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British Columbia's housing affordability notably improved but still has far to go, says RBC
: O2 p& R) b3 o+ N4 a TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
5 m3 `2 y; T$ t$ e* C2 ~+ xmiddle of a significant correction that is partly reversing the extensive/ M( M0 W3 b8 w# L8 I5 ?
gains of recent years and which is helping restore affordability conditions,
7 X# r) y7 V: ~ V! }* waccording to the latest housing report released today by RBC Economics.
- E, G& a% Z+ V0 J "The province's housing markets remain under heavy downward pressure,"
0 B K/ ?) E4 u: r o/ n+ Fsaid Robert Hogue, senior economist, RBC. "While housing affordability is# ]9 t. X9 y! K
improving as the correction process runs its course. RBC's affordability' o. @7 }* g5 O, M& z3 |8 j( w
measures for the province are still at levels far off historical averages."
9 k+ |4 v! Z$ n3 q, a RBC notes that the sharp rise in unemployment since last summer is
: n: X8 Q# `3 g) ^" {worrying households in the province and weighing down demand for housing,7 |/ S3 A& N6 t
which runs well short of available supply. Such weak market conditions have
$ v) n9 R4 ^( \- Z# F: i- S5 H# Jsustained the declining trend in prices for both existing and new homes.
2 p* v! ~/ }6 J The RBC Affordability measure for British Columbia, which captures the
* Y7 [ E8 U V* O5 K& R( d/ zproportion of pre-tax household income needed to service the costs of owning a
1 d7 q1 q \. M( u3 z5 vhome, improved across all housing segments in the last quarter of 2008.. y0 v( o+ t+ V9 k- |9 p: e! I( j
Affordability of detached bungalows in the province moved to 66 per cent, the, P) Z. B" _* x( U, n
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and4 @. w9 T! Q$ p
the standard two-story home to 73.7 per cent.
" v: g" R* ?& K/ B0 H According to the report, there are signs that the B.C. housing markets
, W. }+ J" a; J ]) `may be stabilizing as sales of existing homes appear to have bottomed out in- H4 j4 ?. t# L1 i5 [
the closing months of 2008 and the first two in 2009 - although at& g% ?6 R- L+ ]( N8 ~! Y& v. L
historically depressed levels.3 _' K5 H. N- \: J" F0 Q
Despite sharply declining house prices and lower mortgage rates, the cost2 f3 K. a/ [" x6 C' y
of homeownership in Vancouver is still the highest in the country. House
2 |: R3 B: k* s0 h! g& b3 z3 ~8 dprices continue to rapidly decline and pricing power remains firmly in the
% {1 k3 I9 F) I8 v# g. L7 Q3 whands of buyers with the sales-to-new listings ratio at historical lows. "This0 I6 s. ^2 y, r$ V; z6 c z
enormous imbalance suggests that prices will likely further correct in the
5 u$ g# H" L/ D. e9 p) p: E& G3 @months ahead," added Hogue.* ~3 l1 {! N8 r4 l
RBC's Affordability measure for a detached bungalow for Canada's largest
/ b8 @- y4 `) `% jcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
( O6 Z1 y9 E0 q) `' B; F42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.9 h9 }3 |1 }" o; J
The report also looked at mortgage carrying costs relative to incomes for5 b) w+ W2 w! Q' ? i# N
a broader sampling of cities across the country, including Victoria. For these7 C1 D1 y! z8 y. Z
cities, RBC has used a narrower measure of housing affordability that only
* ?! d* i$ _* F1 h4 r9 }takes mortgage payments relative to income into account.7 r& K) M# O) s r$ T
The Housing Affordability measure, which RBC has compiled since 1985, is
, s- ?8 d8 H4 T& U/ Abased on the costs of owning a detached bungalow, a reasonable property
4 t. ]+ c9 W- N5 f' o/ C. ebenchmark for the housing market. Alternative housing types are also presented5 H! E) m# P$ v4 M( F; q
including a standard two-storey home, a standard townhouse and a standard
! L6 {0 t2 N q5 hcondominium. The higher the reading, the more costly it is to afford a home.3 e8 n; q" x7 Q5 c2 h
For example, an Affordability reading of 50 per cent means that homeownership$ V. Y) i1 o) W" m) n2 ~6 A
costs, including mortgage payments, utilities and property taxes, take up 50
3 X% R% [0 H: d% Q# U/ N3 i9 @per cent of a typical household's monthly pre-tax income.5 x1 I4 z* \5 ?" Z
! ?: o$ r8 t# B <<
: i$ _! G9 T* A) I5 Y Highlights from across Canada: i+ I5 y# X/ \5 S2 B) H; G5 ?. ?
