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British Columbia's housing affordability notably improved but still has far to go, says RBC
, u* u$ T0 q! ~+ G1 s) D/ o TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
0 L: P- _6 L$ B4 L4 jmiddle of a significant correction that is partly reversing the extensive
, p% R, ~5 X: [) D0 j+ l8 S/ v* bgains of recent years and which is helping restore affordability conditions,. X5 @5 U6 P6 i3 h& m) G
according to the latest housing report released today by RBC Economics.% r6 w; A+ { G
"The province's housing markets remain under heavy downward pressure,"0 Q# b* {; t' z8 ^' l6 Y% y
said Robert Hogue, senior economist, RBC. "While housing affordability is5 f8 s3 d" k7 D7 x
improving as the correction process runs its course. RBC's affordability( B8 m$ v8 W, j
measures for the province are still at levels far off historical averages."+ }# j9 Y& q* C7 j1 }
RBC notes that the sharp rise in unemployment since last summer is: i9 l0 K, u" T% b" m. r9 i
worrying households in the province and weighing down demand for housing,
% L% e4 u9 s& e+ Q) Hwhich runs well short of available supply. Such weak market conditions have
5 z. Q3 G, x5 W9 g: Qsustained the declining trend in prices for both existing and new homes.' A9 X5 E) s+ M8 B3 L
The RBC Affordability measure for British Columbia, which captures the1 I2 P+ O) u: |( b# G" P2 y' w
proportion of pre-tax household income needed to service the costs of owning a& v2 q/ d2 b# _1 n
home, improved across all housing segments in the last quarter of 2008.
0 ~! {: A" s( f4 n9 S) S, ZAffordability of detached bungalows in the province moved to 66 per cent, the
I R5 t, T) S* R( u2 B5 W( D; Ystandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
) j: N# i; Z: e3 r. t+ j: |the standard two-story home to 73.7 per cent.
4 t& g# o7 _, v According to the report, there are signs that the B.C. housing markets
: I+ y" P, v7 c- Emay be stabilizing as sales of existing homes appear to have bottomed out in; I7 {; {6 |8 C* Q, X. u! e' U
the closing months of 2008 and the first two in 2009 - although at
* M3 _6 M: A M$ L5 \" ?6 jhistorically depressed levels.6 h( E7 E# a$ I4 W
Despite sharply declining house prices and lower mortgage rates, the cost3 _# L7 U3 N* H- G8 V+ k8 D6 g
of homeownership in Vancouver is still the highest in the country. House
7 l" c* j1 `6 X" d" U0 W2 mprices continue to rapidly decline and pricing power remains firmly in the+ w8 B! U. R1 I! X) v5 d! \2 q' W
hands of buyers with the sales-to-new listings ratio at historical lows. "This
6 M0 ?6 L! M; N1 henormous imbalance suggests that prices will likely further correct in the% V0 y6 B( x, N
months ahead," added Hogue.( t- ?; j x2 E9 t+ h+ o
RBC's Affordability measure for a detached bungalow for Canada's largest3 O3 T' j: c/ A+ o3 O9 w
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary6 |, ]# E6 Z: V6 X0 ?+ c
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
% O: e5 N- u( F7 M) R The report also looked at mortgage carrying costs relative to incomes for
+ c/ P0 p) h' N% a6 ka broader sampling of cities across the country, including Victoria. For these
, i4 e. Z! f. N0 z ncities, RBC has used a narrower measure of housing affordability that only$ \: R: ?: D6 r& S0 G
takes mortgage payments relative to income into account.
