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British Columbia's housing affordability notably improved but still has far to go, says RBC
9 c4 t, O- ?5 Q7 t" T TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the/ b. n' a: j# B
middle of a significant correction that is partly reversing the extensive9 X/ Y. W& a7 a/ [3 F% o! n# N
gains of recent years and which is helping restore affordability conditions,
$ X4 W; g ^, ?" L. `according to the latest housing report released today by RBC Economics.% T, p- g' z2 n* Q
"The province's housing markets remain under heavy downward pressure,"9 _# b3 {- ?9 u
said Robert Hogue, senior economist, RBC. "While housing affordability is7 _. A5 E9 v/ x v
improving as the correction process runs its course. RBC's affordability) R# q' B- B* U
measures for the province are still at levels far off historical averages."5 U; H' _1 C( a9 a
RBC notes that the sharp rise in unemployment since last summer is
* ^9 ^ ?) H/ |0 q7 C) L+ ?worrying households in the province and weighing down demand for housing,& ?2 g8 P. D' A: V
which runs well short of available supply. Such weak market conditions have) N7 a6 N3 r* o9 U
sustained the declining trend in prices for both existing and new homes.- e' C! S7 F# M8 f/ O& T
The RBC Affordability measure for British Columbia, which captures the
# B8 L" V& P" m* rproportion of pre-tax household income needed to service the costs of owning a
7 y, i8 F8 U5 \home, improved across all housing segments in the last quarter of 2008.# n; o: m. [0 I- U
Affordability of detached bungalows in the province moved to 66 per cent, the
7 _: G" o- P! B3 r) R' U# B2 hstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and: O, K2 ?6 h- ~3 t- n/ Z
the standard two-story home to 73.7 per cent., r) k" j5 M r, H
According to the report, there are signs that the B.C. housing markets2 s+ M$ T! ~: j% d7 b0 T
may be stabilizing as sales of existing homes appear to have bottomed out in
+ B1 _& f, ? ]0 s) x1 U, H7 `3 J; w. [the closing months of 2008 and the first two in 2009 - although at* Q, A2 o3 V* V
historically depressed levels.9 Q/ ]; ]7 `, M! i3 _. A+ j
Despite sharply declining house prices and lower mortgage rates, the cost: Z0 {9 ~/ V* q( X$ {7 o
of homeownership in Vancouver is still the highest in the country. House# P% F# s! d$ s$ c! Q, J7 g: X$ G
prices continue to rapidly decline and pricing power remains firmly in the
; L; h# }' `4 yhands of buyers with the sales-to-new listings ratio at historical lows. "This- {( }4 }4 p! Q+ j
enormous imbalance suggests that prices will likely further correct in the8 d- @8 Y4 l& G1 J2 P
months ahead," added Hogue.
C6 f$ y0 ?$ A: i" I RBC's Affordability measure for a detached bungalow for Canada's largest, i& ^0 l; }6 @- n; {
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
: R* W) |; I4 G! e42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
5 M& W/ l; R: K+ x# A( q- ` The report also looked at mortgage carrying costs relative to incomes for
! N# S7 X0 W9 \( j! l/ H' A& T6 Wa broader sampling of cities across the country, including Victoria. For these" S/ L1 W; G7 h9 r
cities, RBC has used a narrower measure of housing affordability that only2 ?, L- b$ |( Y6 _/ y) o/ X
takes mortgage payments relative to income into account.
- p8 c' x$ Y- @" G; `1 t6 h The Housing Affordability measure, which RBC has compiled since 1985, is3 o8 o+ u% d! \2 k
based on the costs of owning a detached bungalow, a reasonable property
. h2 N8 V) G+ y6 V4 V V5 pbenchmark for the housing market. Alternative housing types are also presented% T( Z1 e4 _3 V6 N
including a standard two-storey home, a standard townhouse and a standard. z* E0 N3 c- E) M
condominium. The higher the reading, the more costly it is to afford a home.
7 O2 k J Q9 K% B4 ?( yFor example, an Affordability reading of 50 per cent means that homeownership5 F; v* k2 E! \- H- P" }
costs, including mortgage payments, utilities and property taxes, take up 50
( W' o- |0 K1 a/ s, G3 f+ u2 Rper cent of a typical household's monthly pre-tax income.. n% m/ l4 L0 v, {7 x* o! G) I) T4 \' Q
/ N: t3 H+ C) {/ a, {- Z/ `" J
<<: R5 ~: c/ M% G" d; o
Highlights from across Canada:
5 W, D0 [. q2 V( a! r% G% C8 ]
4 J& r( U; {6 N - Alberta: Since last fall, the declining Alberta economy has- ?7 c, r0 P( Y/ O7 i
intensified the downdraft on the province's housing markets, causing0 l' ]3 Y: p2 w$ B. x
home resales to drop to a 12-year low at the end of 2008 and rebound( r+ g$ c7 |5 h
only modestly since. Affordability has been on an improving track" p7 Q |% M. T. z! z
since about the middle of 2007.
1 A" C# h$ E" b) I3 \ - Saskatchewan: Market activity has cooled considerably from the! c) r# l$ {. {" u& t. F+ U; \. p
frenzied pace from 2006 to early 2008 and prices have begun to
- `, R7 W5 d6 P/ e& ]( D8 g decline. Nonetheless, economic and demographic fundamentals are still( i/ a. t; u8 i* `0 S( S! F6 Q
largely supportive of the housing market and overshadow extremely. ?$ |8 @2 ^3 }; V. z
poor affordability levels.3 p; |$ T+ @' n0 r' q; h
- Manitoba: Manitoba's housing markets have fared much better than the
' l6 I/ c. Q3 r# J9 o0 W: M7 Z* J/ u vast majority in Canada: resale activity has slowed moderately and' ~6 p" ` V+ R' Y `4 U
prices have either held their own or edged down just slightly.
$ M4 I2 c" j( Q/ z( Y& R! U Affordability has been kept out of the danger zone, helping to( f7 F# \$ J* G0 S. W' F
minimize any downside risks.
; N, [' w* _: v2 g - Ontario: With the recession pounding many communities, housing market8 O$ X A: j8 j1 `) ]) \
conditions have deteriorated considerably. However, the impact is
7 F0 r, F2 U, P1 w& W. e8 N, ?1 p' C8 n unlikely to develop into an all-out rout similar to that of the early
3 ?3 _: x" ?% u8 ]. y 1990s. Affordability, while still causing some stress, is quickly- m- W9 ^- W) L; ^, q$ Z, l8 _
being restored to levels closer to long-term averages.
2 w0 Y1 \1 M1 C2 g: [( y- s8 F- [% ] - Quebec: The province's housing markets have been among the last in6 I' a# v; a+ V; K% M( T
Canada to yield to the weakening trend. The main sign of cooling thus
3 F& m+ R. \6 ~ X3 L' S- g far has been a drop in resale activity, as prices have held up8 ^, L; l0 }& ?; a/ {! N7 d
reasonably well. Some of the persisting market strength can be; v/ e6 M# @5 [' v- @6 ~
ascribed to sensible affordability levels, which had eroded only
8 J7 ]$ d% b- x& V. G& x* I* U* a modestly in recent years.
- \0 p: E! l0 y! Q - Atlantic region: Markets have largely remained stable against the3 V1 k2 y/ Z( o) B2 t* G/ |" J
general housing downturn, with St. John's becoming the housing hot
O1 N8 R: |! @ J spot in Canada and Halifax and Saint John maintaining steady upward
5 E4 {, i! z& H) K6 S price momentum. The region is benefiting from improving affordability
6 h* k$ S! F0 \( P following two years of deterioration.
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