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British Columbia's housing affordability notably improved but still has far to go, says RBC
$ T3 y0 @9 [: d2 t. Z; w TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
/ s) j% ^4 O3 Fmiddle of a significant correction that is partly reversing the extensive
: g% I$ F& o9 O" zgains of recent years and which is helping restore affordability conditions,' k$ H6 S* C f) n
according to the latest housing report released today by RBC Economics.
# Z0 k" t4 |3 E" p f "The province's housing markets remain under heavy downward pressure,"
- c" O! s q3 D+ f1 {+ N0 ksaid Robert Hogue, senior economist, RBC. "While housing affordability is: `; f2 F4 O" {
improving as the correction process runs its course. RBC's affordability2 Q# F3 A: u8 D7 Q
measures for the province are still at levels far off historical averages.": N/ [- y6 R5 G9 c1 `
RBC notes that the sharp rise in unemployment since last summer is
' O* h) O5 i, y1 N) T2 l8 b/ \2 yworrying households in the province and weighing down demand for housing,- M. D/ s* o% b5 T& a9 n* ~. A E
which runs well short of available supply. Such weak market conditions have) U' I0 \' m9 D
sustained the declining trend in prices for both existing and new homes.
/ ]% g0 Q) V/ O' K The RBC Affordability measure for British Columbia, which captures the4 y3 C% v% N9 `; E2 o
proportion of pre-tax household income needed to service the costs of owning a
& H, ^" H/ ^- g+ khome, improved across all housing segments in the last quarter of 2008.
+ O( k; ?4 h2 b6 C1 O$ I* `Affordability of detached bungalows in the province moved to 66 per cent, the' v N# q, E4 g' _
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and% [( [6 R$ C2 k$ N! e0 v4 x+ C: r
the standard two-story home to 73.7 per cent.2 x% X5 y/ A# c8 y7 p
According to the report, there are signs that the B.C. housing markets
% ?3 x: L/ Y* q# lmay be stabilizing as sales of existing homes appear to have bottomed out in
+ \2 p3 Z4 q% }& C- F- Dthe closing months of 2008 and the first two in 2009 - although at
( u( r5 N' @- I9 p @3 Xhistorically depressed levels.
3 k" m, B0 R- |9 s ^# A, J( S Despite sharply declining house prices and lower mortgage rates, the cost8 H8 M4 Z* J4 j* M5 U
of homeownership in Vancouver is still the highest in the country. House
- v6 _$ G( e N# Yprices continue to rapidly decline and pricing power remains firmly in the+ l+ h& m$ m* V; U- j
hands of buyers with the sales-to-new listings ratio at historical lows. "This
6 P3 M" i6 |2 ]/ F, z6 eenormous imbalance suggests that prices will likely further correct in the- c( V7 N8 s1 r, {% T. q6 p* G, f
months ahead," added Hogue.$ k ?) T0 D. q7 A" T6 @+ v
RBC's Affordability measure for a detached bungalow for Canada's largest
) s0 H9 v% d% y' Ycities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
5 L `& f/ h- y$ j8 c F8 E42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.2 k7 D# |7 {+ w* _
The report also looked at mortgage carrying costs relative to incomes for6 z+ f' K$ Z4 ?& X1 b u
a broader sampling of cities across the country, including Victoria. For these
3 a% |% P' X }" @2 Wcities, RBC has used a narrower measure of housing affordability that only
. Q5 N1 T5 H) W' t! Ptakes mortgage payments relative to income into account.- |1 s) G ?9 ]$ |& Z
The Housing Affordability measure, which RBC has compiled since 1985, is
: K4 F# x* |4 L$ a$ m! M* Nbased on the costs of owning a detached bungalow, a reasonable property! S- f6 f# t0 e! U) ^
benchmark for the housing market. Alternative housing types are also presented# F, R, U6 S6 E+ ~3 m+ G
including a standard two-storey home, a standard townhouse and a standard
: Z% W, @: @( y) A/ ucondominium. The higher the reading, the more costly it is to afford a home.
( B! d- n- o& ^For example, an Affordability reading of 50 per cent means that homeownership
7 Y" D* q* B0 Lcosts, including mortgage payments, utilities and property taxes, take up 50
" P& w" F# u2 Y/ U4 R% E) v0 Tper cent of a typical household's monthly pre-tax income.
) ?9 T" ~ y: U* \1 }* ]/ N# {: V# Z L
<<
; Q( X V# o0 `( ~8 H( q# D Highlights from across Canada:2 b% I3 w# T3 D' H& M% g0 t
" Y/ H8 e6 q2 b0 l8 ]9 n: E) D
- Alberta: Since last fall, the declining Alberta economy has# u9 Q) |* U4 R1 K0 r/ x* N3 _
intensified the downdraft on the province's housing markets, causing
! Y( b& o8 ~& q* ]: f m6 Z home resales to drop to a 12-year low at the end of 2008 and rebound
7 |5 L" A& X$ ?5 Q, M. I, y only modestly since. Affordability has been on an improving track1 Z/ ?5 t: f/ h F- l5 z
since about the middle of 2007.
; n# b, h$ W( E! L5 ^+ r& x8 l, q& x - Saskatchewan: Market activity has cooled considerably from the
/ t% n- ~& \. L. T frenzied pace from 2006 to early 2008 and prices have begun to
1 L9 i( V6 J9 a8 Q& n decline. Nonetheless, economic and demographic fundamentals are still8 c& H9 \- ?+ L" K# n1 G
largely supportive of the housing market and overshadow extremely
) U3 |7 x. ^7 o5 m poor affordability levels.9 `1 u9 Q6 t# `7 x3 b
- Manitoba: Manitoba's housing markets have fared much better than the
2 |* ` e3 o1 F& [) u5 j vast majority in Canada: resale activity has slowed moderately and: ]/ f, X5 t4 s+ ?
prices have either held their own or edged down just slightly.
+ u% H6 V# a! t; h Affordability has been kept out of the danger zone, helping to
1 z; S- p) O) c minimize any downside risks.
?3 _; _5 B2 d0 X+ {% V - Ontario: With the recession pounding many communities, housing market
. |9 g; \* w; L: X conditions have deteriorated considerably. However, the impact is
; L8 \! z3 M8 C0 H& K* b( V1 t unlikely to develop into an all-out rout similar to that of the early% U8 A8 f/ G" {9 s5 @, c; J, W" I
1990s. Affordability, while still causing some stress, is quickly
. p; d% O* a9 V- j" t2 q being restored to levels closer to long-term averages.8 D1 `& F% W( |" a
- Quebec: The province's housing markets have been among the last in
% F6 `1 [) b" y2 j* C; ` Canada to yield to the weakening trend. The main sign of cooling thus/ A! z" L4 f# T4 G5 k! p2 ?
far has been a drop in resale activity, as prices have held up0 O9 O; \" u i3 u6 H6 S+ K8 W% h
reasonably well. Some of the persisting market strength can be g+ z7 ~. @- ]$ T4 c
ascribed to sensible affordability levels, which had eroded only
+ m: ]1 r: {* E9 {9 A6 H modestly in recent years.8 E' @2 G8 Z4 {, A+ O
- Atlantic region: Markets have largely remained stable against the
5 W5 i8 X/ ~0 X. x) {# R general housing downturn, with St. John's becoming the housing hot+ {. U, C2 m" X# l1 a8 V7 F
spot in Canada and Halifax and Saint John maintaining steady upward
& |# @8 D3 P6 F& B: R price momentum. The region is benefiting from improving affordability
& m( T; [/ g- l: g following two years of deterioration.
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