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British Columbia's housing affordability notably improved but still has far to go, says RBC
" l' y. z( R$ J/ M8 S" t4 P( X TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
0 o2 b- a$ _) W$ C, w# U& \2 ymiddle of a significant correction that is partly reversing the extensive2 b# t- R* Z+ w- K0 b4 l
gains of recent years and which is helping restore affordability conditions,$ P; X" n: M' ~
according to the latest housing report released today by RBC Economics.
: J% h b/ `5 \0 C% Z% [, @; {1 ` "The province's housing markets remain under heavy downward pressure,"
6 Y# i6 |7 A% q0 osaid Robert Hogue, senior economist, RBC. "While housing affordability is5 q0 b: }% J$ W" B; L
improving as the correction process runs its course. RBC's affordability2 W+ \+ h8 ]+ O, k8 c' p( g; X
measures for the province are still at levels far off historical averages."0 M- O5 R; O' }4 g1 `# s
RBC notes that the sharp rise in unemployment since last summer is
2 g; I) _+ f; r# qworrying households in the province and weighing down demand for housing,' U9 O5 n9 f* X9 h) T( V2 F
which runs well short of available supply. Such weak market conditions have' H& |4 g1 p9 X/ x/ Z7 T- F
sustained the declining trend in prices for both existing and new homes.
7 g2 C( C/ q9 F; P5 u3 D The RBC Affordability measure for British Columbia, which captures the
) z2 r' J9 e6 _6 t- q6 S0 _proportion of pre-tax household income needed to service the costs of owning a
! l: u$ s1 V6 G" J; dhome, improved across all housing segments in the last quarter of 2008.& i( k/ c- k3 t" p
Affordability of detached bungalows in the province moved to 66 per cent, the
, C& _( K9 Q& S; o$ A5 d( {standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and* l ~; u. N$ M9 [0 h# W
the standard two-story home to 73.7 per cent.
# i+ w( d/ Q# k; Y" o According to the report, there are signs that the B.C. housing markets; j& c3 t, z& j n7 d
may be stabilizing as sales of existing homes appear to have bottomed out in
5 \+ L( L1 \- b7 g( r; O! S7 Kthe closing months of 2008 and the first two in 2009 - although at2 V7 ]- I. o& ^# n0 c5 e9 z+ X
historically depressed levels.+ H7 l! r& L4 }; _
Despite sharply declining house prices and lower mortgage rates, the cost
0 a$ f( a! s: E# O, Uof homeownership in Vancouver is still the highest in the country. House9 N! d; A5 O m
prices continue to rapidly decline and pricing power remains firmly in the
4 y% b; y( H R- q; k( Chands of buyers with the sales-to-new listings ratio at historical lows. "This3 X* C; [; t$ r* k1 L
enormous imbalance suggests that prices will likely further correct in the
! r: Z' C0 }( w2 Omonths ahead," added Hogue.7 R% E# t' O* J# S3 X+ q! ?6 h
RBC's Affordability measure for a detached bungalow for Canada's largest) i+ o7 p/ K$ \0 Y( a R
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
7 N( t' U- k" p9 O( \5 V4 A42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.. i: N7 G# Z4 Q7 Z
The report also looked at mortgage carrying costs relative to incomes for+ Q8 o+ }% s7 ~& W0 U
a broader sampling of cities across the country, including Victoria. For these
# P. B/ ]/ w8 W9 K2 ^/ c' M7 bcities, RBC has used a narrower measure of housing affordability that only
; B8 e8 |9 X9 s% J9 R3 d9 E* |takes mortgage payments relative to income into account.
8 d! E7 W( f2 x+ j4 T) v# z The Housing Affordability measure, which RBC has compiled since 1985, is
9 `) _1 G( h( e4 Sbased on the costs of owning a detached bungalow, a reasonable property
/ X; m) H% |% J, m# e& cbenchmark for the housing market. Alternative housing types are also presented
, z! i( R- Y( R6 j, qincluding a standard two-storey home, a standard townhouse and a standard# _6 G6 r" C. E
condominium. The higher the reading, the more costly it is to afford a home.9 ^4 M* \ ?- l' f l8 i. n
For example, an Affordability reading of 50 per cent means that homeownership- j0 p5 c, u" h$ R
costs, including mortgage payments, utilities and property taxes, take up 50: e/ d! M( H, I
per cent of a typical household's monthly pre-tax income.4 p3 e0 F& |- U' H! h
& ]# \% k4 N( j/ S9 |0 v/ r
<<
* S1 v* u4 F" o5 g+ d8 a! \ Highlights from across Canada:% _( g$ U2 \ w! L
7 B) x5 s& z' \! `2 f" H6 G
- Alberta: Since last fall, the declining Alberta economy has
) t4 [0 c$ j; q; c intensified the downdraft on the province's housing markets, causing
/ X1 `' w6 t, S' Q2 v& `9 _ home resales to drop to a 12-year low at the end of 2008 and rebound
2 ?# l3 S) `6 r) D only modestly since. Affordability has been on an improving track
6 g+ n$ c" U; \: T8 t since about the middle of 2007.4 W8 i( o. @7 `% [- A) d
- Saskatchewan: Market activity has cooled considerably from the. i6 w y; Y5 l; a3 ?
frenzied pace from 2006 to early 2008 and prices have begun to; P V* u x2 ?0 ~0 l9 O! ~
decline. Nonetheless, economic and demographic fundamentals are still
. H4 V8 ?' B1 Z+ o largely supportive of the housing market and overshadow extremely
$ G9 L- c, i4 \( A& @5 W$ @* F poor affordability levels." e" ~6 @/ ]8 }5 C: [
- Manitoba: Manitoba's housing markets have fared much better than the
4 w$ r# f4 ^, w$ f vast majority in Canada: resale activity has slowed moderately and+ v+ Y: g! n3 P/ C
prices have either held their own or edged down just slightly./ u/ R/ @) ?2 _: G
Affordability has been kept out of the danger zone, helping to9 `. Q% D* H5 M; Q) G
minimize any downside risks.8 S' X7 ^9 L+ i% u: x9 [& `
- Ontario: With the recession pounding many communities, housing market* ?) R# T3 r; N
conditions have deteriorated considerably. However, the impact is) G7 e8 s# Y2 p2 w
unlikely to develop into an all-out rout similar to that of the early7 I u9 d! G0 r
1990s. Affordability, while still causing some stress, is quickly
% f3 D2 d6 l# _9 L3 C! c6 T being restored to levels closer to long-term averages.
( @# b2 R$ Z! N9 v5 y! F, W% J - Quebec: The province's housing markets have been among the last in8 h- B( B# X! [7 g. b; q
Canada to yield to the weakening trend. The main sign of cooling thus/ i7 P( b+ {6 F, c! u
far has been a drop in resale activity, as prices have held up
; j& {4 R7 D! m5 E a reasonably well. Some of the persisting market strength can be
% N7 J. p3 k# Z, D& F: i$ x ascribed to sensible affordability levels, which had eroded only. G, s7 H7 w/ b" r: c$ R7 o$ v7 ~
modestly in recent years.
1 w9 G* s2 {7 N1 S; I6 Y% ] - Atlantic region: Markets have largely remained stable against the
! B# I3 F8 V5 _, g general housing downturn, with St. John's becoming the housing hot' z) q7 [! y9 o) `5 g! s' R
spot in Canada and Halifax and Saint John maintaining steady upward
1 H! C! K6 N/ K& h price momentum. The region is benefiting from improving affordability7 R6 B( x. f7 v' j7 b% @
following two years of deterioration.
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