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British Columbia's housing affordability notably improved but still has far to go, says RBC * K$ \. {; R+ v7 g; u2 `
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the% @+ z& P# o/ P, e3 n
middle of a significant correction that is partly reversing the extensive
/ C7 k, N' K6 z7 \* V# [gains of recent years and which is helping restore affordability conditions,
+ i8 K c$ N! U5 J0 |7 ?/ K% {according to the latest housing report released today by RBC Economics.
, U/ y, O. c' C4 D" z+ y "The province's housing markets remain under heavy downward pressure,"5 [, W$ |. Z% A6 L3 k$ K/ E
said Robert Hogue, senior economist, RBC. "While housing affordability is
7 l! M# I& p V* a( {/ ]% Limproving as the correction process runs its course. RBC's affordability! Y/ a/ f: ^$ p* H# V% |! g
measures for the province are still at levels far off historical averages."
/ l! k3 x4 H7 ~9 h RBC notes that the sharp rise in unemployment since last summer is
3 C- ?7 K" w4 H7 o; M6 n( d+ sworrying households in the province and weighing down demand for housing,1 Y1 {& K% @1 Q1 W; f E/ L
which runs well short of available supply. Such weak market conditions have; y& I# f' P" `; Q4 x: i4 T! n
sustained the declining trend in prices for both existing and new homes.! J1 P* _* W9 b3 G
The RBC Affordability measure for British Columbia, which captures the
& i: S0 Z* D" {; q9 i9 Cproportion of pre-tax household income needed to service the costs of owning a
( [* _$ |0 l, s) y* ]home, improved across all housing segments in the last quarter of 2008.9 l$ y4 V& m( Z0 }& {
Affordability of detached bungalows in the province moved to 66 per cent, the" ?! X: q0 s, Z$ O! I+ U
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
0 t1 E" s3 ]: L' d# l. k2 ?. E7 @the standard two-story home to 73.7 per cent. |4 G: I7 I' ^, t8 [
According to the report, there are signs that the B.C. housing markets5 V4 w7 `, o4 M2 g5 J8 G1 I2 x" c
may be stabilizing as sales of existing homes appear to have bottomed out in
. h* L6 M9 l, I4 [/ Hthe closing months of 2008 and the first two in 2009 - although at
3 v, U3 b7 s8 A) x6 Shistorically depressed levels.3 N% Z' G. K. F1 } h9 p0 v
Despite sharply declining house prices and lower mortgage rates, the cost, o' q( O r/ o
of homeownership in Vancouver is still the highest in the country. House. |2 x, [3 l% E6 v/ y7 u6 y
prices continue to rapidly decline and pricing power remains firmly in the
, A7 `/ e$ D; u, ]$ F) n5 z& z" Yhands of buyers with the sales-to-new listings ratio at historical lows. "This
# r9 e$ y' E6 benormous imbalance suggests that prices will likely further correct in the# s4 W& T _+ i9 e8 y
months ahead," added Hogue.* {/ ]/ v; ]3 o# g
RBC's Affordability measure for a detached bungalow for Canada's largest5 N! W& w7 b7 ^, ~
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary3 j, g5 n! X3 C5 E
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent." _' ?) i @5 x2 C( i
The report also looked at mortgage carrying costs relative to incomes for
5 A4 W4 O: b! Ja broader sampling of cities across the country, including Victoria. For these# }* X3 F6 j; Q( ^
cities, RBC has used a narrower measure of housing affordability that only
" G2 W$ F/ g6 P v; u0 `. Y* o( U- B; ztakes mortgage payments relative to income into account.
) U1 r" W% @2 X& c' y# I' @ The Housing Affordability measure, which RBC has compiled since 1985, is' o4 d2 H: V# B) O+ h% Q( m H
based on the costs of owning a detached bungalow, a reasonable property3 Z! w- @# u+ K; m7 J
benchmark for the housing market. Alternative housing types are also presented$ Z* N0 S3 A$ }! {% C
including a standard two-storey home, a standard townhouse and a standard
& t' E. K0 {- j; e- lcondominium. The higher the reading, the more costly it is to afford a home.% q- w2 N! t7 O& F' g; ?
