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British Columbia's housing affordability notably improved but still has far to go, says RBC
7 Q9 b* m k9 o/ @ TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
7 E. V% M* x( `) u' t# ymiddle of a significant correction that is partly reversing the extensive- {$ N N: z3 e+ G6 \
gains of recent years and which is helping restore affordability conditions,1 `5 W' D7 l+ v1 l1 U% E
according to the latest housing report released today by RBC Economics.
" [8 W8 N ^, l" g' |: C "The province's housing markets remain under heavy downward pressure,"7 y: p4 D; k( h' H
said Robert Hogue, senior economist, RBC. "While housing affordability is
5 f3 b# C6 m8 O6 [8 D- Simproving as the correction process runs its course. RBC's affordability
- v* g/ {0 g4 r# Ymeasures for the province are still at levels far off historical averages."
7 {" n! o% Q& g8 f RBC notes that the sharp rise in unemployment since last summer is
3 f0 s) v: E9 f+ d; L5 e: T8 yworrying households in the province and weighing down demand for housing,
9 t' [$ ^# E- I1 Jwhich runs well short of available supply. Such weak market conditions have: g: \* o& @7 K5 M7 o5 \ L- n
sustained the declining trend in prices for both existing and new homes.
5 f2 x( |$ Q: |1 J3 m The RBC Affordability measure for British Columbia, which captures the
0 J3 y% h8 `! s) i# [; }proportion of pre-tax household income needed to service the costs of owning a
) M6 F# L, L5 [( K* M% m( Ehome, improved across all housing segments in the last quarter of 2008." ]$ B; Q+ b' S- ]* D7 M
Affordability of detached bungalows in the province moved to 66 per cent, the
: O( B J0 [0 F, c3 ustandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
+ q% y6 F" o* X" Othe standard two-story home to 73.7 per cent.6 g0 j. d! K. m
According to the report, there are signs that the B.C. housing markets' P% n. P2 p: ?* Z4 C: a& l
may be stabilizing as sales of existing homes appear to have bottomed out in
3 R! X Q; O4 f* a5 Zthe closing months of 2008 and the first two in 2009 - although at
! y2 C0 I# Y, \+ s& j( Xhistorically depressed levels.2 p1 R9 ?6 U7 }
Despite sharply declining house prices and lower mortgage rates, the cost
9 W7 l+ d* i) g7 N2 H! i0 [0 Mof homeownership in Vancouver is still the highest in the country. House
, F5 C) o) x5 s: N/ Xprices continue to rapidly decline and pricing power remains firmly in the
# N- Y3 O, {( }% ~1 N2 H$ P% shands of buyers with the sales-to-new listings ratio at historical lows. "This
" ?8 P- s) [$ u& I" S- \, venormous imbalance suggests that prices will likely further correct in the
) |) h$ w6 U* T' o: D( S. ?- V. {: P) Jmonths ahead," added Hogue.
4 O. Z5 b8 Q$ } k$ ]% {8 L RBC's Affordability measure for a detached bungalow for Canada's largest
9 c5 U- k5 Z) d K; A Rcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary# {6 P& b! O8 i J- b8 R
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent. K0 y% R9 a* [$ [$ p, K1 H
The report also looked at mortgage carrying costs relative to incomes for c! |1 J) h' @1 O" j2 t- d
a broader sampling of cities across the country, including Victoria. For these
; K6 Z! |( I) p" x, C# J, B7 ycities, RBC has used a narrower measure of housing affordability that only2 _; y. x% s% H# S2 q2 f
takes mortgage payments relative to income into account.
5 f( x. J; R9 T5 W The Housing Affordability measure, which RBC has compiled since 1985, is
) P. t+ y. ?1 Xbased on the costs of owning a detached bungalow, a reasonable property& M- d$ c4 }" X. V: a6 f& G5 p
benchmark for the housing market. Alternative housing types are also presented1 W6 d/ k z$ p0 D
including a standard two-storey home, a standard townhouse and a standard
+ {/ R4 b7 p, Zcondominium. The higher the reading, the more costly it is to afford a home.
! ?. I4 {6 n! h1 nFor example, an Affordability reading of 50 per cent means that homeownership
* R& Q9 X3 q. c% E& {- Zcosts, including mortgage payments, utilities and property taxes, take up 50+ e* I$ y5 n7 N3 R! ?$ B
per cent of a typical household's monthly pre-tax income.
( t1 h1 s3 S" X5 v: E; L% a
" {* V: g# |0 d3 ]' L <<: p7 a' I0 v! o6 K' f
Highlights from across Canada:+ C! M( d- p! t4 |5 E5 J/ A
; j l2 Z: @/ Y+ d& I. q - Alberta: Since last fall, the declining Alberta economy has
& d4 k, @4 F1 w+ i2 L; O intensified the downdraft on the province's housing markets, causing
; N0 U6 j$ s5 j r& E* f1 o9 q home resales to drop to a 12-year low at the end of 2008 and rebound
+ U3 ?1 N. u$ ~ only modestly since. Affordability has been on an improving track
: }1 l2 d6 B7 z+ S4 q Z) w1 w/ N since about the middle of 2007.! x) H. x% }0 n$ i: W' v
- Saskatchewan: Market activity has cooled considerably from the8 J8 q5 w& o: _; n. g9 ` {
frenzied pace from 2006 to early 2008 and prices have begun to* R+ c) V `' Q/ p; x9 D
decline. Nonetheless, economic and demographic fundamentals are still/ H9 k, W- N1 r8 y9 O
largely supportive of the housing market and overshadow extremely2 c- b1 @; t/ D" E( w& k
poor affordability levels. K, j# e, |4 @% y# V. ~; X
- Manitoba: Manitoba's housing markets have fared much better than the5 ?8 w' _! S" }( c
vast majority in Canada: resale activity has slowed moderately and
* {" W* |) W Z d# H6 i3 |( C prices have either held their own or edged down just slightly.
' }/ i* z+ {: E9 F$ M; b, l8 d* ` Affordability has been kept out of the danger zone, helping to2 H' u( H5 v# B# B2 u
minimize any downside risks.
9 @/ d: G# O8 u! j - Ontario: With the recession pounding many communities, housing market
$ T1 A( q, L4 Z5 e7 P; y conditions have deteriorated considerably. However, the impact is8 a w6 u% |4 L: L
unlikely to develop into an all-out rout similar to that of the early# Z6 e3 q2 ]& n4 H) ~0 k3 J" K
1990s. Affordability, while still causing some stress, is quickly. c3 j J7 b+ R$ m
being restored to levels closer to long-term averages.1 D9 O$ ]3 `* i* F5 J( k( j* M* e7 ^
- Quebec: The province's housing markets have been among the last in
2 ?8 g( u+ l/ U$ e Canada to yield to the weakening trend. The main sign of cooling thus
9 t) ~/ C9 Q" U+ S. O7 O6 q far has been a drop in resale activity, as prices have held up K2 D" d V; J
reasonably well. Some of the persisting market strength can be
8 K7 ~( g7 }. i# O4 Y5 g ascribed to sensible affordability levels, which had eroded only
) t& r2 w& m& d* _ modestly in recent years." ^5 o. e8 @- H# F X
- Atlantic region: Markets have largely remained stable against the, C) w S) b9 ~; S
general housing downturn, with St. John's becoming the housing hot& o5 ]* f5 K% y5 H7 B' {
spot in Canada and Halifax and Saint John maintaining steady upward
4 Y% h9 U9 L: y price momentum. The region is benefiting from improving affordability* e1 c) {: A: g- _, r
following two years of deterioration.$ o% m k# p7 q
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