand for housing,
t$ O5 Q! k9 g6 W+ X% j% i, u; pwhich runs well short of available supply. Such weak market conditions have
3 R1 W r; O8 g; v# qsustained the declining trend in prices for both existing and new homes.8 x9 K) s# T) ^( j0 q
The RBC Affordability measure for British Columbia, which captures the
1 R/ @5 I0 M- Y0 H( x' a5 ?5 [proportion of pre-tax household income needed to service the costs of owning a* @5 K3 ]) \' Q3 r1 X Y
home, improved across all housing segments in the last quarter of 2008.
5 O% G3 p- [) S( g8 w2 a9 [Affordability of detached bungalows in the province moved to 66 per cent, the- T* V8 O o" G2 J: w
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and0 F" w9 v9 o5 p" _8 J
the standard two-story home to 73.7 per cent.
! R Y$ Y0 @; L/ T7 x) f' i According to the report, there are signs that the B.C. housing markets
* V2 A6 b. p: _8 q/ omay be stabilizing as sales of existing homes appear to have bottomed out in
" f: r/ }3 H) O% U2 ^. \: {* i+ G2 Sthe closing months of 2008 and the first two in 2009 - although at% x- C- |) a, W4 b) @' `
historically depressed levels.
5 N4 b7 m* v0 G$ l( M Despite sharply declining house prices and lower mortgage rates, the cost
+ ?8 C) }6 E5 m$ T: m+ m; [& H% }of homeownership in Vancouver is still the highest in the country. House9 P9 l9 r# j- t) V3 d2 v
prices continue to rapidly decline and pricing power remains firmly in the$ e9 O% T- d9 F" E$ P; P
hands of buyers with the sales-to-new listings ratio at historical lows. "This
' F: j( ^3 I- ~' D n, i. fenormous imbalance suggests that prices will likely further correct in the; o. G: N- \7 u' S* ^
months ahead," added Hogue.
4 b; p* q" Y* t5 o/ q RBC's Affordability measure for a detached bungalow for Canada's largest* @! G) [% z% g4 N0 K1 r0 }) r
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary1 p* g9 i/ I" i& y5 |
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
: A+ q6 c6 Z C/ r( ~; ^9 P g6 A The report also looked at mortgage carrying costs relative to incomes for; R( y: n1 f& M, C' ~+ `& [! T4 M
a broader sampling of cities across the country, including Victoria. For these
# l& ]4 m( j- Y# a1 z$ V( Gcities, RBC has used a narrower measure of housing affordability that only" w5 e) v8 R: E' M* S
takes mortgage payments relative to income into account.
; C3 q4 a( g6 A6 W, |4 i The Housing Affordability measure, which RBC has compiled since 1985, is$ x& V/ R) ]" x
based on the costs of owning a detached bungalow, a reasonable property
. X& e& }5 N9 f! ybenchmark for the housing market. Alternative housing types are also presented6 E8 B, K2 O2 ~# E- b! w
including a standard two-storey home, a standard townhouse and a standard& u& h, n0 i8 j2 S& f4 @
condominium. The higher the reading, the more costly it is to afford a home.
- Z% @+ n, s2 I; |( X: ~! q2 Q% J4 {For example, an Affordability reading of 50 per cent means that homeownership
9 Z6 S$ N4 O% d/ J& ucosts, including mortgage payments, utilities and property taxes, take up 50- G: R" l0 @' H& c; P
per cent of a typical household's monthly pre-tax income.
8 f7 i( Z7 q. W3 i9 m3 g: O: V- g- }0 Z7 L6 j
<<
0 R8 Z* a+ j4 x" V ?9 S+ @* L7 B Highlights from across Canada:5 \( o& |5 y" f5 v( K9 q/ W5 c
; A9 s0 x3 ^1 M2 N( @ - Alberta: Since last fall, the declining Alberta economy has
! j/ T8 I3 w' y. N% S+ m# C intensified the downdraft on the province's housing markets, causing7 h( @% X) Q( p
home resales to drop to a 12-year low at the end of 2008 and rebound& @) I. Q, P' @3 B
only modestly since. Affordability has been on an improving track, P0 k2 G$ N4 r* h: g+ \' k
since about the middle of 2007.
. r. o; G* @: y - Saskatchewan: Market activity has cooled considerably from the' }6 S) x& `/ E0 B
frenzied pace from 2006 to early 2008 and prices have begun to
2 ~ X; w# W) u3 ]5 W3 f' w8 U' a& B decline. Nonetheless, economic and demographic fundamentals are still
4 @; c8 |( m% V" N largely supportive of the housing market and overshadow extremely
5 I! Q, N6 m4 J$ v1 p k poor affordability levels.
# d4 c$ b5 |1 \- n* \( {; l0 v - Manitoba: Manitoba's housing markets have fared much better than the7 l! i, u; \. d' t& b' t
vast majority in Canada: resale activity has slowed moderately and
2 o) D' `# J5 }! f prices have either held their own or edged down just slightly.! ^# q2 K% _, y% T% L+ Z' z( _
Affordability has been kept out of the danger zone, helping to! C) U" d; M/ k! a) h$ q9 F9 v7 ~
minimize any downside risks.1 x8 w. n+ x1 f9 ^0 z& K/ ~/ A& ]
- Ontario: With the recession pounding many communities, housing market( f% v. _% C4 O; Y9 S
conditions have deteriorated considerably. However, the impact is
2 C. t" B! L- P5 f. W& m unlikely to develop into an all-out rout similar to that of the early4 Q8 S2 P. n) z S1 G0 N! F' J7 N; z
1990s. Affordability, while still causing some stress, is quickly
( ]* U' h" `( i1 ]5 E, c being restored to levels closer to long-term averages.
3 o4 P d0 j* @+ v& z+ T) } - Quebec: The province's housing markets have been among the last in
3 R" I0 Q6 u4 M1 E9 W2 l! I Canada to yield to the weakening trend. The main sign of cooling thus
5 J' l; ]+ }" b0 h Q) c) t far has been a drop in resale activity, as prices have held up- T+ {: f/ H0 \
reasonably well. Some of the persisting market strength can be9 A$ @) ^7 b4 v0 y4 \& v" _! v! u
ascribed to sensible affordability levels, which had eroded only
0 C4 o( v; p% m modestly in recent years.
% Q" p" D% l0 l% d, F9 v( K! Z - Atlantic region: Markets have largely remained stable against the3 r8 b. c5 H, L* h! [4 H
general housing downturn, with St. John's becoming the housing hot
3 `9 k' p9 t1 ^. W spot in Canada and Halifax and Saint John maintaining steady upward
. Y& K7 E8 Y% l$ E2 A price momentum. The region is benefiting from improving affordability
; Z) c2 h- {5 i% V: G following two years of deterioration.) X0 X) N* P5 h" _$ m. B
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