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British Columbia's housing affordability notably improved but still has far to go, says RBC 1 P9 _% V" _- {" z. r3 h
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the Y) w3 ]# c E1 @+ q
middle of a significant correction that is partly reversing the extensive6 a! Y/ ]1 J7 R8 t) p# z0 [
gains of recent years and which is helping restore affordability conditions,/ t1 @) K" n2 d# ?& F8 j2 B
according to the latest housing report released today by RBC Economics.
$ }8 Y, f9 f' ]/ E. z) v6 ^4 c2 y "The province's housing markets remain under heavy downward pressure,"$ _5 t% U2 ? x. s3 e+ y
said Robert Hogue, senior economist, RBC. "While housing affordability is
1 k' d8 Z* M* {) f2 pimproving as the correction process runs its course. RBC's affordability% o* C, d: D- M0 T3 ]
measures for the province are still at levels far off historical averages."- `4 U7 M! Y3 q4 @' ~9 s, M( T7 ~
RBC notes that the sharp rise in unemployment since last summer is& t. ~; w! e1 b9 P6 I9 n
worrying households in the province and weighing down demand for housing,
$ o8 b2 P% O) F4 ?, Nwhich runs well short of available supply. Such weak market conditions have" s; W+ e+ j( L& ?( D, V" N. R" p# q
sustained the declining trend in prices for both existing and new homes.
4 y, }% M( ?) e+ m The RBC Affordability measure for British Columbia, which captures the
: X4 B6 I3 R, j3 n- \proportion of pre-tax household income needed to service the costs of owning a( D3 s2 Z' i8 f8 Y9 E0 x: G
home, improved across all housing segments in the last quarter of 2008.$ r# |3 k" s$ m J3 M, k6 [4 S
Affordability of detached bungalows in the province moved to 66 per cent, the6 m2 z3 @6 Y% p' O/ c+ Q* ]
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and! F. D: B0 y1 W
the standard two-story home to 73.7 per cent.# q7 D m& f% E# t3 x
According to the report, there are signs that the B.C. housing markets* N! V! g7 v8 [
may be stabilizing as sales of existing homes appear to have bottomed out in/ n/ u" b6 k9 l& Z* n4 v
the closing months of 2008 and the first two in 2009 - although at6 Y4 g7 a( q0 y
historically depressed levels.9 y8 q* H5 ~# D5 |
Despite sharply declining house prices and lower mortgage rates, the cost5 X+ _- q6 i3 X$ p6 Z N. k
of homeownership in Vancouver is still the highest in the country. House
$ f/ |# l3 g& V9 \' Y" r) \prices continue to rapidly decline and pricing power remains firmly in the# f8 x. U& v& ]7 M
hands of buyers with the sales-to-new listings ratio at historical lows. "This/ w7 \- m" b- s3 T" `, I# {2 n
enormous imbalance suggests that prices will likely further correct in the9 h; X9 B' @ H
months ahead," added Hogue.9 [, ~; c0 M! `, G9 S
RBC's Affordability measure for a detached bungalow for Canada's largest
$ l& D; ]( d& k1 Ecities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
8 A7 J& L% _* y* _" n42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
1 u* z* c# }6 k/ h) W; {- J) T The report also looked at mortgage carrying costs relative to incomes for
# c8 s2 O5 [' P# p9 H/ Ha broader sampling of cities across the country, including Victoria. For these
& A0 E+ O/ a, b* P# G9 Icities, RBC has used a narrower measure of housing affordability that only Z9 Q) [/ E1 Q* z7 N2 J0 _( T
takes mortgage payments relative to income into account.
7 V8 q' j$ ?% \$ M- C5 @! r The Housing Affordability measure, which RBC has compiled since 1985, is# P- H1 \' @2 Z6 b r
based on the costs of owning a detached bungalow, a reasonable property
; @& ~- V/ J. T3 Cbenchmark for the housing market. Alternative housing types are also presented
/ R4 P% ]# _7 P. d- Mincluding a standard two-storey home, a standard townhouse and a standard
0 C+ y) y$ Q- n4 S1 v( q$ e3 V! xcondominium. The higher the reading, the more costly it is to afford a home.+ o4 E) v+ g( R4 [- E- c
For example, an Affordability reading of 50 per cent means that homeownership
: R& n$ z" P# ^' \+ \costs, including mortgage payments, utilities and property taxes, take up 50
/ A2 A+ g- E+ d$ ~per cent of a typical household's monthly pre-tax income.
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6 p0 ^& N9 J5 ]. u# Y3 p4 e, ` Highlights from across Canada:6 ^8 s% I% Z! _, \3 p D
+ d. T& ~! y; ?* R* ] - Alberta: Since last fall, the declining Alberta economy has
, w$ L& T8 w: s, m0 ~# d intensified the downdraft on the province's housing markets, causing; M( }2 \! Y/ I$ m2 q
home resales to drop to a 12-year low at the end of 2008 and rebound
% m& H7 \8 o2 n only modestly since. Affordability has been on an improving track8 P; N* y7 Y R" q
since about the middle of 2007.: O$ j( o. h1 t; q
- Saskatchewan: Market activity has cooled considerably from the
6 t; Y" f, S% ]- J) X frenzied pace from 2006 to early 2008 and prices have begun to
- x. m3 X7 e) w decline. Nonetheless, economic and demographic fundamentals are still
/ F* A' f/ o" @! ?: ] u largely supportive of the housing market and overshadow extremely: D# m4 b6 `4 l9 P0 D% Q! R
poor affordability levels.( k5 z7 ~# [' @# W+ e, t% L
- Manitoba: Manitoba's housing markets have fared much better than the v B+ O8 w* t9 N/ i
vast majority in Canada: resale activity has slowed moderately and
: t1 Z) J3 x' Y prices have either held their own or edged down just slightly.
$ d" F5 F2 b% q# N4 E9 @5 l6 ^ Affordability has been kept out of the danger zone, helping to2 {5 a) g Q ]2 ^3 P
minimize any downside risks.
! B9 F6 ^# t6 t - Ontario: With the recession pounding many communities, housing market
( @7 ^& k. U6 T9 r. m conditions have deteriorated considerably. However, the impact is( z1 d# u2 F+ w$ H* ^
unlikely to develop into an all-out rout similar to that of the early
0 T# `) Q5 G/ x* T 1990s. Affordability, while still causing some stress, is quickly& |. R0 g9 V9 ~( `$ `9 r3 U5 a
being restored to levels closer to long-term averages.# U" x+ i6 r8 ^# y
- Quebec: The province's housing markets have been among the last in5 g7 ]6 A+ `5 Q) ?1 r N
Canada to yield to the weakening trend. The main sign of cooling thus
0 ^7 h) O9 |5 c. f$ Q1 W, _ far has been a drop in resale activity, as prices have held up
/ o, v8 Q# L( g( O reasonably well. Some of the persisting market strength can be
; ~7 R* H5 a* v& V" b! @ ascribed to sensible affordability levels, which had eroded only! j$ W* D/ w" o: @6 v
modestly in recent years.; S; c* r& o# m5 E
- Atlantic region: Markets have largely remained stable against the
; h5 Q; c4 _7 e general housing downturn, with St. John's becoming the housing hot
0 k% j! k) y6 Q4 G: H6 s spot in Canada and Halifax and Saint John maintaining steady upward
$ ?, C9 ^1 ?8 x3 @' d3 R& r0 b/ f price momentum. The region is benefiting from improving affordability
( w/ o9 g% s r4 X following two years of deterioration.
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