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British Columbia's housing affordability notably improved but still has far to go, says RBC
) s3 [+ ?6 w5 a, t B. h TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
Q7 e3 @" J @9 Rmiddle of a significant correction that is partly reversing the extensive
$ G0 v! M9 ~; s! h6 v# a6 x+ ugains of recent years and which is helping restore affordability conditions,; I* K# z$ V6 M) @& S" z
according to the latest housing report released today by RBC Economics.
. X7 X: K( R; `& v+ j "The province's housing markets remain under heavy downward pressure,"
5 N( A: m9 b7 @+ k$ tsaid Robert Hogue, senior economist, RBC. "While housing affordability is
- F# _6 g# ^$ W5 ximproving as the correction process runs its course. RBC's affordability0 A [5 p( b* w9 Y
measures for the province are still at levels far off historical averages."$ o* L: R$ K: j) a
RBC notes that the sharp rise in unemployment since last summer is
" q- B' K) o% u- k7 rworrying households in the province and weighing down demand for housing,' l2 C! d1 R0 |
which runs well short of available supply. Such weak market conditions have( n7 M. U9 E8 v! h6 s# w
sustained the declining trend in prices for both existing and new homes.6 ? ?0 ^. U8 ~8 W
The RBC Affordability measure for British Columbia, which captures the! F+ s9 n4 q1 j4 G: ?4 n1 i
proportion of pre-tax household income needed to service the costs of owning a- r3 m& ]* ~# }. c9 h( c5 y& S
home, improved across all housing segments in the last quarter of 2008.
8 ^% N: ]6 T8 i0 j/ y7 D2 F4 k) W, G! EAffordability of detached bungalows in the province moved to 66 per cent, the1 l; F$ E- a0 c; K6 s" Q# ~* y9 y
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
) @2 S" U1 k+ _8 h- G7 Zthe standard two-story home to 73.7 per cent.
5 i7 h. G6 M/ \' V J According to the report, there are signs that the B.C. housing markets/ D1 h. ` \3 W+ e! H$ A+ M1 \
may be stabilizing as sales of existing homes appear to have bottomed out in
, d0 U. f& O7 tthe closing months of 2008 and the first two in 2009 - although at3 S. X. S8 d% M
historically depressed levels.7 d- C- e! n+ z6 U, z/ h* ^2 k
Despite sharply declining house prices and lower mortgage rates, the cost8 C, g- { B, p3 q* U% L5 L0 j
of homeownership in Vancouver is still the highest in the country. House
! Q& ^& y& @0 ^1 a% y/ e+ n" J1 A# _prices continue to rapidly decline and pricing power remains firmly in the9 ^( b, U. u' h! I
hands of buyers with the sales-to-new listings ratio at historical lows. "This
0 V* G* J( y2 m' @9 P! ^. qenormous imbalance suggests that prices will likely further correct in the. u3 D9 I1 D8 Z( H2 [ V
months ahead," added Hogue.& i7 X2 h# e$ E3 c6 K. c
RBC's Affordability measure for a detached bungalow for Canada's largest% O8 y5 A% e- i% h, }# M
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
. T/ i$ J1 X8 S; u& \0 N9 x42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
$ U3 _1 C" H% T4 Z0 B; A The report also looked at mortgage carrying costs relative to incomes for" |. \9 f4 G( j6 N/ m
a broader sampling of cities across the country, including Victoria. For these% D+ e) G8 S; `/ I. J& l5 K, n# M
cities, RBC has used a narrower measure of housing affordability that only/ z0 X9 Z* H- p( |3 f
takes mortgage payments relative to income into account.
* b7 X- K( A% I6 z The Housing Affordability measure, which RBC has compiled since 1985, is/ I* I& V2 Z, }6 `. t3 X4 I: \
based on the costs of owning a detached bungalow, a reasonable property" O$ o! N& _* a# d2 J
benchmark for the housing market. Alternative housing types are also presented
4 h8 ~9 E, r/ r& ~& S4 J% Cincluding a standard two-storey home, a standard townhouse and a standard3 o( S6 d5 a: ]4 S: d
condominium. The higher the reading, the more costly it is to afford a home.
