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British Columbia's housing affordability notably improved but still has far to go, says RBC + W* C9 ] w: R; v1 Y
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
; w6 r$ l/ r- p* Cmiddle of a significant correction that is partly reversing the extensive6 j6 z% v- t' `; [* y* ^3 k- p
gains of recent years and which is helping restore affordability conditions,5 o- W9 w i) Y) L9 ]/ b
according to the latest housing report released today by RBC Economics.
5 x" T+ V' i8 T8 d/ E "The province's housing markets remain under heavy downward pressure,"
& ]9 G, J, A, k* N. C% \said Robert Hogue, senior economist, RBC. "While housing affordability is
2 K1 O- N! {" [; w* Fimproving as the correction process runs its course. RBC's affordability$ d5 N7 d) H0 r1 l# Q1 H k) y
measures for the province are still at levels far off historical averages."
5 }( M" @% W7 J, g RBC notes that the sharp rise in unemployment since last summer is/ |2 f# A- P5 W* ~9 X
worrying households in the province and weighing down demand for housing,% v/ h9 p! k- r8 z2 t9 E
which runs well short of available supply. Such weak market conditions have3 Q0 L2 M& V: v1 y+ g: {( x* r
sustained the declining trend in prices for both existing and new homes.
( g6 W9 h0 l& T8 Y) d1 b _: ~ The RBC Affordability measure for British Columbia, which captures the
; l, W3 h% e+ u7 M, Yproportion of pre-tax household income needed to service the costs of owning a4 d) }2 u/ y5 Z4 g2 F, U! z2 C
home, improved across all housing segments in the last quarter of 2008. R" P3 H/ d+ D7 }5 G2 h1 \! Z
Affordability of detached bungalows in the province moved to 66 per cent, the9 C. p) Z$ ~' }7 Q
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
; m( U( T/ Q! }5 i! A3 ~! Sthe standard two-story home to 73.7 per cent.$ v6 b+ g) p7 C# ~
According to the report, there are signs that the B.C. housing markets
0 p/ K) g N; i7 }6 zmay be stabilizing as sales of existing homes appear to have bottomed out in
" u$ a Z2 y! l: m1 s% P0 C9 xthe closing months of 2008 and the first two in 2009 - although at3 d* w6 n: s z3 e0 I
historically depressed levels.6 h% y( U2 Z3 b- ~/ H" d
Despite sharply declining house prices and lower mortgage rates, the cost" @$ i- [2 H5 E' B' E" G
of homeownership in Vancouver is still the highest in the country. House) M: x8 J1 Q9 f# `# R5 I
prices continue to rapidly decline and pricing power remains firmly in the
6 V3 j# g, ^8 Y/ n$ P8 P: rhands of buyers with the sales-to-new listings ratio at historical lows. "This7 j/ W! A9 Z! u A, q) c
enormous imbalance suggests that prices will likely further correct in the4 o! h" F* b* T' g
months ahead," added Hogue.
0 b v3 d5 t$ c6 k) x/ Y RBC's Affordability measure for a detached bungalow for Canada's largest
) B0 M% F+ \- k( w# Dcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary; }& d% e) [: U3 [
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
3 Y; b. s$ N0 U K0 `( c. } The report also looked at mortgage carrying costs relative to incomes for0 F" A; Q4 p0 P/ q7 E# X& w' B
a broader sampling of cities across the country, including Victoria. For these
- R, I0 x9 F% s+ d* g% ycities, RBC has used a narrower measure of housing affordability that only
0 y& Z6 T& k/ C" |9 r4 [- H( qtakes mortgage payments relative to income into account.0 D) Y- I: k' n# O1 _3 t5 u
The Housing Affordability measure, which RBC has compiled since 1985, is% }2 l( [ b5 G8 m- U
based on the costs of owning a detached bungalow, a reasonable property
$ K% B. ]5 C* r. d* u/ y- q- Jbenchmark for the housing market. Alternative housing types are also presented
5 n2 o5 U7 R0 F# L4 O; S; zincluding a standard two-storey home, a standard townhouse and a standard" o: G" ]- a& R
condominium. The higher the reading, the more costly it is to afford a home.- p0 h9 z* ?1 r. s; z
For example, an Affordability reading of 50 per cent means that homeownership
2 ~7 q7 R- x4 X$ ocosts, including mortgage payments, utilities and property taxes, take up 50
, ]) R& ^ o9 L3 i8 E- S7 Bper cent of a typical household's monthly pre-tax income.