; c0 o& d# y# L/ B
- Alberta: Since last fall, the declining Alberta economy has
2 Q& z$ f+ c2 R {% z0 m$ P& s intensified the downdraft on the province's housing markets, causing
, @/ a; Q8 ?. J* Q4 L+ i. @ home resales to drop to a 12-year low at the end of 2008 and rebound. H: w1 z/ S; h( J3 K5 g# v
only modestly since. Affordability has been on an improving track
' S) O% [% W) C+ H0 m since about the middle of 2007.
; I8 |- {9 Z# U6 k9 U - Saskatchewan: Market activity has cooled considerably from the
8 X2 L. n: r4 B, v9 |& T1 @ frenzied pace from 2006 to early 2008 and prices have begun to8 C ?8 `0 Z3 f. ^; y5 ~. k y
decline. Nonetheless, economic and demographic fundamentals are still. \+ n5 y; o/ E% ]& y
largely supportive of the housing market and overshadow extremely
; |6 Z1 K- X/ X+ U1 @' G poor affordability levels.
% T) ]. G0 D1 a% q9 Y" A - Manitoba: Manitoba's housing markets have fared much better than the
1 k) @! Q' C; I1 Y$ ] vast majority in Canada: resale activity has slowed moderately and
# I, q+ t1 g \ prices have either held their own or edged down just slightly.
% [" L% J! b4 ?6 E Affordability has been kept out of the danger zone, helping to
! M# }$ h" E9 n# ~4 { minimize any downside risks.
6 ^4 @( F" r6 l& ^3 J/ g1 M C - Ontario: With the recession pounding many communities, housing market# Z+ s/ Q5 ^7 P2 W/ X4 v$ d
conditions have deteriorated considerably. However, the impact is4 {: r" W* b' S! O
unlikely to develop into an all-out rout similar to that of the early" Z4 U; n& h, }* F' |
1990s. Affordability, while still causing some stress, is quickly8 @/ f/ H+ F4 G8 r4 p
being restored to levels closer to long-term averages.
! J9 `& ?. r, F- P. v; L8 P) H - Quebec: The province's housing markets have been among the last in
8 d% E% B- S: G: z4 S" b Canada to yield to the weakening trend. The main sign of cooling thus* Z# p7 W0 m! C# f. _$ N8 P) p
far has been a drop in resale activity, as prices have held up
9 B7 P+ ^% T. M+ K' F reasonably well. Some of the persisting market strength can be
% S, L( O0 J8 Z+ g ascribed to sensible affordability levels, which had eroded only9 l6 r e6 F+ i! L! g
modestly in recent years.
. c# ~( Q2 M5 ]6 u* Y- X0 G - Atlantic region: Markets have largely remained stable against the
) m' o' f, Y( b" K+ D% ` general housing downturn, with St. John's becoming the housing hot
6 o( D+ e5 g2 k/ \) ?( w spot in Canada and Halifax and Saint John maintaining steady upward( k) K2 E9 G" w. G9 N; [
price momentum. The region is benefiting from improving affordability% q e" I+ D, T. J5 Q3 l1 e
following two years of deterioration.
1 i, P& q6 f/ w; ~" ~$ G9 ` X >> |
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