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British Columbia's housing affordability notably improved but still has far to go, says RBC
) i! O q/ _! K: ?6 y TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the, \* U; B, T' o7 B9 P, F. ~
middle of a significant correction that is partly reversing the extensive
, }* Q+ M2 p1 [4 w& zgains of recent years and which is helping restore affordability conditions,
: {9 H3 f: |; g* i" @: `according to the latest housing report released today by RBC Economics.# x1 m' W' k5 U) }# ]& F8 N; l
"The province's housing markets remain under heavy downward pressure,", \0 V' E% t: [
said Robert Hogue, senior economist, RBC. "While housing affordability is
0 B1 T* C( Q. H& jimproving as the correction process runs its course. RBC's affordability0 m/ s% B: m3 O& |6 {
measures for the province are still at levels far off historical averages.") R3 K0 d: c7 u: T
RBC notes that the sharp rise in unemployment since last summer is. w/ o( f" y# A: M; X3 J
worrying households in the province and weighing down demand for housing,
3 q# R& f/ g7 M5 E! D2 @ b( a: Awhich runs well short of available supply. Such weak market conditions have7 |- h. l4 w, F" s9 y
sustained the declining trend in prices for both existing and new homes.; a3 ]! E- S- f. ~8 t8 D
The RBC Affordability measure for British Columbia, which captures the/ Q. @. X8 Y! \! k( t
proportion of pre-tax household income needed to service the costs of owning a
- V6 [* ?- M) Y, Z# @) ?6 vhome, improved across all housing segments in the last quarter of 2008.6 e# A E8 x( H8 B
Affordability of detached bungalows in the province moved to 66 per cent, the! M+ C5 M# S. \' h0 d
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and; a+ y7 j& D# \- n% p
the standard two-story home to 73.7 per cent.% F6 e0 _( _& B# M
According to the report, there are signs that the B.C. housing markets
+ J' M* X$ M1 F6 p5 B1 nmay be stabilizing as sales of existing homes appear to have bottomed out in
M' k7 W5 t* A* z) o0 b* E2 Ythe closing months of 2008 and the first two in 2009 - although at
5 E1 L7 k Y6 M2 ]historically depressed levels.- }& b6 ]' Y! F9 V5 b% o! ~- s$ w
Despite sharply declining house prices and lower mortgage rates, the cost
6 W) r1 s! n5 M; Fof homeownership in Vancouver is still the highest in the country. House
) B/ @. P& b5 hprices continue to rapidly decline and pricing power remains firmly in the; D% J" K$ D+ p4 W
hands of buyers with the sales-to-new listings ratio at historical lows. "This$ e; x* F- I6 O" A! T
enormous imbalance suggests that prices will likely further correct in the% b# W2 t, A8 J% C0 I. I: m. q5 ^6 j$ F
months ahead," added Hogue.
, @; u2 q. M+ ? RBC's Affordability measure for a detached bungalow for Canada's largest
4 V& @" d3 k& J+ u: {, Hcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary& T- n/ D6 n" s& H- q
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
2 Z0 k: F4 I6 ` The report also looked at mortgage carrying costs relative to incomes for0 e5 ^; B2 N2 T. L) a* w$ n
a broader sampling of cities across the country, including Victoria. For these: H+ K4 V' g: D# g+ R. Q/ _
cities, RBC has used a narrower measure of housing affordability that only
. w$ M5 q: r: H W7 t5 b/ gtakes mortgage payments relative to income into account.
% H" B2 x7 }6 k( J The Housing Affordability measure, which RBC has compiled since 1985, is
& A. A' p/ z: f) ]( x7 x! dbased on the costs of owning a detached bungalow, a reasonable property- |( k$ |! r7 o4 W
benchmark for the housing market. Alternative housing types are also presented
, m' y" S6 g+ s7 S7 p5 wincluding a standard two-storey home, a standard townhouse and a standard
+ n* P9 f: k' r0 }% hcondominium. The higher the reading, the more costly it is to afford a home.9 v O$ N3 P& x3 D0 A9 Z* k
For example, an Affordability reading of 50 per cent means that homeownership
2 t3 K7 r3 v/ ~( l: k# ?- Y6 \costs, including mortgage payments, utilities and property taxes, take up 50
9 r- Z$ ?9 h1 X! u/ \per cent of a typical household's monthly pre-tax income.
1 b" X7 ?1 u2 w: |, g8 Z, q( a! R ?, u8 o! {9 m
<<+ F `: n1 I9 ?3 b( J( v( x
Highlights from across Canada:7 a! c. ^( }6 Q: n) e, h% q
/ |: i. K# P2 i: E# R1 W
- Alberta: Since last fall, the declining Alberta economy has
( S: q0 a! V( a$ l intensified the downdraft on the province's housing markets, causing
4 r6 a [! f; c+ Y! ` home resales to drop to a 12-year low at the end of 2008 and rebound1 i7 c" m3 x2 |: c4 J
only modestly since. Affordability has been on an improving track. [, K( \; i$ s- ?/ H% C
since about the middle of 2007.
: j( V$ G2 h$ H - Saskatchewan: Market activity has cooled considerably from the
5 p/ K: U; w4 J) r" d frenzied pace from 2006 to early 2008 and prices have begun to: [2 d7 z6 l; i
decline. Nonetheless, economic and demographic fundamentals are still. F$ M0 L- T0 N% i
largely supportive of the housing market and overshadow extremely
5 _" `5 e G6 X$ P poor affordability levels.
# [/ F, \) s7 E: F) i - Manitoba: Manitoba's housing markets have fared much better than the
, G' e y" ]& A) ^, e9 Q( o vast majority in Canada: resale activity has slowed moderately and
9 {8 X0 |+ `( ? prices have either held their own or edged down just slightly.; n6 T d7 P( X3 |, l6 |% j
Affordability has been kept out of the danger zone, helping to
3 }- t" R4 b0 E. ` minimize any downside risks.
, _$ h9 k3 S8 v% ? - Ontario: With the recession pounding many communities, housing market
/ d4 n' T* D, }: I0 C2 ?! w conditions have deteriorated considerably. However, the impact is
3 J7 M' o$ h9 I. ? unlikely to develop into an all-out rout similar to that of the early
! Z ^! Y/ E/ @ 1990s. Affordability, while still causing some stress, is quickly
- |" n# B; N( p# D5 ] being restored to levels closer to long-term averages.4 t3 t- @2 r' y3 @) L
- Quebec: The province's housing markets have been among the last in# C H5 g( M; V; g
Canada to yield to the weakening trend. The main sign of cooling thus6 c% v: U" K+ U( t" K# I
far has been a drop in resale activity, as prices have held up6 P( P% O6 s# ], S% v- {+ |; ^: b
reasonably well. Some of the persisting market strength can be
) Z5 _4 [, h8 v9 D ascribed to sensible affordability levels, which had eroded only
: r. b8 M6 E: Q8 j% n/ v& O modestly in recent years.& F) j2 q1 ~7 I+ E5 V0 u
- Atlantic region: Markets have largely remained stable against the3 C& h: ]1 @* z2 Q+ R% h: S4 h
general housing downturn, with St. John's becoming the housing hot
8 ?& W- c6 K, Q. n6 |/ c spot in Canada and Halifax and Saint John maintaining steady upward: J6 D9 m* I% l) L
price momentum. The region is benefiting from improving affordability
- b8 r7 `2 l& q* _+ ?4 t- h following two years of deterioration.6 p) X; @; l) v/ o( f
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