6 t( j1 }( K# W7 f/ f
% }7 C. e- X, {7 V; i% K <<9 Z$ D* P4 f' q; K0 t1 L
Highlights from across Canada:2 V6 S( R( i: J
( k# J g' C6 q6 U, Q+ c - Alberta: Since last fall, the declining Alberta economy has
1 k& K# W0 U, ^, J; K& Q' W intensified the downdraft on the province's housing markets, causing
" U0 A x Y" |* c' n home resales to drop to a 12-year low at the end of 2008 and rebound$ B( i- A- Z4 q- ?0 [
only modestly since. Affordability has been on an improving track4 f2 i9 \/ @! w
since about the middle of 2007.
8 z* H6 C$ j6 o0 @) S* w: M - Saskatchewan: Market activity has cooled considerably from the8 p7 _1 Q0 s9 |( Y Q2 z! m, d
frenzied pace from 2006 to early 2008 and prices have begun to2 @- W' n3 X$ }0 O8 F
decline. Nonetheless, economic and demographic fundamentals are still
s# Y |! d+ s, j6 t' ^ largely supportive of the housing market and overshadow extremely/ P8 i" x1 h+ o1 B+ ^3 i
poor affordability levels./ j+ f: e1 n6 r" u8 S
- Manitoba: Manitoba's housing markets have fared much better than the
7 T- A3 ^! O3 @; H vast majority in Canada: resale activity has slowed moderately and
( O' [6 t% F6 n3 H b, i8 C) f1 U+ x prices have either held their own or edged down just slightly.
1 ^3 I6 e/ ]$ R: m6 ?) v$ H Affordability has been kept out of the danger zone, helping to
% w& l% f. ~. }1 _- z r minimize any downside risks.0 {4 N- T# _8 K) B# A% I
- Ontario: With the recession pounding many communities, housing market, _: p$ O' ]8 Y H/ b! U: a7 s
conditions have deteriorated considerably. However, the impact is
! J- V" ~9 R6 s$ e! O unlikely to develop into an all-out rout similar to that of the early# ~+ Y9 V+ `. t1 H# |7 E4 |
1990s. Affordability, while still causing some stress, is quickly$ \; F4 H" A- u" G6 R4 j
being restored to levels closer to long-term averages.! |2 d1 J/ m v5 A
- Quebec: The province's housing markets have been among the last in4 d/ f7 E4 x7 n+ F- \
Canada to yield to the weakening trend. The main sign of cooling thus
?2 T% J& p$ O& A; K1 P8 G far has been a drop in resale activity, as prices have held up
/ K6 b6 p' t2 c$ v reasonably well. Some of the persisting market strength can be
( C8 s! p; t: J3 x# C7 A ascribed to sensible affordability levels, which had eroded only
3 I# }3 }7 M* f6 N3 }7 V modestly in recent years.
) w. E/ C/ X7 Y" K( P - Atlantic region: Markets have largely remained stable against the
3 u; |# c4 F& e/ t4 f& P general housing downturn, with St. John's becoming the housing hot( r7 t' t: f5 g( T7 a" d, l
spot in Canada and Halifax and Saint John maintaining steady upward C- O9 p# X: y* _2 d3 q6 T: y- ^
price momentum. The region is benefiting from improving affordability
1 } h8 y+ }" a7 o. |6 u following two years of deterioration.
7 a, N* T1 L. A" w3 m6 E3 ? >> |
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