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British Columbia's housing affordability notably improved but still has far to go, says RBC
# O2 ~# _5 g) X! N( b6 g( z TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the8 i" g. r( e' @ C3 i
middle of a significant correction that is partly reversing the extensive
6 e1 _% M% A- Z2 t2 x3 ~gains of recent years and which is helping restore affordability conditions,
+ t; ?7 T" G0 _3 Y. Taccording to the latest housing report released today by RBC Economics.- V1 [. M# r2 b5 L8 h( y7 p" b) i' S- r
"The province's housing markets remain under heavy downward pressure,"1 O0 B# h5 D# y% e# a/ \! J
said Robert Hogue, senior economist, RBC. "While housing affordability is( L7 o' `: e7 m
improving as the correction process runs its course. RBC's affordability6 }5 K( ?7 `* g8 r) |
measures for the province are still at levels far off historical averages."% b; V$ g) O( p8 Q( e
RBC notes that the sharp rise in unemployment since last summer is
' K4 G3 g5 g0 I' H% o9 lworrying households in the province and weighing down demand for housing,
. b- L! U% g, r+ q Y, l8 Mwhich runs well short of available supply. Such weak market conditions have
5 h# A. W" q7 p# o% ssustained the declining trend in prices for both existing and new homes.
. ]! v# c/ p2 x- A0 N+ t6 y The RBC Affordability measure for British Columbia, which captures the
) H: y2 i* S, J! p8 l) aproportion of pre-tax household income needed to service the costs of owning a4 p. |% Q6 H$ |
home, improved across all housing segments in the last quarter of 2008.
- I2 _- c. ^* }# }. W$ UAffordability of detached bungalows in the province moved to 66 per cent, the
% R1 t/ ]" X2 K2 ?" Tstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
" Y1 f( s2 H. x( I5 T: mthe standard two-story home to 73.7 per cent.
1 A+ [3 [1 u1 R( n) S According to the report, there are signs that the B.C. housing markets% ^- I' e% f! l# j! R, Q& z
may be stabilizing as sales of existing homes appear to have bottomed out in9 _0 D& \* R8 y3 t3 a! P! ~
the closing months of 2008 and the first two in 2009 - although at' L9 p2 @& B5 R/ ~) e5 v. m
historically depressed levels.
" Y1 `& p* _* `" B5 d Despite sharply declining house prices and lower mortgage rates, the cost+ B$ o o. c9 \6 A q
of homeownership in Vancouver is still the highest in the country. House
6 Z$ A: o# N& b6 q. dprices continue to rapidly decline and pricing power remains firmly in the
% [; o: t2 L3 I+ F/ J+ R2 fhands of buyers with the sales-to-new listings ratio at historical lows. "This# L) l5 ?2 C/ q/ M, W
enormous imbalance suggests that prices will likely further correct in the2 U4 }' g! T5 H' _, [
months ahead," added Hogue.+ i+ \. ~- g# p' @9 d# F; h1 F2 N
RBC's Affordability measure for a detached bungalow for Canada's largest$ I2 ^+ i0 m- p% c# q* B( E/ ` I
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary [5 I7 Z2 ~' [: _$ T# v7 B. O+ h
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
3 A0 K$ u) X1 N% E6 g. d The report also looked at mortgage carrying costs relative to incomes for
4 b' A; e5 p. T8 [ ia broader sampling of cities across the country, including Victoria. For these8 t, [% W8 F! K$ l; Q
cities, RBC has used a narrower measure of housing affordability that only
4 O8 s. k i6 [* l: etakes mortgage payments relative to income into account.
- g! F" q- o5 s) G% I- v5 N The Housing Affordability measure, which RBC has compiled since 1985, is8 F0 } \" c% o# K+ l1 d
based on the costs of owning a detached bungalow, a reasonable property
5 Y& I+ }( a- g) @benchmark for the housing market. Alternative housing types are also presented6 h. X% ^3 O: f7 E5 V2 a/ k% t7 Q0 F
including a standard two-storey home, a standard townhouse and a standard
& n' P" J2 b( m* H; Ccondominium. The higher the reading, the more costly it is to afford a home.
