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British Columbia's housing affordability notably improved but still has far to go, says RBC + F6 h; S, h9 H3 ]
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the% W! ?. I* [. Y- l8 X9 @
middle of a significant correction that is partly reversing the extensive
- j; Y1 d/ T8 R1 M* G( Zgains of recent years and which is helping restore affordability conditions,
+ M, ~! n' ?! H1 }6 Yaccording to the latest housing report released today by RBC Economics.. p5 U* W5 ]3 B+ H7 _: y3 Q( S! D
"The province's housing markets remain under heavy downward pressure,". K0 z& T& Z6 B) e* `
said Robert Hogue, senior economist, RBC. "While housing affordability is
7 J* C( \9 v) L8 Q9 x' g. t7 cimproving as the correction process runs its course. RBC's affordability0 \: w, P0 N) k1 ~, X9 T
measures for the province are still at levels far off historical averages."
4 |, R$ H3 p! s8 ?: o RBC notes that the sharp rise in unemployment since last summer is
- [7 O( Q2 b$ X" @4 L; d' X, Wworrying households in the province and weighing down demand for housing,6 v' q @9 ~( ? O. }) T
which runs well short of available supply. Such weak market conditions have7 D# } z2 d( |! Q' T
sustained the declining trend in prices for both existing and new homes.
8 B0 `- v" L" F6 l0 t4 W7 H The RBC Affordability measure for British Columbia, which captures the
. @$ \( z. }7 e7 G5 }proportion of pre-tax household income needed to service the costs of owning a
1 ?, W2 O/ L6 ^3 K0 c& N* j" Mhome, improved across all housing segments in the last quarter of 2008.
# l* T* j+ U* t% E) V) p# nAffordability of detached bungalows in the province moved to 66 per cent, the
$ Q; o8 E( U) _& y. o. R! Wstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
* I) D+ C+ r0 ]& @: @4 H" l( jthe standard two-story home to 73.7 per cent.( L/ H2 Y$ x, Z. w6 p# y0 F5 Q! ^
According to the report, there are signs that the B.C. housing markets! q: W$ t- C0 ^6 \1 j* o: L
may be stabilizing as sales of existing homes appear to have bottomed out in5 o, H, p* E F l' s: @
the closing months of 2008 and the first two in 2009 - although at0 q* Z: A6 @+ J# i7 q: O
historically depressed levels.
6 w& d3 I1 Q) @ j5 y3 g Despite sharply declining house prices and lower mortgage rates, the cost
" ~) E1 B' o5 v' {- Q6 j; Uof homeownership in Vancouver is still the highest in the country. House
; M5 @3 e) ?2 i4 D+ f- O; Aprices continue to rapidly decline and pricing power remains firmly in the7 x# e( T$ o3 V+ z" i
hands of buyers with the sales-to-new listings ratio at historical lows. "This ]+ x" k' x; K+ |* {' s% W
enormous imbalance suggests that prices will likely further correct in the. }! {5 M( Y. Y/ ~' K
months ahead," added Hogue.+ ?( G ^# o+ G8 J9 h
RBC's Affordability measure for a detached bungalow for Canada's largest
% o4 ]% s$ R. vcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
5 C2 T3 y, {! v, J* J: Q! j: ^42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
" B7 y: X; O3 [, H- n5 i The report also looked at mortgage carrying costs relative to incomes for) d& G5 O! L! r: s7 v
a broader sampling of cities across the country, including Victoria. For these4 _1 Y1 O/ ], n( r; ?3 Z
cities, RBC has used a narrower measure of housing affordability that only
/ |& S/ r. q2 n/ Ntakes mortgage payments relative to income into account.
! h4 v8 W( u j* V The Housing Affordability measure, which RBC has compiled since 1985, is
- E0 o7 |5 Z( bbased on the costs of owning a detached bungalow, a reasonable property
5 d& A9 W$ [& l, b2 }# Zbenchmark for the housing market. Alternative housing types are also presented# E6 A. J! ]# s& D. k
including a standard two-storey home, a standard townhouse and a standard5 S7 K5 _7 v" j; Q
condominium. The higher the reading, the more costly it is to afford a home.
