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British Columbia's housing affordability notably improved but still has far to go, says RBC
/ N/ }2 ] o7 s9 r# c TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the r: L" q. |9 J0 Y4 C7 B1 T
middle of a significant correction that is partly reversing the extensive5 G: u: h0 d2 k! n4 s
gains of recent years and which is helping restore affordability conditions,
# @" |3 J$ V1 O: v( R* ^2 kaccording to the latest housing report released today by RBC Economics.
' |1 N5 V. T% _3 H1 P "The province's housing markets remain under heavy downward pressure,"
& E, v& G: s1 ~* {3 jsaid Robert Hogue, senior economist, RBC. "While housing affordability is
" M$ w$ a; P& L% Iimproving as the correction process runs its course. RBC's affordability+ ~& j. v' M) p7 n# W. V
measures for the province are still at levels far off historical averages.". p1 k3 {2 N6 B5 y
RBC notes that the sharp rise in unemployment since last summer is
# C0 c$ Z& h3 ?. b0 Xworrying households in the province and weighing down demand for housing," w3 T+ W3 x3 K
which runs well short of available supply. Such weak market conditions have+ \/ ]& b& K2 K; n/ e% Q/ ]* G9 n
sustained the declining trend in prices for both existing and new homes.% k5 u5 n, |6 x7 @( F2 {, g
The RBC Affordability measure for British Columbia, which captures the
$ M( h! K5 R6 {6 q" ~: ?proportion of pre-tax household income needed to service the costs of owning a* v6 Y$ A- b+ u
home, improved across all housing segments in the last quarter of 2008.
$ g" p: g' D+ ~$ A. W( TAffordability of detached bungalows in the province moved to 66 per cent, the& b9 ~( l! N" l6 |8 \- o# G
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
! j' B$ M/ b* ~1 k$ g. A1 U9 X& ^the standard two-story home to 73.7 per cent.. @" J* g2 M6 o3 ?3 U z
According to the report, there are signs that the B.C. housing markets" f& W! P( A) t/ N( h# r% r
may be stabilizing as sales of existing homes appear to have bottomed out in
; Z" C# u2 z. ^/ hthe closing months of 2008 and the first two in 2009 - although at6 B+ R7 P/ E: \; W
historically depressed levels.$ Z' u$ k0 t+ E' @' j/ Q \
Despite sharply declining house prices and lower mortgage rates, the cost
R8 A) b, I/ x+ |% Oof homeownership in Vancouver is still the highest in the country. House# m' P4 T% |4 D
prices continue to rapidly decline and pricing power remains firmly in the- n3 L# w2 a8 S; `
hands of buyers with the sales-to-new listings ratio at historical lows. "This
3 N* F! D, r+ L# R. Eenormous imbalance suggests that prices will likely further correct in the4 w' ~* }3 Y0 v# c
months ahead," added Hogue.- e) R/ z: m7 x- J
RBC's Affordability measure for a detached bungalow for Canada's largest4 V2 C1 }& a# Q3 v. ^1 m# m* q' }
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
2 [+ [& N4 W- N& Z) G! T( \42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent." a. ^5 P5 N% J7 Y) W6 Z
The report also looked at mortgage carrying costs relative to incomes for: i' k8 S$ z- U( ]3 K* }0 b
a broader sampling of cities across the country, including Victoria. For these8 {* \: V( R' o6 ~, I5 O N9 }2 U6 U
cities, RBC has used a narrower measure of housing affordability that only
+ X& I5 P! H+ K, @/ rtakes mortgage payments relative to income into account.
% G V' Z( o/ Y j, a The Housing Affordability measure, which RBC has compiled since 1985, is
! f- d ^; a0 i- _based on the costs of owning a detached bungalow, a reasonable property8 L8 D1 L+ w, _! s- o$ a* s8 Y
benchmark for the housing market. Alternative housing types are also presented
/ I7 i! t0 s# t7 n$ \including a standard two-storey home, a standard townhouse and a standard- A# _8 Q: ~. \
condominium. The higher the reading, the more costly it is to afford a home.
