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British Columbia's housing affordability notably improved but still has far to go, says RBC
' a a; d& V! p TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
- M0 H9 M4 q1 e" omiddle of a significant correction that is partly reversing the extensive
, i# V- c `$ Y+ t& v/ I4 Fgains of recent years and which is helping restore affordability conditions,: Y! h) i _9 M3 n
according to the latest housing report released today by RBC Economics.6 c: A2 T$ I) a' X. k' ]% O8 M
"The province's housing markets remain under heavy downward pressure,"
9 D4 @4 \3 t/ Xsaid Robert Hogue, senior economist, RBC. "While housing affordability is$ D$ a* y* n4 f4 p" J+ g( {
improving as the correction process runs its course. RBC's affordability
z+ `3 U' Y7 C bmeasures for the province are still at levels far off historical averages."
5 y! p! u! X/ p H( H RBC notes that the sharp rise in unemployment since last summer is, L2 _# F. T( v2 G" g7 P
worrying households in the province and weighing down demand for housing,
1 G* x G# L! @2 \9 E3 w5 |: _which runs well short of available supply. Such weak market conditions have
/ L( g4 U* [- H8 H# A/ W* L# Gsustained the declining trend in prices for both existing and new homes.
0 o( j" W' d# ^7 N5 h G( C The RBC Affordability measure for British Columbia, which captures the! Q: F: E# ^) q4 G- S* p# c9 t5 x
proportion of pre-tax household income needed to service the costs of owning a, O7 `, ^+ D; h" x& i, C- @
home, improved across all housing segments in the last quarter of 2008.
" ~1 f8 D- G) c2 d: \0 iAffordability of detached bungalows in the province moved to 66 per cent, the
3 H8 }, K. e/ P i9 j5 nstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
- Y) ^: H9 q8 H+ E E% c: `the standard two-story home to 73.7 per cent.
1 z2 G, `$ V p B According to the report, there are signs that the B.C. housing markets
* J/ _' N( z. M2 h5 r" L2 H- jmay be stabilizing as sales of existing homes appear to have bottomed out in
: [- m# u8 @6 @9 d# Fthe closing months of 2008 and the first two in 2009 - although at
# E/ R7 F0 Z V6 e/ Hhistorically depressed levels.' V0 G1 c- d6 K5 `! t8 W7 `. ?8 o
Despite sharply declining house prices and lower mortgage rates, the cost3 Y( F( w. |; i3 y/ B0 U
of homeownership in Vancouver is still the highest in the country. House
8 J: C" ]9 Q8 Hprices continue to rapidly decline and pricing power remains firmly in the1 ]7 x' k- C1 `8 X( z5 t- k8 a
hands of buyers with the sales-to-new listings ratio at historical lows. "This- L5 O. q; E' z) Z
enormous imbalance suggests that prices will likely further correct in the
: d+ @, v& Z! Nmonths ahead," added Hogue.
# C; Q$ J8 w; l5 ] S3 R% S( D RBC's Affordability measure for a detached bungalow for Canada's largest, Y o9 i( ]% L6 l8 f
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary0 o" k+ s8 D6 W9 [; q2 h8 i6 A
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.3 r. r1 ]' y8 y; V1 o1 k$ o# ?
The report also looked at mortgage carrying costs relative to incomes for C8 R ]# o1 T8 M# O2 _
a broader sampling of cities across the country, including Victoria. For these
( L9 w7 `# `7 Kcities, RBC has used a narrower measure of housing affordability that only
; r2 h7 }! n+ K- F( T$ mtakes mortgage payments relative to income into account.$ m2 E1 H+ P$ U! n1 ^; P9 g
The Housing Affordability measure, which RBC has compiled since 1985, is" m5 n. Y3 G, f( d, X
based on the costs of owning a detached bungalow, a reasonable property
. c) x3 a" z( Z: |% J) p& [benchmark for the housing market. Alternative housing types are also presented
6 S5 n" O1 S, Y* y0 bincluding a standard two-storey home, a standard townhouse and a standard4 a$ f& c$ `) ?* z+ l+ h/ `9 K( l
condominium. The higher the reading, the more costly it is to afford a home.
