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British Columbia's housing affordability notably improved but still has far to go, says RBC
+ E' W+ u2 q. A) {1 u TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
6 m3 N2 R" c0 X& pmiddle of a significant correction that is partly reversing the extensive
- ]. [, A5 u; u3 Ugains of recent years and which is helping restore affordability conditions,
: G' h5 H5 l$ O7 U( Qaccording to the latest housing report released today by RBC Economics.5 U' r" d, O( Q8 k: }( j; [
"The province's housing markets remain under heavy downward pressure,"( T5 U' |7 v7 Y
said Robert Hogue, senior economist, RBC. "While housing affordability is
) c( M- M- x; _/ B, k, Yimproving as the correction process runs its course. RBC's affordability
" d1 ]2 ?! }* Fmeasures for the province are still at levels far off historical averages."1 J: v! {; R' O/ ^- N C
RBC notes that the sharp rise in unemployment since last summer is0 I# ~8 ]# Y$ @" d& X: O* ]
worrying households in the province and weighing down demand for housing,
0 G" C. v5 F! m% e5 b: ewhich runs well short of available supply. Such weak market conditions have5 w2 d7 j$ Y: `# }& I* [8 _* ]
sustained the declining trend in prices for both existing and new homes.# |& U3 h6 X/ P/ E6 U" E
The RBC Affordability measure for British Columbia, which captures the
: H( F0 S l, |8 q& kproportion of pre-tax household income needed to service the costs of owning a
9 f0 F7 G9 ?' Ehome, improved across all housing segments in the last quarter of 2008.
' p: H2 w6 q+ I) l7 S% {6 m7 |& TAffordability of detached bungalows in the province moved to 66 per cent, the
# S3 f7 ?! _; j5 f8 }, j# t5 ~standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and1 t+ }8 h: |& v/ @( i
the standard two-story home to 73.7 per cent.
7 g- Q( ^& k; D; e% k According to the report, there are signs that the B.C. housing markets
( p9 z$ Q# f7 u" z- Nmay be stabilizing as sales of existing homes appear to have bottomed out in! A* V1 p/ j2 e5 m0 o6 ]$ W
the closing months of 2008 and the first two in 2009 - although at" E9 J) ]. v( E/ V0 s
historically depressed levels.$ c6 |) O" y* D, x
Despite sharply declining house prices and lower mortgage rates, the cost
! {" t' p; G) G! dof homeownership in Vancouver is still the highest in the country. House1 Y$ Q! W+ K5 l. m8 L
prices continue to rapidly decline and pricing power remains firmly in the
- |9 D4 c' Z( i7 ^% O' s( fhands of buyers with the sales-to-new listings ratio at historical lows. "This
) Q9 z3 ~6 T+ Ienormous imbalance suggests that prices will likely further correct in the; ^2 U% p! V; L- E+ f
months ahead," added Hogue.
' F" F: A. _! D* ?2 u5 N3 K RBC's Affordability measure for a detached bungalow for Canada's largest
. _& r9 v2 m$ Y' d* E# Ecities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
. H( S! l- m2 o# [/ k42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
% ]3 K1 V7 B: Z Z4 m4 q5 s: L The report also looked at mortgage carrying costs relative to incomes for" k. B2 @/ N f7 W# P" g" I
a broader sampling of cities across the country, including Victoria. For these
9 R% `- N! Z& G0 L- p# w9 @cities, RBC has used a narrower measure of housing affordability that only
3 c W& w+ a% h& ~3 L( @) Ltakes mortgage payments relative to income into account.
! x5 C9 @6 D& D+ g/ P& q2 S% M The Housing Affordability measure, which RBC has compiled since 1985, is
, ~/ [: V# d! Ubased on the costs of owning a detached bungalow, a reasonable property1 Z. y k3 X2 F, I4 B; l- [
benchmark for the housing market. Alternative housing types are also presented" u' t8 q* z' k2 g" R/ z
including a standard two-storey home, a standard townhouse and a standard7 ~+ b/ S9 X0 V8 ~6 `; f- x( ^8 p
condominium. The higher the reading, the more costly it is to afford a home.
