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British Columbia's housing affordability notably improved but still has far to go, says RBC
8 i, `: G- e" \$ R8 S TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the# x1 y9 }4 {! s4 J; v$ m
middle of a significant correction that is partly reversing the extensive& _& y, Y+ S. {
gains of recent years and which is helping restore affordability conditions,
/ d; o1 _. R2 p* F4 Z3 G2 Uaccording to the latest housing report released today by RBC Economics.
: ?4 d, E; K" A) F$ a& X "The province's housing markets remain under heavy downward pressure,"
% h; r$ \/ Q% h8 [. s" usaid Robert Hogue, senior economist, RBC. "While housing affordability is7 _# s- W/ @, x8 ]6 d
improving as the correction process runs its course. RBC's affordability
6 {, L! V, z2 Cmeasures for the province are still at levels far off historical averages."
( j6 W2 `/ A! J. u RBC notes that the sharp rise in unemployment since last summer is3 X1 g* Z- A# i" }0 F# u& w& i
worrying households in the province and weighing down demand for housing,# R, F' l, w7 f) o+ d* [' F
which runs well short of available supply. Such weak market conditions have
% z7 a- F1 V' F- _/ A, \sustained the declining trend in prices for both existing and new homes.
, a: A* }" V+ K1 y# P The RBC Affordability measure for British Columbia, which captures the
' g0 g& Y( ~* b, |& V6 t3 Nproportion of pre-tax household income needed to service the costs of owning a5 D/ O5 M$ q" c$ H) Y
home, improved across all housing segments in the last quarter of 2008.; T8 t/ l1 s4 N9 N! W
Affordability of detached bungalows in the province moved to 66 per cent, the: t& c, f+ `2 W! z$ Q8 G+ z
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and$ L) a& V+ C2 B0 |
the standard two-story home to 73.7 per cent.( t; M% o( n, b. Z* g& Z
According to the report, there are signs that the B.C. housing markets
' @- c9 v/ I3 V1 }may be stabilizing as sales of existing homes appear to have bottomed out in
# h- V8 k* }. f, J* m) t, gthe closing months of 2008 and the first two in 2009 - although at
- p5 p9 o y# o _; r" s# }historically depressed levels.# c* o4 L! X8 T& U# e
Despite sharply declining house prices and lower mortgage rates, the cost, s1 `1 u0 s7 [; b- c
of homeownership in Vancouver is still the highest in the country. House
1 R& m A, H1 {, o. }prices continue to rapidly decline and pricing power remains firmly in the
$ l6 e L# b% v( x, v9 ?hands of buyers with the sales-to-new listings ratio at historical lows. "This, H, Q* h9 Q4 k: \# m! `. W
enormous imbalance suggests that prices will likely further correct in the4 {$ I6 z; S O' i! d; P# e( ~
months ahead," added Hogue.
' J( j( t+ L4 e% D RBC's Affordability measure for a detached bungalow for Canada's largest8 [% F. b1 s7 ]* C) P+ S a
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary3 u1 p$ t! J9 D6 O% h+ a# w
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
% `& }7 D. w" T/ j- q7 a$ r/ R7 f The report also looked at mortgage carrying costs relative to incomes for
/ k6 T$ I! G, X8 z. ca broader sampling of cities across the country, including Victoria. For these
2 P# {; q; q$ O0 O! Dcities, RBC has used a narrower measure of housing affordability that only
4 j" [/ H6 c; Z. N' V% gtakes mortgage payments relative to income into account.
& }& F; q# @) R$ x7 n The Housing Affordability measure, which RBC has compiled since 1985, is V+ p1 p, D2 O: n5 D
based on the costs of owning a detached bungalow, a reasonable property
* m+ v( ^3 X" J: F8 sbenchmark for the housing market. Alternative housing types are also presented N' N' n3 L5 T5 Q
including a standard two-storey home, a standard townhouse and a standard0 c* v. r2 t: A. J4 R
condominium. The higher the reading, the more costly it is to afford a home.
) S }4 ~( i6 ]" ?0 l' D- AFor example, an Affordability reading of 50 per cent means that homeownership
- I; b7 H5 _. i) Ccosts, including mortgage payments, utilities and property taxes, take up 50
. l" l. I# [. P) Y5 [per cent of a typical household's monthly pre-tax income., h2 p) c) f7 M
7 s5 ?9 V) u) X) ~+ Y
<<
( N9 S8 k: P+ J3 Z Highlights from across Canada:
9 [! \7 a; O6 J, ~
% d. n" m% L. s; p9 q* X9 z - Alberta: Since last fall, the declining Alberta economy has
; F& b" B2 _- t6 H+ j+ v intensified the downdraft on the province's housing markets, causing
% j1 A4 ~7 D1 ~2 i, X0 D home resales to drop to a 12-year low at the end of 2008 and rebound
/ @ r* d! k6 ^! R/ h only modestly since. Affordability has been on an improving track: C+ ]+ G% ]: b( H
since about the middle of 2007.3 h7 H( d- |6 h) d
- Saskatchewan: Market activity has cooled considerably from the
+ ^7 \. V4 V6 \, i0 _' A) v frenzied pace from 2006 to early 2008 and prices have begun to8 p6 z6 F6 |6 O* \1 e6 E
decline. Nonetheless, economic and demographic fundamentals are still
4 S2 N7 A" O0 ^! k4 m- Z largely supportive of the housing market and overshadow extremely
: b, l& \, A2 J: A6 ?) N( t7 O poor affordability levels.
7 N3 u& n) g, F3 n - Manitoba: Manitoba's housing markets have fared much better than the4 ?" J$ o" t2 t
vast majority in Canada: resale activity has slowed moderately and
( z @! S# X2 p0 O6 ~! Q7 h prices have either held their own or edged down just slightly.: S1 z9 j$ X$ H5 K8 Z& e
Affordability has been kept out of the danger zone, helping to+ V6 F( l7 V) X
minimize any downside risks.
- E, p& c% o0 t" R: n - Ontario: With the recession pounding many communities, housing market1 R& Q' w9 c4 z4 ? e ]
conditions have deteriorated considerably. However, the impact is
, N5 D" v1 D& ?* p unlikely to develop into an all-out rout similar to that of the early
% P4 |4 N u; K" O+ D. `) w' M: A 1990s. Affordability, while still causing some stress, is quickly
5 w! P* l4 r3 \3 { being restored to levels closer to long-term averages.* e% {8 P+ Q2 r/ D
- Quebec: The province's housing markets have been among the last in1 E- k1 b6 S% y+ B/ \: l
Canada to yield to the weakening trend. The main sign of cooling thus* i0 R+ z, h: v; B7 D9 p
far has been a drop in resale activity, as prices have held up
! [0 M" }8 T# H reasonably well. Some of the persisting market strength can be- w+ S Q" P- \% v4 Q& \- e5 B
ascribed to sensible affordability levels, which had eroded only
4 Y5 M) h/ K5 [( P modestly in recent years.
# K% q, H) E, ]' S" Z2 e# s; k - Atlantic region: Markets have largely remained stable against the
. O+ i4 f: {( O general housing downturn, with St. John's becoming the housing hot
. s& \$ {' Z' `1 a1 J spot in Canada and Halifax and Saint John maintaining steady upward
2 O; ?* X; T2 W price momentum. The region is benefiting from improving affordability
5 k3 o4 z, d/ u$ a1 w7 o following two years of deterioration.
( P% X6 E, y5 K$ T5 e) F >> |
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