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British Columbia's housing affordability notably improved but still has far to go, says RBC
/ f$ E0 @7 q) U/ Q7 W7 n TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
. h1 P4 E" Q8 C1 S5 R1 omiddle of a significant correction that is partly reversing the extensive9 H9 T5 G ~) w1 s, B4 g
gains of recent years and which is helping restore affordability conditions,. O, Q( A6 B& t3 C
according to the latest housing report released today by RBC Economics.
) A$ t9 i3 t1 ^ w0 h "The province's housing markets remain under heavy downward pressure,"
* M& e% m# h) l+ ~said Robert Hogue, senior economist, RBC. "While housing affordability is
. j! B( N; K. q+ P* ^improving as the correction process runs its course. RBC's affordability- m' [+ y$ H3 h* ?+ g
measures for the province are still at levels far off historical averages." R# G, f8 O q" [ O T
RBC notes that the sharp rise in unemployment since last summer is9 F6 j$ N( M5 {. b2 b: i; J! t
worrying households in the province and weighing down demand for housing,8 X2 u2 D8 D& z9 K w. A& |0 ^
which runs well short of available supply. Such weak market conditions have1 S' H3 S7 V7 S9 C6 ^( [1 Q d
sustained the declining trend in prices for both existing and new homes.5 S. w# l% k2 i) a6 U% C* \
The RBC Affordability measure for British Columbia, which captures the
3 g4 t" H2 d; X/ g, v8 ~! gproportion of pre-tax household income needed to service the costs of owning a8 C$ Y. w8 Q- B
home, improved across all housing segments in the last quarter of 2008.$ I8 [3 ]9 ^* P$ l$ j* J! _$ s! x' A
Affordability of detached bungalows in the province moved to 66 per cent, the
0 o9 t& p5 O. j8 i5 M3 F! pstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and% Q6 t* l" I( r( g
the standard two-story home to 73.7 per cent.1 m8 X) j7 F8 w+ L; W% [- Q8 H
According to the report, there are signs that the B.C. housing markets
% Z0 E0 q& s ^0 Ymay be stabilizing as sales of existing homes appear to have bottomed out in
. I7 X3 t, o1 x, @+ a" F" \5 M8 `the closing months of 2008 and the first two in 2009 - although at
6 Z& a# e$ }2 N5 B0 Q0 _- `2 X; nhistorically depressed levels.
3 O% h ~; f# C1 z1 P% C Despite sharply declining house prices and lower mortgage rates, the cost: S# j1 |# D+ h5 n$ ^1 W4 ^
of homeownership in Vancouver is still the highest in the country. House5 }9 C) ~. Q, n6 H
prices continue to rapidly decline and pricing power remains firmly in the
1 B: y+ ^1 A6 `8 W; ?- h1 Ohands of buyers with the sales-to-new listings ratio at historical lows. "This
" ]! l5 ^: E' w9 ]' |* Aenormous imbalance suggests that prices will likely further correct in the
2 R, B. N- K0 `1 r" h: o6 ^months ahead," added Hogue." G9 \0 O, ?+ ^
RBC's Affordability measure for a detached bungalow for Canada's largest6 ]- Q2 }/ F2 A, {% e2 p# H) f
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
6 q4 \& d2 ^6 p! `' r42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
8 g0 _7 R5 Y# a# h* P The report also looked at mortgage carrying costs relative to incomes for) [# g6 E1 ?8 _
a broader sampling of cities across the country, including Victoria. For these
: h6 l$ N+ g8 P5 Z' bcities, RBC has used a narrower measure of housing affordability that only8 T9 d; i* Y4 F y6 ~( O
takes mortgage payments relative to income into account.
