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British Columbia's housing affordability notably improved but still has far to go, says RBC
# w0 i" I3 v! Y5 r TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the! f8 e+ |5 \4 j4 R/ a* W9 y5 N
middle of a significant correction that is partly reversing the extensive2 j7 R. k* e2 B3 A( l
gains of recent years and which is helping restore affordability conditions,5 U, g% {( o- f& a5 Y
according to the latest housing report released today by RBC Economics.# F3 t7 g4 h- m7 j/ _
"The province's housing markets remain under heavy downward pressure,"
- \3 L0 x* o5 Z6 o" g9 y4 [0 Xsaid Robert Hogue, senior economist, RBC. "While housing affordability is
3 x6 s; H) E& a0 ~( @% dimproving as the correction process runs its course. RBC's affordability
) G9 {- k/ B& l- D% R* ?2 r4 C7 fmeasures for the province are still at levels far off historical averages."
( b- v: c# u/ B4 T8 G6 k RBC notes that the sharp rise in unemployment since last summer is
8 L- B% p6 b5 [; K) x# Y0 Vworrying households in the province and weighing down demand for housing,4 ]) W% i7 F; X$ F0 d- `' {
which runs well short of available supply. Such weak market conditions have
7 c* m; z2 r4 z" ssustained the declining trend in prices for both existing and new homes. }1 n% P" s" a/ I8 n
The RBC Affordability measure for British Columbia, which captures the
' w8 m, _. y3 R- \% G8 v0 L% Vproportion of pre-tax household income needed to service the costs of owning a! H" L3 w1 p3 t% H n" _, G
home, improved across all housing segments in the last quarter of 2008.4 V+ e: F; T* q: y f, t' f7 H
Affordability of detached bungalows in the province moved to 66 per cent, the
" U& }' t/ Y' \- U" `! \standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and J- _* S- D# Q* x* P
the standard two-story home to 73.7 per cent.
% ~' G2 c; T( }: k( z$ z/ Y According to the report, there are signs that the B.C. housing markets! ^' T( q# n- T! X9 P/ Q. \; r2 }; h
may be stabilizing as sales of existing homes appear to have bottomed out in. d) \. t" ^( d* w
the closing months of 2008 and the first two in 2009 - although at; f; G! R9 U! V& ?
historically depressed levels.% [1 E4 f( V# e2 C& |/ g
Despite sharply declining house prices and lower mortgage rates, the cost% P" l9 U G2 x3 `; {: t/ L
of homeownership in Vancouver is still the highest in the country. House q. z3 `, |$ n/ {+ Q, s
prices continue to rapidly decline and pricing power remains firmly in the$ T! n" x) J- `- \9 k2 {; W
hands of buyers with the sales-to-new listings ratio at historical lows. "This) A3 m c8 K9 e3 Q
enormous imbalance suggests that prices will likely further correct in the; m0 I: p# s# |6 t2 }
months ahead," added Hogue.1 [- ]3 ^; M# j6 g" a
RBC's Affordability measure for a detached bungalow for Canada's largest& n* L o4 ~: j( ^" i% ?
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary2 |4 l B) P; [- f, ~# Y! a
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.$ X8 k/ v' c j8 c
The report also looked at mortgage carrying costs relative to incomes for
( G" a9 N. s5 ]) r, ja broader sampling of cities across the country, including Victoria. For these
% R: S# M3 C: v; F; pcities, RBC has used a narrower measure of housing affordability that only( @7 N6 ~, T; r( f4 ]; ^9 a
takes mortgage payments relative to income into account.* T; O, R# X6 Z" ?. x
The Housing Affordability measure, which RBC has compiled since 1985, is4 z2 l5 y+ }' K) y5 G7 L. k
based on the costs of owning a detached bungalow, a reasonable property
" r3 q7 d* E5 O) A# Zbenchmark for the housing market. Alternative housing types are also presented
& p4 O. l- L9 v5 z( Z0 y! W: K, }including a standard two-storey home, a standard townhouse and a standard6 f! C1 a: S& H: q) x: K
condominium. The higher the reading, the more costly it is to afford a home.
