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British Columbia's housing affordability notably improved but still has far to go, says RBC
1 b& C4 }# z+ s: V1 @- x* K TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the9 S8 C6 e: I1 K. t: B# V- G6 n
middle of a significant correction that is partly reversing the extensive. j4 W |" W% d5 y: m; ]
gains of recent years and which is helping restore affordability conditions,9 c% o% I' R. ^. e' v
according to the latest housing report released today by RBC Economics.
$ l* g, t1 E; K$ b% R0 Z3 f( ~ "The province's housing markets remain under heavy downward pressure,"
$ c x& U) Z) X- l9 C/ F9 zsaid Robert Hogue, senior economist, RBC. "While housing affordability is
# \ ?1 Y/ M7 `! g: zimproving as the correction process runs its course. RBC's affordability
& f; I9 q4 c1 _measures for the province are still at levels far off historical averages."
0 H6 M# p! k7 u! T& U RBC notes that the sharp rise in unemployment since last summer is0 [) c& r5 P" e( A0 o
worrying households in the province and weighing down demand for housing,7 y" _8 l$ T' Y. P& @5 ^
which runs well short of available supply. Such weak market conditions have
$ s x B, t' a0 M2 [: B! ^/ ksustained the declining trend in prices for both existing and new homes.3 e Q# m2 A5 G# L/ N. e5 V0 ^5 L* C6 e
The RBC Affordability measure for British Columbia, which captures the: v4 _( W2 `# m& }; m3 m5 o
proportion of pre-tax household income needed to service the costs of owning a$ z1 b. `2 b; O$ K. y# y
home, improved across all housing segments in the last quarter of 2008.
: m; O( T5 v. f$ M" i: J gAffordability of detached bungalows in the province moved to 66 per cent, the
5 u* d& }0 K$ i9 L" jstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and$ y* z: {0 B/ j# o9 O% m
the standard two-story home to 73.7 per cent.; A8 ^% N- f: G6 f
According to the report, there are signs that the B.C. housing markets
1 k- r, X, K% |2 Dmay be stabilizing as sales of existing homes appear to have bottomed out in
, w+ j, _2 q4 q, Y& d" N8 U; ]the closing months of 2008 and the first two in 2009 - although at
2 j5 l' M6 P& A& @8 Z4 G. z# xhistorically depressed levels.4 z" \5 F% G! L+ O
Despite sharply declining house prices and lower mortgage rates, the cost
' E, W; F9 P3 Z$ t$ pof homeownership in Vancouver is still the highest in the country. House' o! K$ D5 ~$ p4 v( e: e
prices continue to rapidly decline and pricing power remains firmly in the+ `, W8 n' y3 Q* [
hands of buyers with the sales-to-new listings ratio at historical lows. "This
. F- k- {' D5 D9 Q0 C+ `enormous imbalance suggests that prices will likely further correct in the
, b) Z# y9 H4 N- W0 T# j nmonths ahead," added Hogue.
, h" e( u& ^2 \: H- y* D/ O- J6 q. M RBC's Affordability measure for a detached bungalow for Canada's largest
7 e q4 N: ~2 u0 K) R) R8 bcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary- I6 }4 R: D3 N# A `
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
7 z; E" L* l% \8 p$ x7 o The report also looked at mortgage carrying costs relative to incomes for
/ i& j0 T3 ^/ ]$ D1 b# z( H$ Na broader sampling of cities across the country, including Victoria. For these5 ]0 G! d' c- V! J7 r
cities, RBC has used a narrower measure of housing affordability that only1 |! [; |2 \6 f/ s) Z
takes mortgage payments relative to income into account.
/ k+ H3 }# x: o! g* t U& w The Housing Affordability measure, which RBC has compiled since 1985, is1 Q1 h. }' P3 h1 z4 X
based on the costs of owning a detached bungalow, a reasonable property/ `1 ]9 [# S1 }' Q
benchmark for the housing market. Alternative housing types are also presented
5 R; X6 K& x! _& ~6 H @+ pincluding a standard two-storey home, a standard townhouse and a standard
- ]5 Y1 |+ M- Q0 Q9 p! acondominium. The higher the reading, the more costly it is to afford a home.
