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British Columbia's housing affordability notably improved but still has far to go, says RBC
?' O" i. }# ?) F- {4 j TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
5 K2 f5 a& R1 g& i5 tmiddle of a significant correction that is partly reversing the extensive* |$ d z7 D3 ^* w2 L
gains of recent years and which is helping restore affordability conditions,
% G, k# f1 w" Y' f/ p9 M7 G2 yaccording to the latest housing report released today by RBC Economics.; `. Y! v* `+ h( T
"The province's housing markets remain under heavy downward pressure,"2 K/ Q9 R$ D! K0 _/ C3 z
said Robert Hogue, senior economist, RBC. "While housing affordability is% B- F+ S( S* i( Y- b5 E; s
improving as the correction process runs its course. RBC's affordability8 H$ f6 P' o, o; N- o
measures for the province are still at levels far off historical averages."6 K0 B$ V% \) r# O! y( e; F
RBC notes that the sharp rise in unemployment since last summer is
2 E. r/ Z) d6 C. f4 H8 ]worrying households in the province and weighing down demand for housing,
0 J8 A: w$ ~: ]3 m% c# Ewhich runs well short of available supply. Such weak market conditions have
6 ^1 A* U2 Q! ~. Fsustained the declining trend in prices for both existing and new homes.8 e* v) m8 F+ }
The RBC Affordability measure for British Columbia, which captures the5 r$ k& {, U% I. u V
proportion of pre-tax household income needed to service the costs of owning a S! a! r) O! \) c; v
home, improved across all housing segments in the last quarter of 2008.* _* m' q2 U' z6 h
Affordability of detached bungalows in the province moved to 66 per cent, the
. H0 G7 u/ f5 ]1 W/ Gstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and+ L, `3 i/ Y7 C
the standard two-story home to 73.7 per cent.
7 |+ { }, r. Y- J$ M According to the report, there are signs that the B.C. housing markets+ O; {) ^/ r a6 H. l6 C
may be stabilizing as sales of existing homes appear to have bottomed out in. n" y E" H! ~5 w* T
the closing months of 2008 and the first two in 2009 - although at
) L6 l. d7 H' }) X- H; ahistorically depressed levels.
6 T2 k& @2 @# e! R, U! B% @ Despite sharply declining house prices and lower mortgage rates, the cost
3 c; A. w0 k0 y1 l! K- `5 y/ I7 Yof homeownership in Vancouver is still the highest in the country. House$ H- I. n2 w* ?! t
prices continue to rapidly decline and pricing power remains firmly in the4 e8 j) g* ]) i* D+ i
hands of buyers with the sales-to-new listings ratio at historical lows. "This8 V8 r0 g* R, T$ T
enormous imbalance suggests that prices will likely further correct in the3 F) A) H' p' A, j8 O: |& p
months ahead," added Hogue.- ~1 m; J* n% @- X
RBC's Affordability measure for a detached bungalow for Canada's largest
/ H% e2 d. [2 c" }9 k ccities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
U/ ?8 p6 q* u' {+ c& C8 ~6 U* u42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent./ t# c+ v X3 V$ A7 b( y$ [
The report also looked at mortgage carrying costs relative to incomes for+ a' j- R! u' F P4 X
a broader sampling of cities across the country, including Victoria. For these
; |) V) |' H' q6 Ycities, RBC has used a narrower measure of housing affordability that only
7 W2 x1 t6 q0 gtakes mortgage payments relative to income into account.
& u) B* J, `) K- w% ^ The Housing Affordability measure, which RBC has compiled since 1985, is* P1 r" h: K: r$ P6 x7 b% }
based on the costs of owning a detached bungalow, a reasonable property0 V. N4 h1 j- x. i. ~
benchmark for the housing market. Alternative housing types are also presented1 j% v$ G4 ?. Z1 X4 F2 E' E
including a standard two-storey home, a standard townhouse and a standard* n3 x7 A l3 w+ u
condominium. The higher the reading, the more costly it is to afford a home.% T9 e& A" [& w3 V6 g% J
For example, an Affordability reading of 50 per cent means that homeownership
. A" y7 f! k$ J0 tcosts, including mortgage payments, utilities and property taxes, take up 50) I% m0 S0 G1 Z# W6 U7 d' j
per cent of a typical household's monthly pre-tax income.
$ n' c- A9 u! \- W1 |( [* t M. x0 I! H2 t3 D
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* h. R* v3 B% }0 o Highlights from across Canada:
0 f& M( p; z2 f' K' c- g
: ]& _/ O2 ] B# L; j - Alberta: Since last fall, the declining Alberta economy has
# p) l! `! \6 C6 P- `' l" K intensified the downdraft on the province's housing markets, causing
/ o# g: s3 u, Z2 w) r7 c* Y home resales to drop to a 12-year low at the end of 2008 and rebound# w: k- U# ^ ]
only modestly since. Affordability has been on an improving track8 c2 u1 d& k- l4 Q2 @
since about the middle of 2007.* g3 H( o- v8 e) f
- Saskatchewan: Market activity has cooled considerably from the; i- M( p6 k* E% _0 g+ n
frenzied pace from 2006 to early 2008 and prices have begun to
4 y) T5 }* d! x! c4 t decline. Nonetheless, economic and demographic fundamentals are still) p: I) C' q* C4 h$ r1 G, j! W1 o' _
largely supportive of the housing market and overshadow extremely8 @7 L+ z' t4 d
poor affordability levels.+ |: q9 C. w3 c$ ^7 j& U
- Manitoba: Manitoba's housing markets have fared much better than the
* u# s- \4 |8 |) h/ {. } vast majority in Canada: resale activity has slowed moderately and
: d& r6 S" y6 U, X& [0 a prices have either held their own or edged down just slightly.
( j& N, K2 U$ t, F1 o! {1 ] Affordability has been kept out of the danger zone, helping to, b* y2 ^2 w4 m0 l
minimize any downside risks.1 I3 V h2 p9 }4 g4 n) @
- Ontario: With the recession pounding many communities, housing market2 D: q& G1 S4 y& J3 O. |
conditions have deteriorated considerably. However, the impact is1 E- A& x; Q2 b
unlikely to develop into an all-out rout similar to that of the early
1 z o1 a) b# [; ? 1990s. Affordability, while still causing some stress, is quickly
0 ^! y1 n+ r. v k' O8 i being restored to levels closer to long-term averages.4 W1 t1 D8 |& o* [! n( d( e- t
- Quebec: The province's housing markets have been among the last in5 c: ~/ R0 O9 ~
Canada to yield to the weakening trend. The main sign of cooling thus7 m9 H# ~/ y- i# N6 g: ~! |4 m
far has been a drop in resale activity, as prices have held up
1 _) t1 C0 P2 v7 h reasonably well. Some of the persisting market strength can be
* O% z* e: O! b ascribed to sensible affordability levels, which had eroded only
' D4 [2 A# j" |& T9 T4 z3 y9 r4 G. C, J modestly in recent years.
+ R8 E8 X' d, D7 c6 H) u; q( ^( ] H - Atlantic region: Markets have largely remained stable against the3 v" @; ~3 ]8 ]4 }" s
general housing downturn, with St. John's becoming the housing hot, w Q$ p* w# [4 V( F2 E
spot in Canada and Halifax and Saint John maintaining steady upward8 `' H2 I, u. \; l' r5 F* X8 G& N
price momentum. The region is benefiting from improving affordability
3 P) d; ~% H1 y3 U; o following two years of deterioration.: c% `6 o d' s# l7 F% w3 L
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