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British Columbia's housing affordability notably improved but still has far to go, says RBC
/ i7 G' {) i' v* Z7 H TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the, z" @" {+ I* n* @9 d# Y
middle of a significant correction that is partly reversing the extensive
2 d D2 A1 V* M; o* ]: l2 v& `0 jgains of recent years and which is helping restore affordability conditions,+ |/ v) M, N0 y) A' j
according to the latest housing report released today by RBC Economics.
7 m2 @' {# O" t& [' P) O! j "The province's housing markets remain under heavy downward pressure,"+ _3 [1 d8 D) O% v1 ^: q
said Robert Hogue, senior economist, RBC. "While housing affordability is
6 _. s" S! i# ?( V& r5 {$ ^# H9 E+ i- Simproving as the correction process runs its course. RBC's affordability
" k# P0 b, W3 v9 tmeasures for the province are still at levels far off historical averages."
8 x- o2 G0 {4 a, C% F RBC notes that the sharp rise in unemployment since last summer is9 Q% A! A ~* x' G$ |$ k2 F0 ]
worrying households in the province and weighing down demand for housing,7 {% B9 ?4 n) @( L) l) V) Y
which runs well short of available supply. Such weak market conditions have* j v; r( J) }( o
sustained the declining trend in prices for both existing and new homes.$ |, Q- U4 ?; A9 T5 H. D
The RBC Affordability measure for British Columbia, which captures the) x: b' ?) Z. @6 {% C
proportion of pre-tax household income needed to service the costs of owning a: Z8 Y3 M4 T3 d1 f9 o
home, improved across all housing segments in the last quarter of 2008.
( ]. `: H5 C1 W9 g1 f" PAffordability of detached bungalows in the province moved to 66 per cent, the
8 j) ?) r* M( i4 ?( }8 Ustandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
2 J; x3 O1 q+ y$ x/ mthe standard two-story home to 73.7 per cent.5 r' J: h$ G9 ~9 Q7 n2 ^% f C& g* F
According to the report, there are signs that the B.C. housing markets7 C- t7 T* c( v N
may be stabilizing as sales of existing homes appear to have bottomed out in
X7 u5 T' U$ J- Qthe closing months of 2008 and the first two in 2009 - although at
+ m- z" w8 k5 e! R# h5 [, Phistorically depressed levels.
. i/ ] X& G: O* b Despite sharply declining house prices and lower mortgage rates, the cost
. }1 A* _0 ?3 H7 @7 | A3 p" dof homeownership in Vancouver is still the highest in the country. House4 Z, ?5 w& a1 v0 M3 |
prices continue to rapidly decline and pricing power remains firmly in the' R4 ^) e4 r+ V, E$ _4 _9 T
hands of buyers with the sales-to-new listings ratio at historical lows. "This
6 i2 V o" s0 p/ @6 ^enormous imbalance suggests that prices will likely further correct in the
% ]! h' v1 ]' H$ fmonths ahead," added Hogue.
1 |, q8 ]1 E- N$ F RBC's Affordability measure for a detached bungalow for Canada's largest' F( N/ V, v! G& @. U' b
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
1 E- K2 V' T/ b5 l42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
+ Q0 m1 M" x9 _% h; J% e+ |! x' r The report also looked at mortgage carrying costs relative to incomes for9 ?2 D( s! ]+ Z+ e+ `
a broader sampling of cities across the country, including Victoria. For these
6 v2 G( f. f* _/ Kcities, RBC has used a narrower measure of housing affordability that only