1 E P5 G+ T1 K, X* G* vFor example, an Affordability reading of 50 per cent means that homeownership
# F1 l" y7 o- d7 u: ?, _9 Ocosts, including mortgage payments, utilities and property taxes, take up 50, s2 `9 S+ T% ?4 Z
per cent of a typical household's monthly pre-tax income.
- x0 @' N/ {! O) o3 b2 m8 l- p2 z+ R- b% @* ]9 X5 @: x) n F
<<
& r3 L4 R: y7 `/ L3 `1 Q Highlights from across Canada:
r* A% i+ C3 W
# J: T1 \/ v3 i7 E5 J m, R - Alberta: Since last fall, the declining Alberta economy has
% B q# ~0 Y- y( M0 G. E- H4 l5 { intensified the downdraft on the province's housing markets, causing# r( |$ A- C" c3 v$ R" F3 p
home resales to drop to a 12-year low at the end of 2008 and rebound
/ S. F" R' { h/ X* O# } only modestly since. Affordability has been on an improving track
: |8 p9 Z6 B9 t7 H7 c since about the middle of 2007.
2 d) h) a, ~0 z- B$ C; b - Saskatchewan: Market activity has cooled considerably from the
7 h& q7 q5 y# r, s2 `+ C frenzied pace from 2006 to early 2008 and prices have begun to/ f$ A1 E) J3 f: m
decline. Nonetheless, economic and demographic fundamentals are still
6 ?. M$ b4 j4 m# ]2 B largely supportive of the housing market and overshadow extremely" a) b" {2 w$ B$ u7 {
poor affordability levels.8 }9 }2 T0 {* z6 S* Y0 b* [' F
- Manitoba: Manitoba's housing markets have fared much better than the# Z7 ]+ K4 b; m M0 H9 e0 q8 X' m
vast majority in Canada: resale activity has slowed moderately and
4 m: o# ?9 d' T9 h prices have either held their own or edged down just slightly.2 \$ k: C" T: Q. h* }4 H9 S& L
Affordability has been kept out of the danger zone, helping to
# k2 k+ J, x8 o minimize any downside risks.
6 w; j' T) d5 w - Ontario: With the recession pounding many communities, housing market
- v% _& X0 O) K, }1 v conditions have deteriorated considerably. However, the impact is% O; W6 a! c: e7 f/ o, M. z
unlikely to develop into an all-out rout similar to that of the early2 j6 y. N' {4 E) L3 w# T) S
1990s. Affordability, while still causing some stress, is quickly! ^7 S& C* h7 }, x9 ]8 |
being restored to levels closer to long-term averages.9 f+ |: t4 i: n- I1 [
- Quebec: The province's housing markets have been among the last in; L5 x& _/ s* Z( c. R+ V
Canada to yield to the weakening trend. The main sign of cooling thus+ d$ m. Y4 Q7 K& Y2 x' f9 a/ F
far has been a drop in resale activity, as prices have held up, e' s2 e* X6 J7 ~- K2 H
reasonably well. Some of the persisting market strength can be
) p- E k* X7 }- h6 J/ |( ~ ascribed to sensible affordability levels, which had eroded only; {- e* ~$ K; J m i+ s0 o
modestly in recent years.
* s$ ?) I6 U2 K/ K, O& G - Atlantic region: Markets have largely remained stable against the$ _: l: I% v* V! {' q& Y! z4 l1 n
general housing downturn, with St. John's becoming the housing hot
5 B- N- _' @4 d/ J0 a; i" D& e8 w spot in Canada and Halifax and Saint John maintaining steady upward5 ~* |4 ]8 V6 |2 j+ [- [/ E
price momentum. The region is benefiting from improving affordability- i/ P a$ H4 d6 b! X& V' ~
following two years of deterioration.
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