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British Columbia's housing affordability notably improved but still has far to go, says RBC
6 z* R9 Z3 l$ `$ U TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the2 M2 i; Z* K7 @+ P8 v! l+ b- g
middle of a significant correction that is partly reversing the extensive
6 \7 {7 ~3 l7 pgains of recent years and which is helping restore affordability conditions,
# ?2 Q1 }2 j6 D7 s8 xaccording to the latest housing report released today by RBC Economics.
4 j+ U# y) ]2 `% ?1 k: Q "The province's housing markets remain under heavy downward pressure,"
) M7 y9 C, D3 r1 Xsaid Robert Hogue, senior economist, RBC. "While housing affordability is
0 t0 \4 o! f( }' \6 N4 l; Timproving as the correction process runs its course. RBC's affordability# d# e. b- K* {6 R" l# u6 w6 ^
measures for the province are still at levels far off historical averages."
" V$ [) Y) ~, j3 T8 ^- B4 S RBC notes that the sharp rise in unemployment since last summer is
0 H" J) v0 q: f7 Yworrying households in the province and weighing down demand for housing,
/ b3 C$ b. a! |# ?3 F1 dwhich runs well short of available supply. Such weak market conditions have1 `) }( \9 C# c: O7 j; ]5 |7 G. W% B
sustained the declining trend in prices for both existing and new homes.& f1 y, c. F0 |2 k" |7 w9 A: ]
The RBC Affordability measure for British Columbia, which captures the. P. k: }4 a5 ]! p5 C1 ]3 K- }
proportion of pre-tax household income needed to service the costs of owning a3 l$ _7 N% K |4 t s- Z
home, improved across all housing segments in the last quarter of 2008.$ G9 W4 B1 G" q, n$ d/ U
Affordability of detached bungalows in the province moved to 66 per cent, the6 } e J4 M5 y% `4 ^
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
1 D5 }& b) ?- c6 \/ f( xthe standard two-story home to 73.7 per cent.0 _" O1 f2 c& N- Y
According to the report, there are signs that the B.C. housing markets
% _- _: |6 v% B. dmay be stabilizing as sales of existing homes appear to have bottomed out in& T: T1 n2 ]; X \1 r# g
the closing months of 2008 and the first two in 2009 - although at
+ J; f% }) p1 D9 g! S6 b! |# jhistorically depressed levels.
0 ^7 H+ M$ W% D: P6 R Despite sharply declining house prices and lower mortgage rates, the cost
( k+ b% a! U) u! ?1 e% \of homeownership in Vancouver is still the highest in the country. House
4 r" v* N, e; V p* o) yprices continue to rapidly decline and pricing power remains firmly in the2 N! g( E; b* h1 x$ x$ Z+ }
hands of buyers with the sales-to-new listings ratio at historical lows. "This
8 O7 [5 T) f6 d+ E( S& m+ I5 e' oenormous imbalance suggests that prices will likely further correct in the" r9 a) F9 H& {% R/ t. F
months ahead," added Hogue.* N* N" d5 A6 ^4 T
RBC's Affordability measure for a detached bungalow for Canada's largest
2 n, K5 O2 H: E) {; V3 Mcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
0 F; \! ?5 U& v42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.5 `6 N2 j$ m; `
The report also looked at mortgage carrying costs relative to incomes for
x3 s/ M1 i0 z7 B: p& t+ f2 ia broader sampling of cities across the country, including Victoria. For these0 `8 d! S* @$ I! t& O; U
cities, RBC has used a narrower measure of housing affordability that only
- t, {6 z, a- Z9 ]/ L& e" A. E6 jtakes mortgage payments relative to income into account.
; R& Z& ~3 I$ E/ n" I: u4 t The Housing Affordability measure, which RBC has compiled since 1985, is
. m: g1 i7 S- K) Abased on the costs of owning a detached bungalow, a reasonable property
+ Y) k: W8 c; Nbenchmark for the housing market. Alternative housing types are also presented
) F0 I1 d# O8 u8 l" Fincluding a standard two-storey home, a standard townhouse and a standard
5 w; Z3 M3 Q8 ~condominium. The higher the reading, the more costly it is to afford a home.! q7 i; j( O! G
For example, an Affordability reading of 50 per cent means that homeownership5 ]& H: J- J7 \0 B, c( v& f
costs, including mortgage payments, utilities and property taxes, take up 50
& ^ i7 X$ z4 aper cent of a typical household's monthly pre-tax income.
9 y7 m7 T2 g9 m# ^) T( ]) X0 r( s0 u" l# q, F
<<* S5 O* P) h; t- {8 f1 v0 @1 S
Highlights from across Canada:
# E" ]$ h$ c8 n* D- ]. ~9 N( h4 L, o$ o& v- @" f0 _' j, C9 ^
- Alberta: Since last fall, the declining Alberta economy has
: @0 x; Y5 i( U4 x7 S7 O% s intensified the downdraft on the province's housing markets, causing9 `3 \* g9 Z4 ^& p4 C
home resales to drop to a 12-year low at the end of 2008 and rebound
! P2 h7 ]1 s- o4 a only modestly since. Affordability has been on an improving track
5 i5 Y U' ]7 O/ Z) L) {3 i since about the middle of 2007.5 d, O6 o% z- L) _% S
- Saskatchewan: Market activity has cooled considerably from the8 o) @ H9 S1 h" p$ s
frenzied pace from 2006 to early 2008 and prices have begun to& j! Y) \9 `' P& X4 V
decline. Nonetheless, economic and demographic fundamentals are still! y3 q$ M" b) z
largely supportive of the housing market and overshadow extremely
/ r7 x- ~- Q/ f6 x1 b$ H poor affordability levels.% o9 @6 L! ^8 ?$ Z
- Manitoba: Manitoba's housing markets have fared much better than the
* k4 h( G' X# \+ D& m p3 y vast majority in Canada: resale activity has slowed moderately and
1 M. Q% ^3 @! }# B- B prices have either held their own or edged down just slightly.
' x4 I' ^' R/ v4 m Affordability has been kept out of the danger zone, helping to! K& `: O5 c7 }- H
minimize any downside risks.
& |# T* p1 r9 ?% x p2 C- ^ - Ontario: With the recession pounding many communities, housing market
: s; |" {5 Q$ v conditions have deteriorated considerably. However, the impact is( J# F" m( X9 v0 l; p
unlikely to develop into an all-out rout similar to that of the early ?; O9 N! z; J3 C# Y
1990s. Affordability, while still causing some stress, is quickly
" Z/ e3 E9 V3 w3 [+ A! N being restored to levels closer to long-term averages." Q( V: G! i. V; g/ [! x8 I
- Quebec: The province's housing markets have been among the last in
9 k, ~: p2 C# l, { Canada to yield to the weakening trend. The main sign of cooling thus1 [$ a: Z6 {$ U2 ~
far has been a drop in resale activity, as prices have held up
4 V N1 r/ a+ h! L9 } reasonably well. Some of the persisting market strength can be% I5 F$ _: c% o( D' {5 N9 P
ascribed to sensible affordability levels, which had eroded only
2 e) M! i$ U1 t9 \ Y modestly in recent years.
& O" H* v/ I' e8 r2 J - Atlantic region: Markets have largely remained stable against the
* }" F$ `- [ J# M. k' p, U! n general housing downturn, with St. John's becoming the housing hot
- [6 I$ ~" q* u spot in Canada and Halifax and Saint John maintaining steady upward$ Y9 J6 F+ c! \3 D1 r
price momentum. The region is benefiting from improving affordability/ g! K8 b1 }9 d
following two years of deterioration.
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