# J0 d/ Y m- }$ p8 L( ]takes mortgage payments relative to income into account.
6 O% c9 K. z2 s* B+ f The Housing Affordability measure, which RBC has compiled since 1985, is
5 d+ o* L& D8 w3 C* P+ a) Vbased on the costs of owning a detached bungalow, a reasonable property
8 N7 W8 S9 f) O/ d3 ^# y! d' gbenchmark for the housing market. Alternative housing types are also presented
; S( p; Y/ q; b$ [$ O, L% Fincluding a standard two-storey home, a standard townhouse and a standard
3 u- E9 I+ @0 M0 Dcondominium. The higher the reading, the more costly it is to afford a home.. `. I# Q9 f" _# x- ~; T$ g/ A
For example, an Affordability reading of 50 per cent means that homeownership
, j. O9 k9 v% ]7 Y2 T4 E2 K+ Acosts, including mortgage payments, utilities and property taxes, take up 50
6 B6 Z6 ?) H( x" X' J- m! |per cent of a typical household's monthly pre-tax income.
/ t: i1 ]8 {, m/ H; g& o# V. E8 `1 k! a' S: e3 w
<<; ~* p. L2 Z% p5 c5 |
Highlights from across Canada:3 G' Y- B( F0 T7 h$ }8 l* E
& g, ^- p# @/ D* |. C! T - Alberta: Since last fall, the declining Alberta economy has
$ C" V) ^* R7 `" X- r1 w( w intensified the downdraft on the province's housing markets, causing# k1 D0 K4 [/ I5 t7 ~
home resales to drop to a 12-year low at the end of 2008 and rebound
f/ U6 x: T' N2 m+ q& n3 Q only modestly since. Affordability has been on an improving track# c. k5 b- a- ?! |7 \# y
since about the middle of 2007.5 p t# B( s6 o% I" ?3 I5 d
- Saskatchewan: Market activity has cooled considerably from the+ F7 I, _7 E* q( t0 [- E
frenzied pace from 2006 to early 2008 and prices have begun to; j$ S8 e2 b5 V, C7 k0 H3 l
decline. Nonetheless, economic and demographic fundamentals are still+ W; K. c Q! a5 D, u5 e" ~7 F
largely supportive of the housing market and overshadow extremely- U3 ]: J# Z# x0 m- {
poor affordability levels.8 B1 k) M4 v( C/ w+ C
- Manitoba: Manitoba's housing markets have fared much better than the# L4 O" H- Z1 A
vast majority in Canada: resale activity has slowed moderately and
9 s. Q, ^: [3 m8 ?* |% [( Z prices have either held their own or edged down just slightly.
+ j$ }) X, {/ C. c) t) y+ j) g) j Affordability has been kept out of the danger zone, helping to B* L8 ?: X' ~* u# g' D
minimize any downside risks.
) ?3 w( t" n2 c% }" L5 v - Ontario: With the recession pounding many communities, housing market
; u# K9 T2 l$ c7 x# Y* `9 Z conditions have deteriorated considerably. However, the impact is! e) X1 z0 t/ Z: }- W" V
unlikely to develop into an all-out rout similar to that of the early+ N5 a! u0 k9 z2 Y( j& t6 f
1990s. Affordability, while still causing some stress, is quickly
, a. w8 v# f0 l) J being restored to levels closer to long-term averages.
# H' n9 l. N, }! l; F T, V - Quebec: The province's housing markets have been among the last in: o2 J, o2 [5 G
Canada to yield to the weakening trend. The main sign of cooling thus; X# I' i d$ ?; f
far has been a drop in resale activity, as prices have held up
" X3 S( D. F" b# H* d1 ] reasonably well. Some of the persisting market strength can be, X4 y& G! M b4 z# J$ `6 |
ascribed to sensible affordability levels, which had eroded only
3 Q- i+ Y$ A% f- l# J: [( t modestly in recent years.
1 v* }2 B& b/ `: y/ U - Atlantic region: Markets have largely remained stable against the
8 a: U q" E2 D0 F6 ]1 ?0 X9 A general housing downturn, with St. John's becoming the housing hot1 }8 M* g- p% E$ t1 p
spot in Canada and Halifax and Saint John maintaining steady upward
) A% C9 q2 U, C* Y; M. W price momentum. The region is benefiting from improving affordability
- J" ^1 v. H% S# U following two years of deterioration.
% |: D# i5 G, j% i, I7 N >> |
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