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British Columbia's housing affordability notably improved but still has far to go, says RBC
5 y0 ]- D1 k8 }. y TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
) \9 Y' P. m4 I: r8 x& P H0 Imiddle of a significant correction that is partly reversing the extensive
$ a0 n$ L& ~ U6 c" Y$ J# Tgains of recent years and which is helping restore affordability conditions,
; Y, `% G7 j J- n! i2 k5 S# laccording to the latest housing report released today by RBC Economics.: \8 p/ a; T! {8 w" J
"The province's housing markets remain under heavy downward pressure,"! R0 Y- _! H$ i8 v, T! h& F$ i
said Robert Hogue, senior economist, RBC. "While housing affordability is- ] q* s# a5 n9 `
improving as the correction process runs its course. RBC's affordability# q! D8 k1 b6 z
measures for the province are still at levels far off historical averages."
" v7 v1 W! |6 F1 U, ? RBC notes that the sharp rise in unemployment since last summer is
% R& ?4 C) M: D( gworrying households in the province and weighing down demand for housing,- \4 O6 i9 j' n4 t" x6 [# Q g
which runs well short of available supply. Such weak market conditions have4 @6 G( a1 i, q! S3 |7 m
sustained the declining trend in prices for both existing and new homes.2 L' i& m/ K: ~& g3 u; L
The RBC Affordability measure for British Columbia, which captures the- C! X4 O( }8 z- z- q
proportion of pre-tax household income needed to service the costs of owning a* y1 t( f" _, }! D0 s2 a# t+ i
home, improved across all housing segments in the last quarter of 2008.
& T$ \) K! G I8 VAffordability of detached bungalows in the province moved to 66 per cent, the; p% m7 ]$ ^ T% E5 L/ I; q
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and( E+ a$ s$ R+ G0 E0 f
the standard two-story home to 73.7 per cent.
5 e0 _% j9 [3 {+ k* B According to the report, there are signs that the B.C. housing markets
' `& d9 p/ m9 }' Umay be stabilizing as sales of existing homes appear to have bottomed out in9 k- u5 ~2 s3 v) g2 O v- I
the closing months of 2008 and the first two in 2009 - although at# B, p, S# m# H$ ~4 ^# [
historically depressed levels.
! X5 @" `* {- Z2 l0 T) b Despite sharply declining house prices and lower mortgage rates, the cost
2 V0 C% o" N" a- h) h: eof homeownership in Vancouver is still the highest in the country. House
& W; Z7 m; h* L) E& P5 r$ gprices continue to rapidly decline and pricing power remains firmly in the
2 Z: X5 H: P& S3 _hands of buyers with the sales-to-new listings ratio at historical lows. "This
7 f) y- {: T0 {9 b" S& U1 \5 _! denormous imbalance suggests that prices will likely further correct in the
0 x* \% `- `3 k3 p, `8 g: q- e7 z" Imonths ahead," added Hogue.
- V- M: v( z v/ h4 B! D, Q7 H RBC's Affordability measure for a detached bungalow for Canada's largest/ c+ Z, q% P1 u9 f5 ]4 R
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
% M( E3 `6 u. ^5 z( y42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
4 B: P [8 a9 C* x: C( K+ } The report also looked at mortgage carrying costs relative to incomes for
, g; a" m0 Z! I2 V. C" V! I. Ja broader sampling of cities across the country, including Victoria. For these/ A) M) {$ H) `* c+ Q
cities, RBC has used a narrower measure of housing affordability that only" U& ^0 {% @8 p W( k0 }) n5 `; w6 r
takes mortgage payments relative to income into account.
