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British Columbia's housing affordability notably improved but still has far to go, says RBC
! T; v) E# L( t TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the. X6 `2 k) q, f9 f
middle of a significant correction that is partly reversing the extensive
9 Q! X; g% t8 igains of recent years and which is helping restore affordability conditions,
0 a7 m, c0 k* a8 daccording to the latest housing report released today by RBC Economics." k7 n( v3 W9 j. B3 l7 [
"The province's housing markets remain under heavy downward pressure,"" s1 w! l$ M$ n2 B
said Robert Hogue, senior economist, RBC. "While housing affordability is
! C) x5 U4 z* L. fimproving as the correction process runs its course. RBC's affordability3 `. u& N) Y9 X' N a
measures for the province are still at levels far off historical averages."& k. ~ X$ Q1 V
RBC notes that the sharp rise in unemployment since last summer is
6 q P9 V9 r! W) i* ^worrying households in the province and weighing down demand for housing,
- D6 E2 `. b. o& t. m$ z) [ Bwhich runs well short of available supply. Such weak market conditions have
+ u9 m: q& l# V% c+ wsustained the declining trend in prices for both existing and new homes.9 Y+ v" C7 l: D6 ~( R( F0 W+ c j
The RBC Affordability measure for British Columbia, which captures the
, M7 u0 m+ G+ s% w( A# z4 O' ^* L8 s( \proportion of pre-tax household income needed to service the costs of owning a/ A# S5 M) B. Y( P3 _4 v) w
home, improved across all housing segments in the last quarter of 2008.! M* B( z2 O6 r! G2 N% K" m
Affordability of detached bungalows in the province moved to 66 per cent, the
7 L3 `3 T5 _4 }" K1 K+ t, }standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and2 X t1 p. @/ b0 ~8 A" c1 }
the standard two-story home to 73.7 per cent.$ `5 x' a3 P! g9 X ?, V# J) X
According to the report, there are signs that the B.C. housing markets
6 R, R% }) I7 V2 w6 W" C Tmay be stabilizing as sales of existing homes appear to have bottomed out in
! p! I- |) U% i. B6 Sthe closing months of 2008 and the first two in 2009 - although at
+ p# d% X! _# |( V! n* Y! O9 yhistorically depressed levels.
. i, j# P# ~6 w @2 Y6 d: i v k2 v Despite sharply declining house prices and lower mortgage rates, the cost8 `# [* L7 ~# S! q2 A+ x+ s; G. X
of homeownership in Vancouver is still the highest in the country. House
, u5 M' A0 j9 a) ~prices continue to rapidly decline and pricing power remains firmly in the
* P% p4 I& B" |& i* ~ A( [hands of buyers with the sales-to-new listings ratio at historical lows. "This
/ H1 x* ~$ w4 e8 P$ i+ j+ Oenormous imbalance suggests that prices will likely further correct in the2 l4 x- H$ ^: m1 t
months ahead," added Hogue.
% y& d0 L* e7 o RBC's Affordability measure for a detached bungalow for Canada's largest( m/ t1 A D }" Z
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
. Z2 w; u* g8 a M42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
+ D5 h: I. C4 L7 Y The report also looked at mortgage carrying costs relative to incomes for8 } @; D9 I! b+ O" O* C
a broader sampling of cities across the country, including Victoria. For these1 i& d* R4 P' b/ f) X
cities, RBC has used a narrower measure of housing affordability that only, `- q3 p' G6 m" t- H! c, r+ J) B
takes mortgage payments relative to income into account.* x+ k) u0 j+ u0 F+ J, I$ H
The Housing Affordability measure, which RBC has compiled since 1985, is: B9 ~5 S4 K9 S' j0 n) @% x6 B
based on the costs of owning a detached bungalow, a reasonable property
/ o/ m* P! D; Y5 Ibenchmark for the housing market. Alternative housing types are also presented9 b) o4 K+ \1 s3 f
including a standard two-storey home, a standard townhouse and a standard5 Q# M2 G' ], z9 E: Q6 Q. K, M3 t
condominium. The higher the reading, the more costly it is to afford a home.
* E' ~% N* b5 k0 a- }+ pFor example, an Affordability reading of 50 per cent means that homeownership
7 I* M+ M9 z1 T& T) q" ocosts, including mortgage payments, utilities and property taxes, take up 50
2 `+ o6 \5 o2 P( tper cent of a typical household's monthly pre-tax income.! b% b* {8 D$ D ?8 @
% {9 v( y7 l v4 R5 I& A' j9 B
<<
3 P, w+ t9 y' @1 r" q! o6 o Highlights from across Canada:
% e& b9 [6 R) k5 b1 Q
0 j& f# x: F _ - Alberta: Since last fall, the declining Alberta economy has
" R! ^. p& Y) {1 R* f2 F intensified the downdraft on the province's housing markets, causing
" p4 I, y# K1 M- v) F" x, V' m& C home resales to drop to a 12-year low at the end of 2008 and rebound3 o; Q: N5 p! J( H; O
only modestly since. Affordability has been on an improving track- q7 N: O' J+ ^! P9 f/ m2 b/ i; i
since about the middle of 2007.
& h2 Z" H3 c! J* T* L' r3 n- A8 l# } - Saskatchewan: Market activity has cooled considerably from the
2 {" S' ^* ?! W# X5 z, N frenzied pace from 2006 to early 2008 and prices have begun to$ U7 K) O8 a V( _
decline. Nonetheless, economic and demographic fundamentals are still3 K' n1 k. }& Q @' Y
largely supportive of the housing market and overshadow extremely
* w* P# F0 q7 j) H% ` poor affordability levels.+ G" [$ R. U6 V
- Manitoba: Manitoba's housing markets have fared much better than the) B! D- N+ C' I. W% {
vast majority in Canada: resale activity has slowed moderately and9 n2 C& t/ ]9 S0 p# r! T
prices have either held their own or edged down just slightly.
# }/ r& X c" g$ A4 ?+ q Affordability has been kept out of the danger zone, helping to( v1 \8 i; l5 E8 q3 |
minimize any downside risks.
: H0 X: q. ]' O+ E- t - Ontario: With the recession pounding many communities, housing market `& o9 y! ]) \) ]9 f
conditions have deteriorated considerably. However, the impact is
; T& q; R L) W+ _ unlikely to develop into an all-out rout similar to that of the early# [4 H0 X. w4 M+ \/ \
1990s. Affordability, while still causing some stress, is quickly6 r8 K+ B# P0 G
being restored to levels closer to long-term averages.; V3 |* H# A: g3 v
- Quebec: The province's housing markets have been among the last in/ n1 [* z* u9 U: a: K) m$ a
Canada to yield to the weakening trend. The main sign of cooling thus
8 i+ F2 l9 e" _% F( A8 F far has been a drop in resale activity, as prices have held up
' E7 I+ ^: t2 l- O e, Y) D8 |; C& z reasonably well. Some of the persisting market strength can be3 W; j1 J8 T2 O+ E) c3 C0 M' x3 _, A7 N
ascribed to sensible affordability levels, which had eroded only
0 j5 j+ z/ ?( K$ U$ K modestly in recent years.) T _; A ~+ I! s K% H# Q8 `3 N
- Atlantic region: Markets have largely remained stable against the
: }# j: b/ I8 S/ [4 n general housing downturn, with St. John's becoming the housing hot
8 J1 i: ]0 L# p/ y9 F spot in Canada and Halifax and Saint John maintaining steady upward# a+ _, q& [; k
price momentum. The region is benefiting from improving affordability% ~2 p$ j8 Y: Z$ S3 i
following two years of deterioration.
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