9 J$ b& r+ v& F& o The Housing Affordability measure, which RBC has compiled since 1985, is" z# M. W; O, l# E( p% [0 E& O
based on the costs of owning a detached bungalow, a reasonable property3 _) j0 L4 T$ O8 @1 V, K* V
benchmark for the housing market. Alternative housing types are also presented k6 J7 W& S8 m* o! Y4 `; h
including a standard two-storey home, a standard townhouse and a standard; v- \* H7 b$ b5 j* N8 D
condominium. The higher the reading, the more costly it is to afford a home.+ m+ v; l% F, X5 Z9 r( K S: @' I( c
For example, an Affordability reading of 50 per cent means that homeownership
2 h8 w, v) O" z# ~" H# S+ G, ycosts, including mortgage payments, utilities and property taxes, take up 50- n& F) W# t i1 h0 k; U
per cent of a typical household's monthly pre-tax income.& P7 z+ q1 A% Z
- z) D- M2 n, _! k
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! o5 I; _: Q; S- n7 ] w" {4 @ Highlights from across Canada:
. k; R0 l5 L+ y" a" G* C$ {) ?# J& Y5 _ n2 L
- Alberta: Since last fall, the declining Alberta economy has
# h/ V- A2 j5 J, A, x; {5 |! a intensified the downdraft on the province's housing markets, causing2 Z/ s" T2 N( e2 w" s( l
home resales to drop to a 12-year low at the end of 2008 and rebound+ q" z. v& b' P# ~0 [8 Y+ n
only modestly since. Affordability has been on an improving track5 z6 B+ p- X1 |' E8 D
since about the middle of 2007.5 ~) m8 m# }. B" f* o' s
- Saskatchewan: Market activity has cooled considerably from the# }$ w% a/ p7 B3 E" m" U
frenzied pace from 2006 to early 2008 and prices have begun to, w& Z2 z- Z2 u2 _
decline. Nonetheless, economic and demographic fundamentals are still
: E' `6 m2 ^7 { n3 F; s largely supportive of the housing market and overshadow extremely
; b# v* s: a& Q$ n7 L poor affordability levels.
4 U. d* O% l* | y! u. W - Manitoba: Manitoba's housing markets have fared much better than the
5 u( O7 z" F5 ^5 x4 u/ K, a5 X) c vast majority in Canada: resale activity has slowed moderately and
( K1 ]9 i& e. N8 p4 x prices have either held their own or edged down just slightly.0 {) L+ X" T7 A5 H
Affordability has been kept out of the danger zone, helping to
4 D9 q; X3 W; ~$ b0 a minimize any downside risks.
; Q3 ?8 R& t1 X7 H- Y - Ontario: With the recession pounding many communities, housing market' k+ i2 I- ]+ A1 A& U4 v: ~
conditions have deteriorated considerably. However, the impact is
% o: o& w* a! E unlikely to develop into an all-out rout similar to that of the early" j7 k9 q5 u0 l- `
1990s. Affordability, while still causing some stress, is quickly
2 D5 u% N4 G& \8 D! B being restored to levels closer to long-term averages.8 H7 V# p3 R n! X6 e
- Quebec: The province's housing markets have been among the last in
, Z6 M3 W- H7 B4 l; B; h. k Canada to yield to the weakening trend. The main sign of cooling thus
* D) ]' H( L& O5 k2 `! k far has been a drop in resale activity, as prices have held up
" w1 [ R8 U. }7 a/ D2 B reasonably well. Some of the persisting market strength can be
0 U O; v" _) l# p1 J$ O ascribed to sensible affordability levels, which had eroded only
5 f% |: K a/ l% m! n, f modestly in recent years.
) b% h; E% P$ e7 | - Atlantic region: Markets have largely remained stable against the5 _* G1 a4 _. X- @: n; R- ^6 l
general housing downturn, with St. John's becoming the housing hot
; }; T, H5 D2 A" Q+ R' K spot in Canada and Halifax and Saint John maintaining steady upward
9 a9 X) P. U' X% R- n9 l! v" l$ k+ K price momentum. The region is benefiting from improving affordability
. W0 T$ L- a U5 i' t following two years of deterioration.5 u* T% I; q& F0 o6 ^
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