- P9 d5 m: V9 S$ o' M! J2 VFor example, an Affordability reading of 50 per cent means that homeownership
1 }4 c2 R/ {7 D* lcosts, including mortgage payments, utilities and property taxes, take up 50* i1 X1 o6 `- V$ Y4 a4 r7 r2 ~) O2 s
per cent of a typical household's monthly pre-tax income.$ @+ F# @) [, }! v
5 G3 n; }3 W. a( t- ^+ A5 [
<<
# l8 r/ r8 B0 ^8 S Highlights from across Canada:' s3 k. M* _; U; d( S5 X
9 z) z+ K7 T' r7 |
- Alberta: Since last fall, the declining Alberta economy has3 i/ C+ r) \# J/ |
intensified the downdraft on the province's housing markets, causing$ q2 q, m) G' t
home resales to drop to a 12-year low at the end of 2008 and rebound' z* D: w7 }2 Z- Z/ s1 {
only modestly since. Affordability has been on an improving track
. o# `! _: ~6 P" F/ F3 J: i) f1 ? since about the middle of 2007.4 l: ^$ j9 M8 \5 M8 ~3 Y1 C- v
- Saskatchewan: Market activity has cooled considerably from the3 n# q7 w8 o+ P9 ?) }/ o- e" o0 V& `
frenzied pace from 2006 to early 2008 and prices have begun to, Z! `& ~2 S3 r+ b( a. }- y
decline. Nonetheless, economic and demographic fundamentals are still7 d+ j; _! `8 k5 } a
largely supportive of the housing market and overshadow extremely
8 O) L u; s) k: Q _- f poor affordability levels.
3 D' B) t3 F( ? - Manitoba: Manitoba's housing markets have fared much better than the3 f1 y2 X3 _5 [) j
vast majority in Canada: resale activity has slowed moderately and
- s8 p# @1 R$ u/ C5 g7 b prices have either held their own or edged down just slightly.) K: B( q, p9 f! b
Affordability has been kept out of the danger zone, helping to. J6 A" j& D( H# x5 l+ G) t" @9 t
minimize any downside risks.
8 ?. i( k$ L% p - Ontario: With the recession pounding many communities, housing market9 G" C9 U5 R. I5 J6 I Z- F
conditions have deteriorated considerably. However, the impact is
7 q- i4 D; n+ t7 q8 m0 j( J unlikely to develop into an all-out rout similar to that of the early* x4 e; W7 |" |* O
1990s. Affordability, while still causing some stress, is quickly7 ?, P$ C8 v$ t
being restored to levels closer to long-term averages.
& j+ |2 h% P1 q- t! m - Quebec: The province's housing markets have been among the last in
& M0 t6 ~, O) e' b0 G Canada to yield to the weakening trend. The main sign of cooling thus
3 @, g: d& m; {3 Z; `/ g; l& i far has been a drop in resale activity, as prices have held up; F1 s3 Q; e% y* H, m* i' ^# j; f# i
reasonably well. Some of the persisting market strength can be
# |; ?" i% @6 o* q0 |" K ascribed to sensible affordability levels, which had eroded only8 z B4 `4 R" T
modestly in recent years.
8 T1 G' e! a6 E/ u) I+ B - Atlantic region: Markets have largely remained stable against the2 n( c0 P) e# h* u
general housing downturn, with St. John's becoming the housing hot
; E' L) e5 v/ [- e, Q spot in Canada and Halifax and Saint John maintaining steady upward
' u6 u* R- G5 t' A# W price momentum. The region is benefiting from improving affordability
: H. |* ^! d8 k# c' j* W' B following two years of deterioration.
5 Z% N2 M1 i! [3 m >> |
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