8 J7 t0 k; h- J' eFor example, an Affordability reading of 50 per cent means that homeownership+ V& d$ T. \# ]- \, T3 Q
costs, including mortgage payments, utilities and property taxes, take up 50& d m& U0 h9 X& G# I$ E
per cent of a typical household's monthly pre-tax income." @) m' y; \- }
# s! [7 `1 v! V& D8 r# V7 Z <<& z2 m% d5 P5 E! A8 W" V
Highlights from across Canada:) }" i6 v9 n! i q5 S/ ]7 P
4 B8 [( R4 \% _) ` - Alberta: Since last fall, the declining Alberta economy has
% P0 [! d2 Z6 U1 I intensified the downdraft on the province's housing markets, causing
, ^# a' x: C; O" Z7 D s8 u+ f home resales to drop to a 12-year low at the end of 2008 and rebound
( Q6 C& y" }6 W x4 L only modestly since. Affordability has been on an improving track
& j1 f+ [. t6 ~1 B- r& q" ? since about the middle of 2007.) l" ^- w8 A7 B" q) H% D3 ~
- Saskatchewan: Market activity has cooled considerably from the
2 S& Z% E+ w# V {0 V! v frenzied pace from 2006 to early 2008 and prices have begun to
, X6 o {8 @4 M% F: p5 a decline. Nonetheless, economic and demographic fundamentals are still
) n+ z0 [# C1 C' N7 h% y largely supportive of the housing market and overshadow extremely6 L- W: |) P4 ^% @! \4 Y$ ^ v
poor affordability levels.# K; z" ?5 X1 D3 }7 r5 d
- Manitoba: Manitoba's housing markets have fared much better than the7 o8 A7 l1 v0 }: C
vast majority in Canada: resale activity has slowed moderately and
9 o1 U. [: ?/ m1 E! i prices have either held their own or edged down just slightly.
+ t: y. q/ R7 W Affordability has been kept out of the danger zone, helping to8 t8 X$ k( B" `( n
minimize any downside risks.$ r% @- O" W1 Q$ X3 |" f& `
- Ontario: With the recession pounding many communities, housing market
7 C& z, J C9 I2 A/ ^" T) M conditions have deteriorated considerably. However, the impact is# g4 L6 }, H0 m7 s# P. c- A: v* P
unlikely to develop into an all-out rout similar to that of the early6 X- P1 |" o) i9 N; X1 q
1990s. Affordability, while still causing some stress, is quickly' `- N3 T- _& n! p" W6 |+ L- D
being restored to levels closer to long-term averages.
t. G3 g9 V$ G0 k - Quebec: The province's housing markets have been among the last in
7 Z! J( E4 H; U+ \% }3 k Canada to yield to the weakening trend. The main sign of cooling thus( H2 w* J; K' r: M% W' p- @3 u
far has been a drop in resale activity, as prices have held up
6 r: }3 E6 @5 I! N reasonably well. Some of the persisting market strength can be
; ?* h& {3 b! E5 n ascribed to sensible affordability levels, which had eroded only2 H3 x) t5 O# I' a8 o( i
modestly in recent years.
' t# P) g9 ?+ x, w7 P3 U1 {4 Y - Atlantic region: Markets have largely remained stable against the8 r. g/ V' @- F" f" X
general housing downturn, with St. John's becoming the housing hot- q" E6 ]% E! W, a8 J
spot in Canada and Halifax and Saint John maintaining steady upward
+ @1 d' F$ u7 J5 W2 Y7 n7 o9 W price momentum. The region is benefiting from improving affordability
: b7 k% G, L) m/ d2 J following two years of deterioration.
6 v7 A( P5 N- k0 I+ F+ U >> |
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