For example, an Affordability reading of 50 per cent means that homeownership
3 ~6 A+ D2 e( u/ B1 v; O' o; X3 \costs, including mortgage payments, utilities and property taxes, take up 50- c; _# L. v* @$ @) W9 ~, m
per cent of a typical household's monthly pre-tax income.
; W' L3 O3 A8 S8 M \' \
6 W1 n/ x& j' }4 B: ~( b4 i7 L <<% a3 y/ P0 g$ |9 ~* X& z: {3 o
Highlights from across Canada:+ ~; j! J7 w% @* h- X9 F; X
. w' X0 g8 p8 j4 O" G" l- \! Y2 h
- Alberta: Since last fall, the declining Alberta economy has8 I5 x$ t! b+ s
intensified the downdraft on the province's housing markets, causing
! g7 A! z. t, X( B1 h7 h5 k+ z0 y, R home resales to drop to a 12-year low at the end of 2008 and rebound
8 ~" }8 y% V& r. J only modestly since. Affordability has been on an improving track* N* u' {7 ^+ V& h7 P
since about the middle of 2007.
0 E! ^6 v" Z$ g4 F/ T - Saskatchewan: Market activity has cooled considerably from the1 \) c. R$ P, `+ M6 Z7 D% n! k
frenzied pace from 2006 to early 2008 and prices have begun to
, d6 {2 L: j9 c- `7 A decline. Nonetheless, economic and demographic fundamentals are still. a+ |: C; f$ [9 z) z* Y
largely supportive of the housing market and overshadow extremely
: A! x' O+ q5 w: Z+ E poor affordability levels.. I! i1 q9 [/ M0 }; [# C
- Manitoba: Manitoba's housing markets have fared much better than the0 e) k' m2 L% r% Y9 ?/ U. g
vast majority in Canada: resale activity has slowed moderately and0 [! ^7 t! Z( B. z2 S
prices have either held their own or edged down just slightly.* M1 L0 ] M! _
Affordability has been kept out of the danger zone, helping to9 a8 [) ], n3 V, Z) a5 ~
minimize any downside risks.
# y0 I; d; t. S, I9 W - Ontario: With the recession pounding many communities, housing market
% T* k/ {. w$ z3 | conditions have deteriorated considerably. However, the impact is/ Q; k5 q* D+ t# F5 Y: r
unlikely to develop into an all-out rout similar to that of the early
$ I* W! n, h' E; B3 f' v3 m8 b# m' [ 1990s. Affordability, while still causing some stress, is quickly
. R* Z: {; |3 u: r w7 | being restored to levels closer to long-term averages.
3 \( C% A" `- Q" P - Quebec: The province's housing markets have been among the last in1 l' W- c& U/ l4 p$ y
Canada to yield to the weakening trend. The main sign of cooling thus( D, U. Y* y: l/ b( c/ B
far has been a drop in resale activity, as prices have held up, n( e9 [8 S2 L& z3 t
reasonably well. Some of the persisting market strength can be6 f! z7 C5 V& E7 I0 `5 N
ascribed to sensible affordability levels, which had eroded only
# Z0 Z& K; e# T, E modestly in recent years.
! A+ v* J3 L2 D6 X! o/ u3 a - Atlantic region: Markets have largely remained stable against the
( I' k" L e% {# K1 \: b7 U# W general housing downturn, with St. John's becoming the housing hot% X! |# T" T! y* q
spot in Canada and Halifax and Saint John maintaining steady upward
; j4 c! W+ U' P4 e price momentum. The region is benefiting from improving affordability; ]! P, q l% X. Y0 c& ^ s
following two years of deterioration.
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