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British Columbia's housing affordability notably improved but still has far to go, says RBC
6 D* [* \1 h" r; s: G* }$ P TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
/ j0 ?8 ~1 n: v% s6 Fmiddle of a significant correction that is partly reversing the extensive
+ C- U7 w$ o5 |8 H$ |+ P% k! `gains of recent years and which is helping restore affordability conditions,3 O( V4 j$ L% c& |9 \9 E" c# b
according to the latest housing report released today by RBC Economics.
! \$ U9 ]# d- ]9 B0 T9 d/ O "The province's housing markets remain under heavy downward pressure,". L- d' `- l# K3 H
said Robert Hogue, senior economist, RBC. "While housing affordability is1 n& E: i% [- n, Q
improving as the correction process runs its course. RBC's affordability1 O% R6 g$ ^1 E" B. z* R
measures for the province are still at levels far off historical averages."
0 m6 K. }6 v# u1 r% D RBC notes that the sharp rise in unemployment since last summer is1 Y% _6 G' N0 m' U. G* [" j
worrying households in the province and weighing down demand for housing, U$ b) x3 k1 ?8 @
which runs well short of available supply. Such weak market conditions have
# Y8 [$ u4 |- z" \sustained the declining trend in prices for both existing and new homes.5 @0 t/ @' Y9 s% L# j% A
The RBC Affordability measure for British Columbia, which captures the$ x) G: L- M" |: \ s
proportion of pre-tax household income needed to service the costs of owning a
2 }+ ^! E" E- Ehome, improved across all housing segments in the last quarter of 2008.
- g, G; t: S- [: k6 g5 BAffordability of detached bungalows in the province moved to 66 per cent, the' H+ {, e5 H, j1 R4 I
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
4 F+ G) M! O! G/ M' ^the standard two-story home to 73.7 per cent.3 U% t' _. H1 b5 y/ X9 N
According to the report, there are signs that the B.C. housing markets; Q+ f( Q+ Y& u# Y( q
may be stabilizing as sales of existing homes appear to have bottomed out in8 k. H0 ?9 T! q; M% ^5 _0 e
the closing months of 2008 and the first two in 2009 - although at
3 e1 B7 `4 I% {7 m' n( Yhistorically depressed levels.
9 ]/ ]+ q& F5 M+ u6 Z' r: \ Despite sharply declining house prices and lower mortgage rates, the cost
! s" {, _) x6 u/ |of homeownership in Vancouver is still the highest in the country. House9 _- H% Q. {; j) f) ^# C
prices continue to rapidly decline and pricing power remains firmly in the% g$ Y$ g; e7 A" x' U
hands of buyers with the sales-to-new listings ratio at historical lows. "This' ?3 ~) n1 x. |
enormous imbalance suggests that prices will likely further correct in the3 W9 q3 l. B, W$ a5 `' b
months ahead," added Hogue.
% b( m2 \% { Q3 m6 P8 K( p* v RBC's Affordability measure for a detached bungalow for Canada's largest5 W4 a7 S" g& X& n0 w' i( {$ U7 @
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary* J8 p+ h& m8 @- D% `8 }( N1 }
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
: G J" Q/ }- B$ X( o The report also looked at mortgage carrying costs relative to incomes for
5 T3 p# o* [9 [4 |a broader sampling of cities across the country, including Victoria. For these n( Z1 O4 {6 T7 w8 l, b
cities, RBC has used a narrower measure of housing affordability that only3 u2 }% G* a5 g4 a# u
takes mortgage payments relative to income into account.
