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British Columbia's housing affordability notably improved but still has far to go, says RBC
& A, s" ]6 e. ?% J# ^% d: w TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the: L0 f4 F1 |. l/ X/ v; e+ R& A
middle of a significant correction that is partly reversing the extensive3 Q1 B0 a) }: u" k# u4 E% T
gains of recent years and which is helping restore affordability conditions,9 i" L; S# t" U9 J: M
according to the latest housing report released today by RBC Economics.! F4 v* ^7 x- U1 {. g
"The province's housing markets remain under heavy downward pressure,"* V: N0 o' A& y8 d
said Robert Hogue, senior economist, RBC. "While housing affordability is
$ P( F+ K1 Y& w" C* z% L0 rimproving as the correction process runs its course. RBC's affordability
7 F' w( U4 n8 x7 v- Smeasures for the province are still at levels far off historical averages."6 D3 H0 L3 m9 r1 S" q8 S8 @
RBC notes that the sharp rise in unemployment since last summer is; m3 h- U1 {& |% |: h, s, U
worrying households in the province and weighing down demand for housing,
& |+ i8 I+ ?: j. m! Zwhich runs well short of available supply. Such weak market conditions have- W! I6 y# {- i! u+ F7 B5 ]8 |/ L
sustained the declining trend in prices for both existing and new homes.: i( g, J" K! Y" o
The RBC Affordability measure for British Columbia, which captures the
! ? A* Y6 @/ Gproportion of pre-tax household income needed to service the costs of owning a% _ K9 b4 O( z. i% Z$ h
home, improved across all housing segments in the last quarter of 2008.# O$ s, ]. O$ W5 }- O
Affordability of detached bungalows in the province moved to 66 per cent, the
/ c& x$ ~" \3 I# Vstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
7 ?: P" D1 ~4 L6 ^% G, }the standard two-story home to 73.7 per cent.
5 }1 A# u& Q t According to the report, there are signs that the B.C. housing markets X" e. c( S$ [7 F8 o+ |9 `
may be stabilizing as sales of existing homes appear to have bottomed out in
' j# F6 t& C! n+ d6 K6 y5 pthe closing months of 2008 and the first two in 2009 - although at
2 e! ^ {, f' s% M% ? z" Xhistorically depressed levels.! S& N) m/ D6 l7 ~* L
Despite sharply declining house prices and lower mortgage rates, the cost. x3 h3 A Y, O2 P
of homeownership in Vancouver is still the highest in the country. House
: x6 n/ ]1 ?% e6 [0 C6 [prices continue to rapidly decline and pricing power remains firmly in the; Q3 Z0 W" h" [5 x, ~7 _# C
hands of buyers with the sales-to-new listings ratio at historical lows. "This* Z6 k# D: ?3 H7 X9 b! `
enormous imbalance suggests that prices will likely further correct in the0 W( p: j2 Q4 v( o5 a5 u" ~6 b g
months ahead," added Hogue.
p4 w! X% m5 J RBC's Affordability measure for a detached bungalow for Canada's largest
" Z8 c" l1 m5 N0 x* J: ?& U; o5 mcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
4 k0 K( T5 K0 H# t- `% w+ p42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
2 i- o8 w6 H" C1 Q The report also looked at mortgage carrying costs relative to incomes for
& Z" p* L. Z2 C* xa broader sampling of cities across the country, including Victoria. For these, _6 Y' U0 U- m5 ]: _1 W4 Q* a# m
cities, RBC has used a narrower measure of housing affordability that only
, E( M, d- M! x' m, etakes mortgage payments relative to income into account.. n+ J, J8 j; b E0 T+ {0 U3 q4 r
The Housing Affordability measure, which RBC has compiled since 1985, is
" ?3 G0 ~" ~) Q3 k i' x# Y9 Hbased on the costs of owning a detached bungalow, a reasonable property Q v4 k9 M: d: S- V
benchmark for the housing market. Alternative housing types are also presented0 c- V% m% p" C- N* T% A. q
including a standard two-storey home, a standard townhouse and a standard
; t3 w) L f3 fcondominium. The higher the reading, the more costly it is to afford a home.
