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British Columbia's housing affordability notably improved but still has far to go, says RBC 3 T, s9 K' M0 `9 Y* i
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the% ~; x3 W: ~& ^) C' Q! [
middle of a significant correction that is partly reversing the extensive8 g+ T& @8 w3 F: w
gains of recent years and which is helping restore affordability conditions,# J/ v# e# S$ T `! ]: P" K4 I
according to the latest housing report released today by RBC Economics.
' [/ [, C4 p8 b% O7 ^$ Q) X J" B "The province's housing markets remain under heavy downward pressure,"; C7 h. ^! B. G6 z0 `8 x
said Robert Hogue, senior economist, RBC. "While housing affordability is
7 {$ C9 j, |8 C himproving as the correction process runs its course. RBC's affordability+ m# D9 d. P2 G
measures for the province are still at levels far off historical averages."6 |+ _; {9 B: b2 K% T" Z3 A
RBC notes that the sharp rise in unemployment since last summer is& j& [; I4 b! D
worrying households in the province and weighing down demand for housing,5 ?) P! _: Z. [) g7 c1 L$ C
which runs well short of available supply. Such weak market conditions have
* \$ H2 X" ^8 X0 @) E4 Hsustained the declining trend in prices for both existing and new homes.& z8 U$ {/ x7 m) f
The RBC Affordability measure for British Columbia, which captures the
2 V' B1 t0 \. j5 `2 uproportion of pre-tax household income needed to service the costs of owning a
3 Y' J, m, v5 |4 Shome, improved across all housing segments in the last quarter of 2008.' m/ d4 x. P; E& s5 v @9 n! |# Z
Affordability of detached bungalows in the province moved to 66 per cent, the
0 o1 h/ R9 T; |/ b5 D4 estandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
$ E/ r1 u8 I3 @# e& Y7 gthe standard two-story home to 73.7 per cent.8 c* ~3 J! R7 J% h) Z6 R
According to the report, there are signs that the B.C. housing markets k9 b# r2 w. ~& ~; S' w8 b
may be stabilizing as sales of existing homes appear to have bottomed out in" @. f/ n4 @. |% W) h6 ?5 K& }
the closing months of 2008 and the first two in 2009 - although at
8 D4 b& A+ v& B0 X' m, U4 bhistorically depressed levels. S; R6 c, P8 {& l6 ?
Despite sharply declining house prices and lower mortgage rates, the cost7 Q* i4 a W( |* n# n$ C* j
of homeownership in Vancouver is still the highest in the country. House/ y/ [4 g, n5 X7 X# g/ \
prices continue to rapidly decline and pricing power remains firmly in the
% M2 d$ D; A" c0 f" u$ Q1 O7 i% G9 N0 s: Bhands of buyers with the sales-to-new listings ratio at historical lows. "This
. W! `; D; w* K! u: D! e! g6 cenormous imbalance suggests that prices will likely further correct in the* c$ ~; u& i& L# @
months ahead," added Hogue.- ?& \! V# o& c8 }* `& ~
RBC's Affordability measure for a detached bungalow for Canada's largest/ _' }9 W: H4 e; t) S0 ?
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
k; `; q$ F! c: g, _+ A Q# p42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
( t3 F g) x+ k The report also looked at mortgage carrying costs relative to incomes for
! L1 z& w6 ]! g% Ia broader sampling of cities across the country, including Victoria. For these* C* v. t+ n% d% E, |& B# X# j
cities, RBC has used a narrower measure of housing affordability that only; D+ m3 K p! f9 t1 ~* K
takes mortgage payments relative to income into account.% I8 v1 c1 F" [9 i7 e4 F
The Housing Affordability measure, which RBC has compiled since 1985, is
% _4 s8 f& [; F& A/ `0 s0 cbased on the costs of owning a detached bungalow, a reasonable property" d( Z/ l' w" G. o/ K- M% P
benchmark for the housing market. Alternative housing types are also presented
0 A6 c! p! E" v3 \) `including a standard two-storey home, a standard townhouse and a standard8 r& f- @2 m$ f% t* o4 T
condominium. The higher the reading, the more costly it is to afford a home.