+ x. h" I+ J3 E% S: mFor example, an Affordability reading of 50 per cent means that homeownership4 d% x/ K7 ^- Q
costs, including mortgage payments, utilities and property taxes, take up 50, D4 n" g Y1 w( F4 U# g9 H
per cent of a typical household's monthly pre-tax income.; O; b; @. [- P5 F* ?
. M: k& G4 ?: a. d# b2 _' C6 N5 h <<
% B8 V2 s& J- J0 w' W1 m! v1 y7 | Highlights from across Canada:
) v* B3 o9 k0 {8 P2 l
" w9 \' s& D5 e6 z. X$ K- D - Alberta: Since last fall, the declining Alberta economy has* e$ Q* X1 i% i9 y, E8 u8 p% l$ i# }
intensified the downdraft on the province's housing markets, causing* a! u6 `7 j5 U& ?, N. R
home resales to drop to a 12-year low at the end of 2008 and rebound
. z2 h8 C2 b+ c2 w& M3 { @" o only modestly since. Affordability has been on an improving track6 s: q* A$ F1 I g# m# ]
since about the middle of 2007.
7 i. q5 q" K9 X- `* S - Saskatchewan: Market activity has cooled considerably from the
, E. G4 N2 i; e. u7 x frenzied pace from 2006 to early 2008 and prices have begun to+ J2 a# s* F* ?7 N; I
decline. Nonetheless, economic and demographic fundamentals are still
. ~! P2 j, X4 O- {* u largely supportive of the housing market and overshadow extremely q+ s& U2 X9 M9 Y& `! A
poor affordability levels.
2 E# c) A7 r+ ?) b& e0 [# ]! _! l" a - Manitoba: Manitoba's housing markets have fared much better than the) r' c4 W4 T' ?+ K# X
vast majority in Canada: resale activity has slowed moderately and
( B- R$ k) s# z( }3 s4 W. b% d prices have either held their own or edged down just slightly.
0 F- b1 L! ^- q6 T. @ Affordability has been kept out of the danger zone, helping to
: v+ k6 c3 T6 r3 }$ `- K5 X minimize any downside risks.. y( ?3 ]7 X/ g" x: i& v& K7 I) h* q
- Ontario: With the recession pounding many communities, housing market8 i3 L3 o, J3 e+ P& u+ K
conditions have deteriorated considerably. However, the impact is
9 F& }, p* O- k) q, K6 ~ unlikely to develop into an all-out rout similar to that of the early0 k2 @1 c5 J% }1 N" w! }+ X" t- }
1990s. Affordability, while still causing some stress, is quickly
( [+ z/ B( L+ n% x" h% G# L& P being restored to levels closer to long-term averages.' G% |$ T Z/ G/ `# p# |
- Quebec: The province's housing markets have been among the last in4 c3 Z$ v4 d+ D- o% q3 N/ |
Canada to yield to the weakening trend. The main sign of cooling thus
' O* M. S* F7 @% M. S" F far has been a drop in resale activity, as prices have held up
6 T: ]" f+ ~$ ^! d3 W reasonably well. Some of the persisting market strength can be
: H3 J6 h5 @6 s, C/ `- N8 p ascribed to sensible affordability levels, which had eroded only# o' W9 h3 X. _
modestly in recent years.0 k; ^8 T5 U, p& t7 O* |
- Atlantic region: Markets have largely remained stable against the$ {: p1 O5 _7 {* _/ v" X
general housing downturn, with St. John's becoming the housing hot
8 M" Z. B4 c; x. p7 i! u spot in Canada and Halifax and Saint John maintaining steady upward
7 i. W/ T$ ]. S P. h price momentum. The region is benefiting from improving affordability- \$ g" s( K u4 L
following two years of deterioration.
0 g7 W$ }8 a( v! B( }- l >> |
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