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British Columbia's housing affordability notably improved but still has far to go, says RBC
" G) \/ M9 ^: C% } { TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
0 @! F/ ]1 a( }. E, ]4 \9 L# q0 q% Qmiddle of a significant correction that is partly reversing the extensive' h( c e/ E8 w5 \! R/ i
gains of recent years and which is helping restore affordability conditions,
. v) s' J; v: s8 _2 w5 `# R+ @according to the latest housing report released today by RBC Economics.
( q% G% E3 {0 H; y ^; D0 j "The province's housing markets remain under heavy downward pressure,"5 e4 x/ N% m _0 ], k
said Robert Hogue, senior economist, RBC. "While housing affordability is H4 l3 ?% Z- f6 |: M5 A, P1 l2 }
improving as the correction process runs its course. RBC's affordability
) V! J4 h8 {- wmeasures for the province are still at levels far off historical averages."6 R: G0 |) G& `( Z# M) l5 X
RBC notes that the sharp rise in unemployment since last summer is
6 d# u g, r" m0 A1 vworrying households in the province and weighing down demand for housing,* L' U# J6 P5 d$ d2 b! ] M
which runs well short of available supply. Such weak market conditions have
; Q4 r1 M2 g9 J/ d8 H/ q' B) isustained the declining trend in prices for both existing and new homes.
" p8 }9 N/ T: ~( d The RBC Affordability measure for British Columbia, which captures the6 V' a. z+ _) n. S0 @
proportion of pre-tax household income needed to service the costs of owning a
( Z! s: K+ c9 Khome, improved across all housing segments in the last quarter of 2008., S! W4 ^( Q: P8 ~* Y/ x8 s) U. Q# `
Affordability of detached bungalows in the province moved to 66 per cent, the
: {1 H* ~. t! k, Y; y0 R" Cstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and5 M% ]- B U( d2 Y7 K( u
the standard two-story home to 73.7 per cent.4 M( y' Y" X/ A! F: Z
According to the report, there are signs that the B.C. housing markets3 {$ f* n! j5 u+ L7 l, c; B
may be stabilizing as sales of existing homes appear to have bottomed out in
x% I0 R% ^ i# W; w/ d) Hthe closing months of 2008 and the first two in 2009 - although at- Q- ^. o1 p. V/ y
historically depressed levels.! W- h4 v q, n5 i' E, |
Despite sharply declining house prices and lower mortgage rates, the cost* x* Z: b# M2 ~) G, R1 m: L( i
of homeownership in Vancouver is still the highest in the country. House
1 Y# h- R$ W9 Dprices continue to rapidly decline and pricing power remains firmly in the
% B2 O/ }) Q: Ehands of buyers with the sales-to-new listings ratio at historical lows. "This
) }3 K" m. V. h t: xenormous imbalance suggests that prices will likely further correct in the: p0 }+ @4 x+ t& o7 f) r
months ahead," added Hogue.1 O8 A, z2 \* G) t
RBC's Affordability measure for a detached bungalow for Canada's largest0 p2 y4 P6 g" l @
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary# ^" ^# U! r) u
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
3 }, { N8 v' i# i/ { The report also looked at mortgage carrying costs relative to incomes for" G+ P' I, w4 D" u, @6 G2 y- f
a broader sampling of cities across the country, including Victoria. For these" l+ r! e" s5 j, B L1 F8 j; k
cities, RBC has used a narrower measure of housing affordability that only
( R. i* H, p9 n, [; q! [6 F$ `7 Gtakes mortgage payments relative to income into account.
0 W+ ?6 R$ ]6 n) h. h/ W9 F3 m The Housing Affordability measure, which RBC has compiled since 1985, is
( L- ?7 S% a" X4 f3 zbased on the costs of owning a detached bungalow, a reasonable property
: r; S/ a: A8 z3 m4 G: pbenchmark for the housing market. Alternative housing types are also presented
' Q% [) V0 |: Y H, Q- dincluding a standard two-storey home, a standard townhouse and a standard- {% j7 W0 N& e" K$ w
condominium. The higher the reading, the more costly it is to afford a home.