! e7 ]8 t6 ]6 v" { p8 G The Housing Affordability measure, which RBC has compiled since 1985, is( Q5 A" H# [( x: a
based on the costs of owning a detached bungalow, a reasonable property, F5 \: g& a& O7 X! i E/ P1 r4 c
benchmark for the housing market. Alternative housing types are also presented1 l+ s% y, {9 a X: T0 P3 ]
including a standard two-storey home, a standard townhouse and a standard$ s( e8 ~+ M) s- R/ r
condominium. The higher the reading, the more costly it is to afford a home.5 Z) ?( Y u8 f" q' M9 G' m! D
For example, an Affordability reading of 50 per cent means that homeownership
$ R: }( X: r8 A, I4 Q' a+ ncosts, including mortgage payments, utilities and property taxes, take up 507 V% N+ u' T' v" F# ~
per cent of a typical household's monthly pre-tax income.
" t! l" R0 i0 I, {/ R( ]0 F: B3 b
<<& l+ W- o! o. W; O
Highlights from across Canada:
& K9 @) a5 |4 `& @. m, e7 G0 q
4 ^ O8 Q1 [. k, ` - Alberta: Since last fall, the declining Alberta economy has' _4 [' x: C4 L9 l9 o# s
intensified the downdraft on the province's housing markets, causing+ B! ~; J) W4 k( u2 q! ^
home resales to drop to a 12-year low at the end of 2008 and rebound
- I2 t* J& x. f I7 W only modestly since. Affordability has been on an improving track
& `0 Y5 M: G [9 D since about the middle of 2007.
' }3 p% J1 S b% E1 B# r+ w- m - Saskatchewan: Market activity has cooled considerably from the
9 _1 C% m3 y* b& u) |# [) c- ] frenzied pace from 2006 to early 2008 and prices have begun to. B& W$ _. t# [. |$ M, `7 x
decline. Nonetheless, economic and demographic fundamentals are still5 X# ?, r: j& u
largely supportive of the housing market and overshadow extremely
- @0 `) V( T8 V# z( \3 { poor affordability levels.
# z r% n2 d$ H( I% @ - Manitoba: Manitoba's housing markets have fared much better than the
' O/ d \5 U9 k/ G3 D/ {! o vast majority in Canada: resale activity has slowed moderately and4 a- x+ E1 o, L6 g
prices have either held their own or edged down just slightly.
. ~1 ~/ ]5 J8 }& Q) r+ H, H2 r' Q( K Affordability has been kept out of the danger zone, helping to
3 v$ [5 u5 z. c6 M- T3 y minimize any downside risks.
`0 Y1 b+ o+ m/ G8 Y% B- J0 [ - Ontario: With the recession pounding many communities, housing market, h* z @1 Y4 [6 g ~6 U5 H/ @- e
conditions have deteriorated considerably. However, the impact is
( N( B; a4 o# R& h* _ unlikely to develop into an all-out rout similar to that of the early
! k+ A4 q7 J& s' G" o5 {5 X 1990s. Affordability, while still causing some stress, is quickly
: c. R4 z5 S7 b3 V; V1 `0 p being restored to levels closer to long-term averages.
/ o7 S v) T8 q& H" R& ^ - Quebec: The province's housing markets have been among the last in
9 O9 k9 ]* I9 V" t! Q" j# q Canada to yield to the weakening trend. The main sign of cooling thus
3 o4 K( H G9 q5 ~# E% l h+ B far has been a drop in resale activity, as prices have held up
) k/ ]+ n8 \# r reasonably well. Some of the persisting market strength can be
% b5 G% J7 D- E( N2 N& I ascribed to sensible affordability levels, which had eroded only
. S- V+ b, S8 u7 u9 | modestly in recent years.
+ l; d+ U8 _0 @$ l: j: k' _ - Atlantic region: Markets have largely remained stable against the. I8 p& |3 e, V* ? t
general housing downturn, with St. John's becoming the housing hot
2 c* Q8 x, `/ L5 I2 X/ ? spot in Canada and Halifax and Saint John maintaining steady upward
) V3 k' f1 c5 `7 J' K price momentum. The region is benefiting from improving affordability0 S: O* R$ ?( ?2 Q( o/ A
following two years of deterioration.' C7 W+ C( x4 C4 W+ g
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