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British Columbia's housing affordability notably improved but still has far to go, says RBC 4 F6 y: r" w5 V: M/ L) E/ V8 c
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
, H! d, f; g0 n" Qmiddle of a significant correction that is partly reversing the extensive1 ]" z1 m4 p& n
gains of recent years and which is helping restore affordability conditions,
7 H. o7 a8 k; [ oaccording to the latest housing report released today by RBC Economics.- W- C7 F0 b; f2 W& n9 t- h
"The province's housing markets remain under heavy downward pressure,"
7 Y9 g4 O* ^! w# I, C5 |said Robert Hogue, senior economist, RBC. "While housing affordability is
$ g. j1 N/ ?: M( Timproving as the correction process runs its course. RBC's affordability
! B8 q( {# `4 Mmeasures for the province are still at levels far off historical averages."
+ d F, v# X1 J8 d/ q RBC notes that the sharp rise in unemployment since last summer is
5 Y1 {: a1 T1 gworrying households in the province and weighing down demand for housing,
7 I" f5 D0 @, t# U1 i& f# Rwhich runs well short of available supply. Such weak market conditions have2 E0 t! f, A3 h
sustained the declining trend in prices for both existing and new homes.
4 y! n. U( D" m6 y The RBC Affordability measure for British Columbia, which captures the
" `0 v# [3 Z0 ~; t% k; S$ lproportion of pre-tax household income needed to service the costs of owning a
1 y* k ?: |3 e2 A! f4 U. n; Fhome, improved across all housing segments in the last quarter of 2008.! A* F* B0 |4 l9 M$ I' C* a
Affordability of detached bungalows in the province moved to 66 per cent, the" b3 |4 D+ x- h$ p
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
* F. D5 {1 Q6 j+ Y8 Q F3 ?the standard two-story home to 73.7 per cent.
; m* r. @* m9 q' m; s/ X0 n, C According to the report, there are signs that the B.C. housing markets
& M) I4 I" g. v) C ~) i5 qmay be stabilizing as sales of existing homes appear to have bottomed out in, @, i# [. G1 D' w" A2 p
the closing months of 2008 and the first two in 2009 - although at
$ u5 G# q/ z: E2 D$ [) n4 m8 Shistorically depressed levels.
/ a* r& R2 D1 P6 W. B Despite sharply declining house prices and lower mortgage rates, the cost
; ?# z; v; J, ]- @# b, A$ ?4 b$ Tof homeownership in Vancouver is still the highest in the country. House% }. r/ B2 P8 Y' [' a
prices continue to rapidly decline and pricing power remains firmly in the
; e0 q2 c6 a/ P3 Bhands of buyers with the sales-to-new listings ratio at historical lows. "This
: @( p/ M: X- C5 f( F; Penormous imbalance suggests that prices will likely further correct in the5 K |, g& X: J' N& `2 r/ D& C
months ahead," added Hogue.
* ]: g! y' z: l1 }, ?+ D8 f& ` RBC's Affordability measure for a detached bungalow for Canada's largest
* W, O* f" g7 B# d; p7 x, V. Pcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
# G; |1 N" ~& a# _8 W42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.4 e2 W, S" q% _+ G) f3 g- P+ D
The report also looked at mortgage carrying costs relative to incomes for& d6 k1 x$ k& l. K J" g
a broader sampling of cities across the country, including Victoria. For these: S( S+ D7 ]0 R0 @
cities, RBC has used a narrower measure of housing affordability that only; k* {% H5 D) C' p5 v$ s
takes mortgage payments relative to income into account.