" L) F. l, U( T7 L( [+ k- NFor example, an Affordability reading of 50 per cent means that homeownership U: q. o/ C6 h4 k% e7 c
costs, including mortgage payments, utilities and property taxes, take up 50
6 t/ |: J/ x0 ]6 k, x9 r9 E, D Tper cent of a typical household's monthly pre-tax income.5 `& m% v) j1 v- d
) n5 }$ I) Y: y) L' e <<
3 I) B+ Q5 U& @/ l& d Highlights from across Canada:
3 p8 i! T H, d9 b* T3 _0 p1 E" P7 I, k' l7 f- {
- Alberta: Since last fall, the declining Alberta economy has
: I5 h6 g' \1 Q- \ intensified the downdraft on the province's housing markets, causing% d1 u) m; z9 z$ O* `' J( e- B
home resales to drop to a 12-year low at the end of 2008 and rebound
' l2 O, ]" c0 C1 Y6 q* t' H only modestly since. Affordability has been on an improving track
" T2 |! k: d0 J# H since about the middle of 2007.
- u" I+ \+ Q" p- t - Saskatchewan: Market activity has cooled considerably from the
& O. ]3 f( P& s$ U) z" O) c frenzied pace from 2006 to early 2008 and prices have begun to$ e$ J* N/ ~% o! s) d/ n$ W1 J
decline. Nonetheless, economic and demographic fundamentals are still, b' C2 Q% w! v. Z; U2 d4 x' V
largely supportive of the housing market and overshadow extremely
6 I, _# j7 P: `0 }. J+ ^4 W poor affordability levels.
0 ?. @) W' u, L( P! f! B& M. b5 c. J - Manitoba: Manitoba's housing markets have fared much better than the& I& |7 p( R: U; A- v
vast majority in Canada: resale activity has slowed moderately and) v2 ]/ x5 h& ^* e/ d* u5 J- p
prices have either held their own or edged down just slightly.
; w( g5 M6 ^6 l$ D/ t Affordability has been kept out of the danger zone, helping to
& E# i3 k# f6 ]- a- ?: _ minimize any downside risks.
1 O9 o4 p% g! X* {7 I. L& b - Ontario: With the recession pounding many communities, housing market
3 E7 T* f+ J4 `8 p conditions have deteriorated considerably. However, the impact is9 [ z5 \5 |6 v) S! m; R
unlikely to develop into an all-out rout similar to that of the early
% C0 J7 E9 _: G0 R6 j+ b4 |: I 1990s. Affordability, while still causing some stress, is quickly# F0 s3 b3 [- Y; @9 f; N$ O; G, \6 }
being restored to levels closer to long-term averages.
" q A6 Z0 s9 m# W - Quebec: The province's housing markets have been among the last in
# p4 j6 ^. E4 Y1 C1 K( z# k; z; d+ P, G Canada to yield to the weakening trend. The main sign of cooling thus
7 Z# k- S$ N0 M: G8 O* ? far has been a drop in resale activity, as prices have held up+ j ^4 h5 _4 c1 N3 J5 n# Q
reasonably well. Some of the persisting market strength can be! K1 E0 R) k( q
ascribed to sensible affordability levels, which had eroded only3 J j5 W, @& m* w0 T
modestly in recent years.6 r! p7 S; p' Y) d8 d# M( y
- Atlantic region: Markets have largely remained stable against the
& M! U( O# f; A5 k6 v+ ]1 m- v* b general housing downturn, with St. John's becoming the housing hot
3 w& N# b+ g" O9 g7 f spot in Canada and Halifax and Saint John maintaining steady upward1 R! M+ T1 [( H- u& F
price momentum. The region is benefiting from improving affordability _ J1 k; h a- U& }1 ]
following two years of deterioration." j' h% A3 {# Y1 T5 |
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