% a E0 F! y; B* `# KFor example, an Affordability reading of 50 per cent means that homeownership& H8 Y5 w( G4 _. P; F5 w$ Z" Z
costs, including mortgage payments, utilities and property taxes, take up 50
" u$ ?8 h0 n5 c7 i0 I! B, w. ~4 Kper cent of a typical household's monthly pre-tax income.+ i" J* l; S# d/ l$ r: ]
% R3 o9 O8 S. K5 p! w' Q
<<8 Y+ j9 g# E1 r) q5 W7 P% t
Highlights from across Canada:5 |% j2 A) F) j) z
' A! Z/ [6 l* K* h
- Alberta: Since last fall, the declining Alberta economy has
2 t- }1 \: J/ C) L( K" |$ D+ d intensified the downdraft on the province's housing markets, causing
+ ^2 y' y9 N2 s, @3 c @ home resales to drop to a 12-year low at the end of 2008 and rebound$ I3 q' w0 d5 M- O( p
only modestly since. Affordability has been on an improving track: [ f6 z6 i& U4 R9 H) y
since about the middle of 2007.
. f0 o0 }4 {+ Z" d9 ?- L2 w- _ - Saskatchewan: Market activity has cooled considerably from the
8 W' W( h7 B9 ?. x frenzied pace from 2006 to early 2008 and prices have begun to7 B1 k( u0 A0 p% I. q
decline. Nonetheless, economic and demographic fundamentals are still
$ V1 A6 M) l; ^/ E largely supportive of the housing market and overshadow extremely
' t( A8 a3 ^4 V1 N* Q poor affordability levels.7 E E; i+ P/ F
- Manitoba: Manitoba's housing markets have fared much better than the; v. }5 d N* i' @
vast majority in Canada: resale activity has slowed moderately and( q5 n4 ~6 V2 N7 | w F
prices have either held their own or edged down just slightly.
( j* |" s4 `* s9 Z. z) R Affordability has been kept out of the danger zone, helping to
* @8 M B% W+ a; J1 c: w8 n) ~ minimize any downside risks.+ J/ }" s! R g6 ` ^* p. C. z
- Ontario: With the recession pounding many communities, housing market/ {, X2 R0 p1 k% y# M2 N( Q
conditions have deteriorated considerably. However, the impact is
: I3 H9 P' L U) N unlikely to develop into an all-out rout similar to that of the early
6 Z" K- Q% w/ S5 _3 | 1990s. Affordability, while still causing some stress, is quickly* g6 F" f- m( Y( r
being restored to levels closer to long-term averages.' D9 o0 B, ?& u/ p4 L
- Quebec: The province's housing markets have been among the last in8 N) r4 |- x( b, c6 _
Canada to yield to the weakening trend. The main sign of cooling thus
9 Q) b0 S- P4 E+ F+ q5 H2 c" U8 ~ far has been a drop in resale activity, as prices have held up
& a4 M' S7 w: J$ Y, k, {; A reasonably well. Some of the persisting market strength can be8 C* C# k/ U% N- b0 O) a
ascribed to sensible affordability levels, which had eroded only
! b- o2 q- K% H5 g: S( S modestly in recent years.
1 ?: ^. R1 C8 v* y' u - Atlantic region: Markets have largely remained stable against the
9 ]5 ?7 @) P1 H- B* } general housing downturn, with St. John's becoming the housing hot. F3 \7 }% B$ F9 @
spot in Canada and Halifax and Saint John maintaining steady upward8 S+ u1 f* K- D, s
price momentum. The region is benefiting from improving affordability
( Q" f3 u* b/ w' Z9 q following two years of deterioration.! X3 I' x" H, @
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