: O: B" D4 d# z& d9 i! O& fFor example, an Affordability reading of 50 per cent means that homeownership
! P6 Q8 `! e4 @* \. E# a' c( Gcosts, including mortgage payments, utilities and property taxes, take up 506 }+ D6 A& I! b7 H
per cent of a typical household's monthly pre-tax income.- O# h2 z; w9 X8 H) X }6 \- t# U
3 J- ~; \' {8 r <<) |2 ^% t5 o" v$ b
Highlights from across Canada:
9 w3 b' A/ x# o8 y# q
& \& S( [7 y2 z7 \+ T - Alberta: Since last fall, the declining Alberta economy has
0 G1 d7 p6 v+ l; s) K intensified the downdraft on the province's housing markets, causing
4 H2 H G8 N7 o7 i* { home resales to drop to a 12-year low at the end of 2008 and rebound; V# @! d' c6 I$ v( R8 E5 h
only modestly since. Affordability has been on an improving track h& L" ]2 A3 H( K! o
since about the middle of 2007.( @) T Y3 O+ x0 c! i
- Saskatchewan: Market activity has cooled considerably from the
4 t1 q- w4 d" V, f/ r7 U& q8 z frenzied pace from 2006 to early 2008 and prices have begun to! W4 b/ n# T. ], @: j' S( g! z: ^
decline. Nonetheless, economic and demographic fundamentals are still4 ~: u' a) ^1 e# E6 t
largely supportive of the housing market and overshadow extremely
/ L" q8 W1 H8 _% ~5 \ poor affordability levels.+ ~# P/ P- F; S2 d
- Manitoba: Manitoba's housing markets have fared much better than the0 t, L, U% u5 Z7 h0 H4 d3 o3 z8 G
vast majority in Canada: resale activity has slowed moderately and
, ?" L% ]+ |, M prices have either held their own or edged down just slightly.
* Y; J% f6 C0 I9 z4 ] Affordability has been kept out of the danger zone, helping to: q# W. S( P4 @
minimize any downside risks.; R. |+ M( L' Y1 U1 T0 P0 |* b( Q
- Ontario: With the recession pounding many communities, housing market
$ X: R, ]1 V3 i5 I( m* b3 b conditions have deteriorated considerably. However, the impact is
5 U. |6 r6 U" ]3 M# ] unlikely to develop into an all-out rout similar to that of the early, {8 t0 d6 }% i2 u
1990s. Affordability, while still causing some stress, is quickly
& _0 e5 G" H) {6 i0 G being restored to levels closer to long-term averages.6 L. x, S0 C2 v9 O6 r) e) U
- Quebec: The province's housing markets have been among the last in
9 m* Y6 m, k& H5 y' Q9 f Canada to yield to the weakening trend. The main sign of cooling thus
9 e( y2 _* u* V* D4 j far has been a drop in resale activity, as prices have held up
# @2 m0 y$ J# U reasonably well. Some of the persisting market strength can be
. v$ @1 D- ~/ w' o* T6 s1 d ascribed to sensible affordability levels, which had eroded only
& j1 c! B: D7 C1 E modestly in recent years.! c* ~9 ~9 ~- w" t! d9 E
- Atlantic region: Markets have largely remained stable against the
, C R8 Z9 Q5 Q8 J, y" w6 s, h general housing downturn, with St. John's becoming the housing hot
) l: @9 L* ?- _2 d spot in Canada and Halifax and Saint John maintaining steady upward
2 j ? x1 C9 W% X2 C, l. I8 R price momentum. The region is benefiting from improving affordability1 ?# c4 h: x$ U' j5 I( g$ @8 O2 Z+ P
following two years of deterioration.
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