( M) x0 u2 v( E% d The Housing Affordability measure, which RBC has compiled since 1985, is
" n/ M; R3 D' `% ]based on the costs of owning a detached bungalow, a reasonable property
/ F5 \& R4 w1 D" y, |3 t4 v( v( jbenchmark for the housing market. Alternative housing types are also presented
+ Q3 [8 |7 I' h/ X6 I: m9 [including a standard two-storey home, a standard townhouse and a standard
8 v6 t$ w& b2 R/ m1 xcondominium. The higher the reading, the more costly it is to afford a home.! t& R' |# y/ V' U* v; v# } j; H
For example, an Affordability reading of 50 per cent means that homeownership. N( g9 `. |/ F4 J3 L8 F# W4 l! g5 q
costs, including mortgage payments, utilities and property taxes, take up 50
- ~: |* z2 G1 l! v0 aper cent of a typical household's monthly pre-tax income.
0 ?' z% o/ y# r0 t2 s% q1 J# f, T+ s3 T- {4 |5 D# ~
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/ {8 k9 k$ B8 ]+ Q: \ Highlights from across Canada:
8 d6 q! b* l% n J# U3 C" d% S- `. T- D& t
- Alberta: Since last fall, the declining Alberta economy has
v/ a* S# z4 r [8 C+ N& |; Y intensified the downdraft on the province's housing markets, causing
% a* r- b3 ?( t, O4 G home resales to drop to a 12-year low at the end of 2008 and rebound
+ I7 a+ S- [7 d: S3 `* ^ only modestly since. Affordability has been on an improving track
, m" X7 }1 F8 ?" O& ?" z Y since about the middle of 2007.- E: a0 f6 S; G S; p" I1 e
- Saskatchewan: Market activity has cooled considerably from the
. d5 v @% \+ O# \: P- d frenzied pace from 2006 to early 2008 and prices have begun to
- H8 D3 f2 c+ T7 Q; p decline. Nonetheless, economic and demographic fundamentals are still
3 G6 h$ K+ v% D, x; k! \ largely supportive of the housing market and overshadow extremely
% P& L# Q+ r" T, X$ g( `. k" F+ X poor affordability levels.
$ e5 F# Z# ?2 d - Manitoba: Manitoba's housing markets have fared much better than the
$ P# d2 g" |2 `. ]! g vast majority in Canada: resale activity has slowed moderately and4 v3 `$ Q: j* {* C
prices have either held their own or edged down just slightly.
8 V* z6 i7 _! ~6 T* Y$ Y. L Affordability has been kept out of the danger zone, helping to
8 w! }# ~/ V3 ?3 O) u2 ~" Z minimize any downside risks.
; v& s4 p R; p* P - Ontario: With the recession pounding many communities, housing market
9 j" z9 h- [1 }& R# ^ conditions have deteriorated considerably. However, the impact is$ Y$ C. P( q( p4 O T) L
unlikely to develop into an all-out rout similar to that of the early
* D2 x# p7 n3 j- S 1990s. Affordability, while still causing some stress, is quickly
! s' H5 B6 l/ H$ L: @ being restored to levels closer to long-term averages.
c2 W: A8 { ]" T - Quebec: The province's housing markets have been among the last in. a# o* }1 t8 ~2 n3 W2 M
Canada to yield to the weakening trend. The main sign of cooling thus0 R0 r- x7 q$ J; ^
far has been a drop in resale activity, as prices have held up
$ P2 j w/ g) {4 l reasonably well. Some of the persisting market strength can be# Y& ^! ?0 [( a3 K4 V6 w* r
ascribed to sensible affordability levels, which had eroded only5 D% y, t8 m% \6 m3 V" X1 u
modestly in recent years.
$ W' B/ d! x) s - Atlantic region: Markets have largely remained stable against the
# L7 w) `/ v+ Q, G general housing downturn, with St. John's becoming the housing hot) w/ C. Y# M4 g, I- Z8 [
spot in Canada and Halifax and Saint John maintaining steady upward
5 S9 R& A2 P: n/ K# L' M- J3 m1 O price momentum. The region is benefiting from improving affordability
* e3 `! X1 v/ Q5 b0 y$ w following two years of deterioration.
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