( ~" x" D/ O% d7 O, S/ O# PFor example, an Affordability reading of 50 per cent means that homeownership1 `% c2 }& x$ h) l J
costs, including mortgage payments, utilities and property taxes, take up 50
z- o( M) n# U0 _/ Z4 hper cent of a typical household's monthly pre-tax income.
- f; L( ^7 S7 ?' I% t+ A2 x$ t+ @% l" V4 d' N% d" D9 n
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2 K) _* r% b4 X Highlights from across Canada:/ S1 Q/ X7 O% L- a+ h
+ D! v0 W5 {: B9 R' r8 l1 q# A; t
- Alberta: Since last fall, the declining Alberta economy has, [3 R% E. H8 N8 p0 t
intensified the downdraft on the province's housing markets, causing$ @9 o. Y/ q. E9 z( o8 ~
home resales to drop to a 12-year low at the end of 2008 and rebound1 U, T6 b8 C+ I* A% S' T
only modestly since. Affordability has been on an improving track6 ]9 D# z, \) X7 t' I$ c4 |- Y
since about the middle of 2007.
1 H/ @0 V" I0 Y9 g y A - Saskatchewan: Market activity has cooled considerably from the
1 o, Y% S! Y3 A# u- n frenzied pace from 2006 to early 2008 and prices have begun to
& J4 l+ i/ q4 Y2 Z& O& K' ^ decline. Nonetheless, economic and demographic fundamentals are still
w' j% B) U0 U, [, e% [ largely supportive of the housing market and overshadow extremely; X, D3 y7 L9 a9 q/ T9 k
poor affordability levels.
1 t. p" q+ o% ?$ ?3 Q" y4 L1 j) Q/ h - Manitoba: Manitoba's housing markets have fared much better than the( c% Z, i, k) l
vast majority in Canada: resale activity has slowed moderately and
) l f' \; M3 C7 h/ [ prices have either held their own or edged down just slightly.4 r0 j' i" h3 `. u) Y# J7 ^( B5 u
Affordability has been kept out of the danger zone, helping to5 L/ c, P$ |! K
minimize any downside risks.2 O3 r. u6 L" ^ Z0 X) @- L* j8 g: L3 g
- Ontario: With the recession pounding many communities, housing market
3 A; K' Y0 I% c conditions have deteriorated considerably. However, the impact is7 b% {2 [* B0 h' _
unlikely to develop into an all-out rout similar to that of the early
7 d6 q: l7 f7 ?1 i0 Y& e 1990s. Affordability, while still causing some stress, is quickly) _: \% D( [& l6 r
being restored to levels closer to long-term averages.
2 H4 T! ^0 V' e v) I4 F4 x( L9 w - Quebec: The province's housing markets have been among the last in5 B H% v$ t. }: w( w ^5 d
Canada to yield to the weakening trend. The main sign of cooling thus
' [6 K9 h( V" F( I% F2 R far has been a drop in resale activity, as prices have held up# w1 y& p, I& |
reasonably well. Some of the persisting market strength can be
0 ^% t* `& G' v. n' T# M ascribed to sensible affordability levels, which had eroded only
' g w. }0 n2 I" O( q b; `/ z% b modestly in recent years.
- @2 U/ Z4 h$ \ - Atlantic region: Markets have largely remained stable against the
# @' d0 n% J3 c* G general housing downturn, with St. John's becoming the housing hot
4 E0 t0 s7 @2 R8 a) x( f spot in Canada and Halifax and Saint John maintaining steady upward* c/ p5 @+ o/ w/ C& ~6 D
price momentum. The region is benefiting from improving affordability
; J# z% x. n4 \7 ~ following two years of deterioration.- {5 F* q5 j6 x' O% o
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