( @4 ^8 @) F5 o7 |4 U4 |/ r PFor example, an Affordability reading of 50 per cent means that homeownership
$ c7 S7 ^( V' A+ K" xcosts, including mortgage payments, utilities and property taxes, take up 508 N9 r* G$ C7 M) G
per cent of a typical household's monthly pre-tax income.
+ q+ [: a7 G$ L! n
: Y) ~9 A& w x% P @2 y8 O <<! K) K6 B% v& A( ^ A
Highlights from across Canada:# Q+ _% s9 S- b, X
/ I3 i( T9 V9 f* K4 K+ v/ w% n) a3 f
- Alberta: Since last fall, the declining Alberta economy has
/ L/ ^* g" K V& g0 I# R intensified the downdraft on the province's housing markets, causing
u9 I- {: }* m$ q home resales to drop to a 12-year low at the end of 2008 and rebound7 z7 ?6 O8 ?8 n/ B+ R. ?
only modestly since. Affordability has been on an improving track& B2 ~& a( D% Y8 ?4 V8 v8 y& _5 T
since about the middle of 2007.+ f7 Q' t- I. s$ _, `; I
- Saskatchewan: Market activity has cooled considerably from the7 _- t) U# W7 S2 z* w$ Z/ ]' A
frenzied pace from 2006 to early 2008 and prices have begun to
! i' i# ~! q; o7 n, O4 Z; X: u decline. Nonetheless, economic and demographic fundamentals are still+ s- [1 [% c+ o; t# n2 X( H7 L0 l2 Q
largely supportive of the housing market and overshadow extremely5 P# g4 Z: x1 c; i b
poor affordability levels.
1 y" k( x( P6 \ - Manitoba: Manitoba's housing markets have fared much better than the' i' y3 T3 J/ T! v& E0 Q
vast majority in Canada: resale activity has slowed moderately and3 }; p0 D% X7 G
prices have either held their own or edged down just slightly.
1 h1 N+ c# `+ h5 _; w: v Affordability has been kept out of the danger zone, helping to
, G5 z+ E1 A# I minimize any downside risks.; X2 [( R8 p8 G+ q0 h
- Ontario: With the recession pounding many communities, housing market
/ H$ R) C: u7 s& ~3 C1 D. B conditions have deteriorated considerably. However, the impact is
+ z) \' B3 S0 k; L/ y3 r unlikely to develop into an all-out rout similar to that of the early
1 |& ?& v3 N" g& m9 K. k6 O 1990s. Affordability, while still causing some stress, is quickly
7 C$ T' x1 |* K- G being restored to levels closer to long-term averages.
0 c% i( g/ }! j) Z9 r - Quebec: The province's housing markets have been among the last in" c- [* t& z r g2 c9 g! z
Canada to yield to the weakening trend. The main sign of cooling thus( ^ q- ]& I' d+ e
far has been a drop in resale activity, as prices have held up) g$ q. e6 g, L3 T
reasonably well. Some of the persisting market strength can be
. e9 W; r) ~) A- E) h2 j4 L ascribed to sensible affordability levels, which had eroded only
0 @8 a# d6 b4 t modestly in recent years.
- T8 d. n) X! y1 ~& ~2 u( v - Atlantic region: Markets have largely remained stable against the2 _, Q! Z. b- H9 m- u1 R7 m
general housing downturn, with St. John's becoming the housing hot
" ?6 _- T5 K4 H: W* P spot in Canada and Halifax and Saint John maintaining steady upward. j1 C9 R. a) N8 z
price momentum. The region is benefiting from improving affordability
5 v/ y& [9 {; ]7 d: ^" Y following two years of deterioration.
) r$ F) q2 }/ S7 B0 X" ^ >> |
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