- z- h( M# }) W& l# T6 n, v The Housing Affordability measure, which RBC has compiled since 1985, is" d1 G7 F4 T8 y( l& Q9 N% U! u; T
based on the costs of owning a detached bungalow, a reasonable property6 Q$ P6 B! n1 P6 z+ [
benchmark for the housing market. Alternative housing types are also presented
% m) g' z5 e) i$ @1 Z! b7 i1 K8 C9 G1 }including a standard two-storey home, a standard townhouse and a standard
' n) q8 ^5 j: }/ Mcondominium. The higher the reading, the more costly it is to afford a home.1 u# p1 Z3 X4 c( g: o3 f+ y# f
For example, an Affordability reading of 50 per cent means that homeownership
d) p# B! X/ v- w5 ~5 Fcosts, including mortgage payments, utilities and property taxes, take up 50
. h0 y+ ?& Q. T; U; I! B) A9 {per cent of a typical household's monthly pre-tax income.
* l" z3 k6 D0 V/ a# B
/ S. m: `3 K* {9 ` <<( b; f# q* U3 b' |; c
Highlights from across Canada:& J! |: N1 R7 U) {$ s
4 }) B% }. @- Z9 G/ F% }
- Alberta: Since last fall, the declining Alberta economy has
! z n6 ^' X @4 x) Y" F1 a, _ intensified the downdraft on the province's housing markets, causing: S- [; A6 ~# h
home resales to drop to a 12-year low at the end of 2008 and rebound
, {7 x$ [8 ]" S* g8 S only modestly since. Affordability has been on an improving track, A8 s- [6 ]2 v# N' t3 x3 u7 T X
since about the middle of 2007." y/ O5 v- n7 M4 W1 _7 e
- Saskatchewan: Market activity has cooled considerably from the/ E4 D& M, j3 n, h
frenzied pace from 2006 to early 2008 and prices have begun to
|5 g1 q; ~& ~ decline. Nonetheless, economic and demographic fundamentals are still
1 T, f" p# A3 u# _ a, c largely supportive of the housing market and overshadow extremely
; F0 U0 D, r) g, F4 M1 U }1 e poor affordability levels.
( B, K5 T/ N y) Q - Manitoba: Manitoba's housing markets have fared much better than the. S h2 u$ [. v. \
vast majority in Canada: resale activity has slowed moderately and# Q! Q; G2 y3 ~* O2 [9 c, c: P' |
prices have either held their own or edged down just slightly.! l( T1 H* c' L5 p# F
Affordability has been kept out of the danger zone, helping to
1 c7 T/ F) W$ Z9 S' \ minimize any downside risks.( i4 c u; l/ k7 |2 R
- Ontario: With the recession pounding many communities, housing market9 t' F4 Q) s0 F
conditions have deteriorated considerably. However, the impact is; K% A$ s& b0 _
unlikely to develop into an all-out rout similar to that of the early
, m# D( Y+ H4 l7 g9 b0 `& f, I 1990s. Affordability, while still causing some stress, is quickly6 n, g& ^! P6 N( D0 L% G9 X7 u
being restored to levels closer to long-term averages.8 p2 Y; W3 P0 ~& Z E
- Quebec: The province's housing markets have been among the last in
$ J7 A0 s+ D# m% t6 C- @+ n" o- b Canada to yield to the weakening trend. The main sign of cooling thus
- I; U1 n( `; z" d+ U5 | far has been a drop in resale activity, as prices have held up+ l* q/ Q1 S4 u1 z
reasonably well. Some of the persisting market strength can be
! v5 \( N% V8 d5 p ascribed to sensible affordability levels, which had eroded only
+ C8 ?% _( z7 s modestly in recent years.
1 M# Q0 }+ ]9 f) g/ V2 G7 ~ - Atlantic region: Markets have largely remained stable against the
l# ~9 h7 ^. K- G general housing downturn, with St. John's becoming the housing hot
9 v+ E4 r# ?1 \ spot in Canada and Halifax and Saint John maintaining steady upward1 g$ q2 g+ B& E* e( L+ j! p, U- m
price momentum. The region is benefiting from improving affordability
% `! j6 R4 \7 W) _! g. W following two years of deterioration.8 K" Z$ L6 e- z( y
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