. g/ O* ?+ P" X8 d/ o1 q# f+ ZFor example, an Affordability reading of 50 per cent means that homeownership
& L. t1 ]4 t; h' q' s5 Y) vcosts, including mortgage payments, utilities and property taxes, take up 500 v# c2 G5 y1 W( I$ a- i9 S* X; z. ?
per cent of a typical household's monthly pre-tax income.0 N2 E: S2 @- G1 @1 W% s; ?. r
" d/ P9 a" n, B0 F; d <<( e# Y/ F+ K! M* }+ K7 ~6 }" ~1 `
Highlights from across Canada:
' O( b8 [. ^ v0 F; X) E
" c2 v0 ~, j ~: k6 B1 M - Alberta: Since last fall, the declining Alberta economy has
, m, `" Z" k; H/ f4 `, ]/ m intensified the downdraft on the province's housing markets, causing
/ Y' n5 Q" x' W m/ F- k* H2 J home resales to drop to a 12-year low at the end of 2008 and rebound: f) c, h$ Q9 ^4 L
only modestly since. Affordability has been on an improving track
; Z( J9 e. \' k% n2 D6 f since about the middle of 2007.1 c% j8 L/ t8 p) u' o! F
- Saskatchewan: Market activity has cooled considerably from the
* `8 I$ [& U. L# u frenzied pace from 2006 to early 2008 and prices have begun to
X4 |( C! `+ U# L' w decline. Nonetheless, economic and demographic fundamentals are still
: h: O( Q, C1 P largely supportive of the housing market and overshadow extremely
3 [$ j) O2 c+ ^/ N% g: `: W poor affordability levels.
6 p3 B8 G) ]1 d3 l - Manitoba: Manitoba's housing markets have fared much better than the4 N+ G9 Z3 m8 d; z
vast majority in Canada: resale activity has slowed moderately and2 I- `% x; a8 e9 A. F
prices have either held their own or edged down just slightly.
6 x& x) M; R6 G Affordability has been kept out of the danger zone, helping to3 N$ Q9 }3 K3 b, Q- F4 |0 r
minimize any downside risks.9 n. _ ] w" {$ @! a9 S, Y
- Ontario: With the recession pounding many communities, housing market
% z) Z; Y& C7 N4 @ conditions have deteriorated considerably. However, the impact is& @9 ]# L2 n! Y0 e& Z9 j3 B
unlikely to develop into an all-out rout similar to that of the early8 |5 F; s0 J4 d4 d W9 s: X
1990s. Affordability, while still causing some stress, is quickly
6 U* C8 g2 h" D; ?' c2 [8 T- d' T being restored to levels closer to long-term averages.9 m, C3 ?) m. i+ U" W( ^7 Z' z
- Quebec: The province's housing markets have been among the last in
; _6 q( O5 R y( W0 k5 I; C1 I0 g Canada to yield to the weakening trend. The main sign of cooling thus9 j/ T+ k) E; x; G! b- P
far has been a drop in resale activity, as prices have held up2 O0 e2 a, Y) |4 \" ~7 C
reasonably well. Some of the persisting market strength can be
# H. L* w0 {1 {7 P. x3 [ ascribed to sensible affordability levels, which had eroded only; d6 S. C2 Z3 l! b! X' P; ~/ {- V
modestly in recent years.3 @9 r1 R' }" }6 q x* c% _
- Atlantic region: Markets have largely remained stable against the
9 N X# N2 V- ?; k. p3 ?9 Y general housing downturn, with St. John's becoming the housing hot# M# \+ s+ M v7 i, j
spot in Canada and Halifax and Saint John maintaining steady upward
& M6 i( D( X$ | price momentum. The region is benefiting from improving affordability
4 W$ u. P, P, j% g& I following two years of deterioration.$ p6 ], z7 B6 t3 ?
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