( e9 C7 Y2 j. z+ v. r( LFor example, an Affordability reading of 50 per cent means that homeownership# H1 w! N. |. M2 ]0 W* m
costs, including mortgage payments, utilities and property taxes, take up 50
& u) U; i) j' o. _$ X- e& Hper cent of a typical household's monthly pre-tax income.
( p6 `# E. r4 z3 i
. }1 g6 i: |/ B' q. B <<
) @$ b, u0 W$ K% D' M! C; c Highlights from across Canada:8 r; K, z6 L( z. C+ H) p$ h3 u, q
7 T9 u9 y1 G x w5 }. ?
- Alberta: Since last fall, the declining Alberta economy has
' h- u% b1 e% O0 R* J, Q% q) g intensified the downdraft on the province's housing markets, causing
3 P& x* a& e! M* g+ O home resales to drop to a 12-year low at the end of 2008 and rebound
# ~$ M$ P Y" @% H3 a& d only modestly since. Affordability has been on an improving track5 k+ J' G: p: K# Y
since about the middle of 2007.3 y; y% ?& v+ h u
- Saskatchewan: Market activity has cooled considerably from the: P, Q g: O" k) B* O' L
frenzied pace from 2006 to early 2008 and prices have begun to
3 r6 F( K# R& V- I decline. Nonetheless, economic and demographic fundamentals are still4 ]2 I, \* r- z; m# y
largely supportive of the housing market and overshadow extremely
- a1 \$ G/ M0 ~0 B) G9 Y( P, f poor affordability levels.
0 a) L% j" d: r" O( V' C4 x& W; I - Manitoba: Manitoba's housing markets have fared much better than the
, k8 ` Q4 v7 Z5 q2 X vast majority in Canada: resale activity has slowed moderately and
, b- _' |! n( z1 Y. h! n prices have either held their own or edged down just slightly.
& U( l0 P0 j& i0 X% [& d Affordability has been kept out of the danger zone, helping to
2 x" [. x- N" [2 L- } minimize any downside risks.
' }0 [: F* j3 s E1 k6 Y3 C+ @ - Ontario: With the recession pounding many communities, housing market
8 j! Q" o a! R0 L+ _ conditions have deteriorated considerably. However, the impact is N9 C, R* M# [& N
unlikely to develop into an all-out rout similar to that of the early
) m& T# L3 r0 l$ U/ X' \! } 1990s. Affordability, while still causing some stress, is quickly, L5 w% ` _; J ~
being restored to levels closer to long-term averages.
9 n& U$ ^2 ^7 t( F" J( b- M) J j5 h - Quebec: The province's housing markets have been among the last in
* g" l$ E% c+ A4 ^1 m# K# f# ] Canada to yield to the weakening trend. The main sign of cooling thus% N) x' U7 K \7 C: ~/ f' H( W+ R
far has been a drop in resale activity, as prices have held up
* X' w0 ~3 [9 ?! v3 I reasonably well. Some of the persisting market strength can be/ I& q$ Q, O7 [8 u! v" c4 s2 b* J0 ]
ascribed to sensible affordability levels, which had eroded only
9 C2 _! K4 h F& }! S+ k$ P( j modestly in recent years.
, ]' T6 f2 L+ ]. N - Atlantic region: Markets have largely remained stable against the! L+ g7 ]7 X6 W8 S6 ?3 n
general housing downturn, with St. John's becoming the housing hot9 S+ w- j- c3 b4 x' T/ T
spot in Canada and Halifax and Saint John maintaining steady upward
9 \, {( C6 B. V price momentum. The region is benefiting from improving affordability
" {) o4 c |2 U following two years of deterioration.1 p, z! G+ ]! ?2 }3 M
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