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British Columbia's housing affordability notably improved but still has far to go, says RBC
: N! E' A! R$ P7 j TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the! G3 \+ r' h/ a1 S+ o' P
middle of a significant correction that is partly reversing the extensive
9 q2 ~( s& n) q# pgains of recent years and which is helping restore affordability conditions,
, s( l2 ~0 ^* C9 u3 saccording to the latest housing report released today by RBC Economics.3 r' m) I1 C( C% {7 Q6 }$ X5 D
"The province's housing markets remain under heavy downward pressure,"
5 X2 U- S, y( b1 u( H4 B$ Wsaid Robert Hogue, senior economist, RBC. "While housing affordability is# g+ D: G9 G) ]- A0 M
improving as the correction process runs its course. RBC's affordability
1 O6 K- P m& g; m9 w( N: m( fmeasures for the province are still at levels far off historical averages.", g, W% S+ ^7 e% U! v! B# U0 l
RBC notes that the sharp rise in unemployment since last summer is
9 I3 w- j" Q7 Z, R( W6 E* ^' Iworrying households in the province and weighing down demand for housing,
3 A8 {4 R5 W- n J! U7 o. jwhich runs well short of available supply. Such weak market conditions have& U' g6 X$ X8 D0 @# @: q) K7 @+ Y
sustained the declining trend in prices for both existing and new homes.
) X1 M C( s" d; a/ G2 w7 k( A; H The RBC Affordability measure for British Columbia, which captures the
1 N7 F" Z! N3 g0 H4 pproportion of pre-tax household income needed to service the costs of owning a
4 w# Z4 j& w# y" ^. Mhome, improved across all housing segments in the last quarter of 2008.
2 H4 C; j9 r0 v3 g( r, cAffordability of detached bungalows in the province moved to 66 per cent, the" s3 d; s, B4 ~* \
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
( Q0 ^% l- p/ |3 Ithe standard two-story home to 73.7 per cent.
( J+ N8 |4 x s( v/ g% @# W According to the report, there are signs that the B.C. housing markets' h# w. i( g; i
may be stabilizing as sales of existing homes appear to have bottomed out in. d' I d! k1 q
the closing months of 2008 and the first two in 2009 - although at6 M) w' ]" p7 d* V% v
historically depressed levels.
+ X" L: { n+ U, P' W R Despite sharply declining house prices and lower mortgage rates, the cost, q: P9 H, ]8 |, s% U
of homeownership in Vancouver is still the highest in the country. House3 y" H$ u$ T/ e! B* [$ C0 R
prices continue to rapidly decline and pricing power remains firmly in the4 B2 D! C, B6 P9 g2 v
hands of buyers with the sales-to-new listings ratio at historical lows. "This
! a) e$ t7 c+ ienormous imbalance suggests that prices will likely further correct in the
# ?; j' n* i6 ^( L. _months ahead," added Hogue.
$ g9 Z5 X7 l% ?# Q# V RBC's Affordability measure for a detached bungalow for Canada's largest
7 s. R2 ]$ I: i) a$ m, X$ c+ Tcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary6 X$ Z9 y; i; M F. [ v+ ?
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
- P0 M# @1 F2 }5 k The report also looked at mortgage carrying costs relative to incomes for
3 [2 M* t Q# M+ ^a broader sampling of cities across the country, including Victoria. For these
' w8 @: |% x3 l& A0 q! Ecities, RBC has used a narrower measure of housing affordability that only
- b4 o M6 e5 d$ atakes mortgage payments relative to income into account.
' y9 }8 l: z# `! g The Housing Affordability measure, which RBC has compiled since 1985, is. g# s) l) O$ O7 ?, q
based on the costs of owning a detached bungalow, a reasonable property' Q9 T+ z. y5 y: \5 ]
benchmark for the housing market. Alternative housing types are also presented+ Y; n8 U% M2 j3 {% E
including a standard two-storey home, a standard townhouse and a standard f1 ]/ f& d. r, S
condominium. The higher the reading, the more costly it is to afford a home.5 Y% L# l: W/ ~! v; d& k7 r
For example, an Affordability reading of 50 per cent means that homeownership
8 n2 _+ l+ G$ P0 J2 Ycosts, including mortgage payments, utilities and property taxes, take up 502 f# m0 f2 y1 }/ X; ]: e! I6 a+ r
per cent of a typical household's monthly pre-tax income.
8 @9 S' \5 F8 K s* g3 C4 `! o" o$ s
<<' N. X1 x( e+ ^$ l' O
Highlights from across Canada:% E1 Y2 E1 @5 B) h; N
: _8 S$ X# j0 n+ i
- Alberta: Since last fall, the declining Alberta economy has
* I# v; t2 Y' X, }, t# k intensified the downdraft on the province's housing markets, causing0 ~9 }, F0 v( {. G
home resales to drop to a 12-year low at the end of 2008 and rebound
% u" ]7 {6 Q+ O only modestly since. Affordability has been on an improving track# t6 U+ N# j5 B0 E b' z o9 I
since about the middle of 2007.
3 `9 c# Z. ~ b* B, n! e - Saskatchewan: Market activity has cooled considerably from the
% A* H3 u$ q) o: I7 c2 U frenzied pace from 2006 to early 2008 and prices have begun to7 ]7 O5 R9 y# A( N C! s
decline. Nonetheless, economic and demographic fundamentals are still, ]. \3 [* D% y& o' Z, U
largely supportive of the housing market and overshadow extremely: P; N- {' }1 l: |
poor affordability levels.
' U" W* E9 f5 W5 S4 p - Manitoba: Manitoba's housing markets have fared much better than the
4 W) d3 `7 K1 t; J6 v vast majority in Canada: resale activity has slowed moderately and
# F9 S1 y/ Y- h3 m2 t' r V5 M prices have either held their own or edged down just slightly.! l1 p+ @3 p! w" i' Q: x8 ~) _6 N
Affordability has been kept out of the danger zone, helping to
0 W; X2 W5 J H minimize any downside risks.
6 w$ C9 S: A5 a/ B4 e - Ontario: With the recession pounding many communities, housing market
! J% g4 g$ U& I7 P conditions have deteriorated considerably. However, the impact is
9 }' D2 W( q9 D$ g o3 T) a# B unlikely to develop into an all-out rout similar to that of the early/ E5 [1 p1 O3 u( B+ k
1990s. Affordability, while still causing some stress, is quickly- _9 ~, H5 s! l4 f! P! E* N) F) ~
being restored to levels closer to long-term averages.0 I3 l& \2 [% J5 F) r B, i
- Quebec: The province's housing markets have been among the last in. y. v0 \7 C1 E. x" _% o
Canada to yield to the weakening trend. The main sign of cooling thus
/ x5 K, Y/ ]3 \ far has been a drop in resale activity, as prices have held up/ X' `4 K8 }2 c; h! y" Z% @( o$ x
reasonably well. Some of the persisting market strength can be- ]1 W& f3 F S& {
ascribed to sensible affordability levels, which had eroded only
6 K9 m W8 _" R4 r modestly in recent years.% v [9 n7 X& b. ~0 P
- Atlantic region: Markets have largely remained stable against the7 U, y, Z: H- }6 N |
general housing downturn, with St. John's becoming the housing hot3 D3 {# S) m' t- \$ o3 ^
spot in Canada and Halifax and Saint John maintaining steady upward; }* b8 p* N" F
price momentum. The region is benefiting from improving affordability
0 [" f! i1 s1 h w. ^0 q following two years of deterioration.2 u0 b0 Q' Y5 |$ ]3 a
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