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British Columbia's housing affordability notably improved but still has far to go, says RBC
- v K; m% {3 n TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
' W. J* _& \$ | n' c; j/ ]middle of a significant correction that is partly reversing the extensive9 t/ R9 J2 k2 O5 d. v
gains of recent years and which is helping restore affordability conditions, Q( J& v0 k! ]# L/ J9 K# j
according to the latest housing report released today by RBC Economics.9 t R& h/ X n! r0 d n
"The province's housing markets remain under heavy downward pressure,"
5 f% `9 X# ^, T1 K3 n0 Osaid Robert Hogue, senior economist, RBC. "While housing affordability is
% h( w! D9 Z% l" ]- E+ oimproving as the correction process runs its course. RBC's affordability! D& Q( A2 E N6 K
measures for the province are still at levels far off historical averages.": ?; q1 f6 X3 |# p5 K
RBC notes that the sharp rise in unemployment since last summer is
7 W. a; j7 \6 Y: q5 Zworrying households in the province and weighing down demand for housing,
% Z( S6 e9 f% c0 Zwhich runs well short of available supply. Such weak market conditions have- J: W) b* w# M# L5 u V
sustained the declining trend in prices for both existing and new homes.- a- _9 l" O3 j; L
The RBC Affordability measure for British Columbia, which captures the# `+ @& u, l D4 H9 }
proportion of pre-tax household income needed to service the costs of owning a
( _6 N8 a. s% b5 t' hhome, improved across all housing segments in the last quarter of 2008.$ f7 G6 x/ ?( f8 u! U1 A
Affordability of detached bungalows in the province moved to 66 per cent, the
3 g* v5 a8 D% ~- M$ ostandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and5 J6 S+ O; s/ O m3 \
the standard two-story home to 73.7 per cent.
# G7 d' V* M. ]: f4 N According to the report, there are signs that the B.C. housing markets
* N& _9 |" t$ K) Z' jmay be stabilizing as sales of existing homes appear to have bottomed out in
1 y9 ?3 c$ \; s9 C0 Uthe closing months of 2008 and the first two in 2009 - although at
: d% i6 d" k% G+ E: Nhistorically depressed levels.
3 Z( T" I# C7 ~7 [0 q Despite sharply declining house prices and lower mortgage rates, the cost% d" C5 q5 a$ ^& H
of homeownership in Vancouver is still the highest in the country. House) s& Q6 a9 z9 L$ i) k( M
prices continue to rapidly decline and pricing power remains firmly in the
' o, F, G7 o( [4 Vhands of buyers with the sales-to-new listings ratio at historical lows. "This
6 `7 M) }( M6 R1 u4 l' J7 {enormous imbalance suggests that prices will likely further correct in the/ G+ v4 S; B: Q- g) }
months ahead," added Hogue.
: F5 x; w0 h- t2 E RBC's Affordability measure for a detached bungalow for Canada's largest
6 K0 m# a u0 W- ?* a$ B' Hcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary# @9 [8 N% \! @
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.3 C' z& T6 Y9 W- j- `+ T+ O
The report also looked at mortgage carrying costs relative to incomes for
8 A$ @, `( i3 E/ da broader sampling of cities across the country, including Victoria. For these5 |0 _' \; A9 H$ O! {7 ?
cities, RBC has used a narrower measure of housing affordability that only# k+ I" F4 ?0 H5 D( r: e
takes mortgage payments relative to income into account.
6 v u- T4 U: P! l' Q/ Z; T The Housing Affordability measure, which RBC has compiled since 1985, is
! _- }7 A- X: ~% pbased on the costs of owning a detached bungalow, a reasonable property# M/ a2 [* j: `
benchmark for the housing market. Alternative housing types are also presented& {( v8 r8 k+ l( @7 y' Q2 u" V
including a standard two-storey home, a standard townhouse and a standard1 _" B, Z( \0 y5 n# ]
condominium. The higher the reading, the more costly it is to afford a home.* c5 S( y: G& P% j' R: ^8 o- m) L
For example, an Affordability reading of 50 per cent means that homeownership
& |: H+ S# O4 r& z) Q" c# _5 ]costs, including mortgage payments, utilities and property taxes, take up 50
7 n$ X! ^) W( `* Gper cent of a typical household's monthly pre-tax income.
- H; k$ m* ]0 s$ Y
- Y5 H c. V0 U3 O6 X! r <<
& t) J3 h' l* C8 C0 u: e" z Highlights from across Canada:
2 H: G5 Q1 N0 O! ~* d1 X, L: G0 R; W3 J3 e: n
- Alberta: Since last fall, the declining Alberta economy has% N% t1 t+ ]0 K" k7 o2 q/ F
intensified the downdraft on the province's housing markets, causing! _( g. m* D% w7 q5 \+ O
home resales to drop to a 12-year low at the end of 2008 and rebound! F: Z9 n1 s4 | q, {3 P
only modestly since. Affordability has been on an improving track0 c% r% J! ^3 e$ _1 ]: q
since about the middle of 2007.
; P+ J2 \0 q* U - Saskatchewan: Market activity has cooled considerably from the' F- g& c8 j$ J
frenzied pace from 2006 to early 2008 and prices have begun to
" R+ |0 r0 R2 h2 e2 E decline. Nonetheless, economic and demographic fundamentals are still
' X% h2 X5 q' ]: {# ]' P largely supportive of the housing market and overshadow extremely4 k* z4 l) V y' V0 g
poor affordability levels.! A3 @* \ f& {( n
- Manitoba: Manitoba's housing markets have fared much better than the
# I$ p, |1 @- T) r. e' T& ?* T vast majority in Canada: resale activity has slowed moderately and
3 W9 {1 E& a) L# R prices have either held their own or edged down just slightly.
B) i: F; R2 Q, n5 X6 p9 f Affordability has been kept out of the danger zone, helping to0 H0 b) G2 {* l. X, S
minimize any downside risks.
- X1 A, y% b5 l( |2 W - Ontario: With the recession pounding many communities, housing market
: D$ S, y' G: X) B conditions have deteriorated considerably. However, the impact is
7 I5 i4 F: N4 @ unlikely to develop into an all-out rout similar to that of the early- ?& Q2 |+ U$ N \6 E% C5 a
1990s. Affordability, while still causing some stress, is quickly f" {9 a' j% o6 i% s: P
being restored to levels closer to long-term averages.4 [5 Y7 i* [7 p6 Q
- Quebec: The province's housing markets have been among the last in3 e: M6 Z+ A/ {* ^7 X- `1 i
Canada to yield to the weakening trend. The main sign of cooling thus p! R/ ~+ Z% E* M, j: K
far has been a drop in resale activity, as prices have held up
+ l! \3 i: j' u reasonably well. Some of the persisting market strength can be- ?& s0 t1 ~$ b
ascribed to sensible affordability levels, which had eroded only
5 Q6 P, D1 g; T+ W; A. z b; T* j1 | modestly in recent years.
& U3 C! b4 T; M - Atlantic region: Markets have largely remained stable against the& W4 o$ P/ b( d: |
general housing downturn, with St. John's becoming the housing hot# E( r9 Q; W" l) ^
spot in Canada and Halifax and Saint John maintaining steady upward
% y* C; U: M8 }- ]$ `; u. h! x price momentum. The region is benefiting from improving affordability
0 P! k. [4 R! O$ a( d& x0 J$ @ following two years of deterioration.3 a7 @& y3 e: l& P
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