0 Z4 ~! ^7 [2 f( S+ E The Housing Affordability measure, which RBC has compiled since 1985, is" @3 K, Q/ s! B
based on the costs of owning a detached bungalow, a reasonable property2 f" q' M5 @5 J& y& p. {+ l! b0 G
benchmark for the housing market. Alternative housing types are also presented
! {( V B, y3 K7 Qincluding a standard two-storey home, a standard townhouse and a standard
4 C8 C! g) j" C @condominium. The higher the reading, the more costly it is to afford a home. \: N7 q" Y3 ]) L( k$ Q
For example, an Affordability reading of 50 per cent means that homeownership& {4 j: j% z: z. t: E2 s
costs, including mortgage payments, utilities and property taxes, take up 504 q( I" u0 S- z* P* o4 i
per cent of a typical household's monthly pre-tax income.
& X4 F' s% T5 D+ ^ d5 {) n+ |2 |4 X- V% f. ?, a5 _* y: v( u
<<
2 v+ a; c$ ~" k y* h, C. `! s Highlights from across Canada:/ P2 V. H8 b0 S" X
g# L m& M) R3 P8 i
- Alberta: Since last fall, the declining Alberta economy has
& m, P* W9 k; `0 D intensified the downdraft on the province's housing markets, causing
2 a3 Z4 p r X4 A# r home resales to drop to a 12-year low at the end of 2008 and rebound
3 G# k) S: T. a( O9 @ s+ [ only modestly since. Affordability has been on an improving track
# K9 i/ w& z7 ] d$ F5 h h: | since about the middle of 2007.4 w- t' ~: e" V/ ]8 x
- Saskatchewan: Market activity has cooled considerably from the+ z# S4 E" f, L& C1 o$ \
frenzied pace from 2006 to early 2008 and prices have begun to
3 e: b1 M4 h" y! i2 \- k; T- o decline. Nonetheless, economic and demographic fundamentals are still; a, ?! R* v9 B0 l
largely supportive of the housing market and overshadow extremely% j, ?' T! i7 C4 V
poor affordability levels.0 V; C* V9 [8 w
- Manitoba: Manitoba's housing markets have fared much better than the
5 F( [$ y/ K: l vast majority in Canada: resale activity has slowed moderately and
& N S4 q# d: o prices have either held their own or edged down just slightly.5 s2 e9 m! t) }, m% c' n8 S
Affordability has been kept out of the danger zone, helping to& N9 w- z+ x& c: T0 s7 a* n
minimize any downside risks.
0 j2 G0 }' ~! P7 C- w9 n* j - Ontario: With the recession pounding many communities, housing market0 f ?0 O% N# Z) D$ @
conditions have deteriorated considerably. However, the impact is
B0 r3 I6 R* G unlikely to develop into an all-out rout similar to that of the early
# D. Y; g4 t% B3 b+ S4 t9 o 1990s. Affordability, while still causing some stress, is quickly
# L' p5 T, y' |& } being restored to levels closer to long-term averages. T7 a1 Q* w: t5 z7 `9 r# `
- Quebec: The province's housing markets have been among the last in6 O+ v& ?7 w8 ]& b) `) s: U8 Z
Canada to yield to the weakening trend. The main sign of cooling thus/ J7 U* U9 h8 b1 m c' ]
far has been a drop in resale activity, as prices have held up
/ f# R# j: v+ c/ R reasonably well. Some of the persisting market strength can be
: L/ W& B) a/ w" f: t. O2 m ascribed to sensible affordability levels, which had eroded only
& v; C3 z6 |7 \6 K. W modestly in recent years.
9 g o' U5 f1 Q/ W5 ^ - Atlantic region: Markets have largely remained stable against the M+ L0 c4 {* o* I
general housing downturn, with St. John's becoming the housing hot- }4 Y" q* y3 X' B
spot in Canada and Halifax and Saint John maintaining steady upward
" K/ t: m; O" x7 s: @" y* [" Q price momentum. The region is benefiting from improving affordability4 X6 P: ]5 [/ ~- e8 J
following two years of deterioration.
7 ^ U- A5 x g. I! g1 a% a1 I8 u1 C >> |
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