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British Columbia's housing affordability notably improved but still has far to go, says RBC
# c+ T' P; I/ M TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
8 C( P6 C& L: L' Z( G- Rmiddle of a significant correction that is partly reversing the extensive7 q b; Z9 H0 U3 X; R
gains of recent years and which is helping restore affordability conditions,* Z3 O0 p* s2 ?! F' e0 j1 ]0 D
according to the latest housing report released today by RBC Economics.
+ j( K1 ~' A# K "The province's housing markets remain under heavy downward pressure,"/ c" Z. W: t% B) J" r) `1 q
said Robert Hogue, senior economist, RBC. "While housing affordability is
: C6 x4 H- e- {5 I! Y& ], X* Mimproving as the correction process runs its course. RBC's affordability
; b! ]; ^& F& V, }2 Imeasures for the province are still at levels far off historical averages."! ]0 u$ c0 t* C8 k2 @/ K8 Y
RBC notes that the sharp rise in unemployment since last summer is" ]" `) C4 \4 P
worrying households in the province and weighing down demand for housing,, m/ D( u6 @( Z* K/ G
which runs well short of available supply. Such weak market conditions have
8 {3 r, K0 B: Isustained the declining trend in prices for both existing and new homes.
3 {6 [8 E- d7 b( d+ Q p/ `0 a The RBC Affordability measure for British Columbia, which captures the6 _& x/ c/ T; u1 n9 q/ @
proportion of pre-tax household income needed to service the costs of owning a
+ [, w. y! r. O. {5 Y, d fhome, improved across all housing segments in the last quarter of 2008.
3 N( U- n; m' v: b2 F% \9 d7 JAffordability of detached bungalows in the province moved to 66 per cent, the
' o5 `6 I1 L) Bstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and5 X3 T3 l3 ^' T) g. ?
the standard two-story home to 73.7 per cent.: N) x( M g, @# B4 \& H, ?
According to the report, there are signs that the B.C. housing markets
5 U8 Q: |/ C& cmay be stabilizing as sales of existing homes appear to have bottomed out in+ [) F( H$ s& F( C. ~
the closing months of 2008 and the first two in 2009 - although at) d' a$ L5 @1 c$ J, z2 S
historically depressed levels.
0 H9 j8 o: x u- f Despite sharply declining house prices and lower mortgage rates, the cost- n2 e( C6 ?5 ~' q
of homeownership in Vancouver is still the highest in the country. House
+ \$ e2 V/ t- bprices continue to rapidly decline and pricing power remains firmly in the
7 ~. V' l- {5 N5 uhands of buyers with the sales-to-new listings ratio at historical lows. "This% {. g0 e' J2 u# I/ S
enormous imbalance suggests that prices will likely further correct in the
. w0 l; @; l7 V6 Bmonths ahead," added Hogue.
0 t% n% M) o* A# \) [1 X: K8 a RBC's Affordability measure for a detached bungalow for Canada's largest
1 u+ d* x* L) c' M+ w! Y# Kcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary3 N& F1 A9 u5 Y7 p) ]6 V1 o9 d/ J
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent./ P# B) [3 ^% C8 Q
The report also looked at mortgage carrying costs relative to incomes for
4 J1 U2 N2 K. N& Z7 wa broader sampling of cities across the country, including Victoria. For these9 y' x: _6 M0 o: `( q0 V
cities, RBC has used a narrower measure of housing affordability that only
2 i4 l, x2 A7 ]- i& {$ vtakes mortgage payments relative to income into account.3 ]% T+ N1 _' p$ m$ j& C4 m! ?( z
The Housing Affordability measure, which RBC has compiled since 1985, is
3 X$ s& k4 a8 n0 xbased on the costs of owning a detached bungalow, a reasonable property7 D, O* z6 g, ?- p, j+ Q( p9 h$ S
benchmark for the housing market. Alternative housing types are also presented3 @7 s, L1 _& R8 b ?& V2 h
including a standard two-storey home, a standard townhouse and a standard
) A0 @3 ^+ |5 B, i; D3 }9 qcondominium. The higher the reading, the more costly it is to afford a home.1 u' J8 \. t4 {, ?* \. H+ u
For example, an Affordability reading of 50 per cent means that homeownership* i8 q) G! m) c3 X" t e
costs, including mortgage payments, utilities and property taxes, take up 50
: {: @( ^' w) b6 H! Y) |per cent of a typical household's monthly pre-tax income.1 D& x9 Z t. G) M+ w+ Z5 y
" f. N7 _; O8 Z; X <<
3 s: h, y# p5 a+ n: ^ Highlights from across Canada:/ n" H9 }# l8 ]5 |& J* N! d
. I' u/ e" @* x1 Z: ? - Alberta: Since last fall, the declining Alberta economy has7 b w9 L2 r2 s; d) b. p
intensified the downdraft on the province's housing markets, causing
2 A8 H5 W; j- w9 _7 b) t home resales to drop to a 12-year low at the end of 2008 and rebound
$ L# X$ O( ^9 H* T$ `7 V# | only modestly since. Affordability has been on an improving track8 l: A( ?" ^& z' H& f/ x/ _! t
since about the middle of 2007.
2 h3 r; `8 f3 L - Saskatchewan: Market activity has cooled considerably from the
9 R- p% y1 C6 ?/ l! E! Y frenzied pace from 2006 to early 2008 and prices have begun to7 Y; R# f/ q8 X
decline. Nonetheless, economic and demographic fundamentals are still' c0 E4 `2 ?3 q6 N+ ]! M' V
largely supportive of the housing market and overshadow extremely
$ U9 v+ T% s( k* }5 ~ poor affordability levels.
$ ]; a8 y2 P% P' G" _, h9 }. S - Manitoba: Manitoba's housing markets have fared much better than the
' H6 Y! h, ?" ?! ~ vast majority in Canada: resale activity has slowed moderately and% U- c$ c3 I1 \6 S4 s" I1 X& A
prices have either held their own or edged down just slightly.: |: \' k# k3 z5 i) K' r1 P
Affordability has been kept out of the danger zone, helping to
/ m; ^, M) J1 C8 b a minimize any downside risks.
- o& E+ h) V+ k# G6 a - Ontario: With the recession pounding many communities, housing market
N8 [" ?8 K* [: A6 p conditions have deteriorated considerably. However, the impact is0 g* b5 x Z0 p$ Y
unlikely to develop into an all-out rout similar to that of the early
1 L- B- g `8 O( D2 ?4 b 1990s. Affordability, while still causing some stress, is quickly
" K$ a0 ~3 L# I8 D& h5 d5 p6 L being restored to levels closer to long-term averages.
* x, z: G( A% J2 m0 ] - Quebec: The province's housing markets have been among the last in
/ `2 Y* M& k8 X5 @ Canada to yield to the weakening trend. The main sign of cooling thus- Q+ o4 {$ I5 k% y% ~! @
far has been a drop in resale activity, as prices have held up
) w& _$ R+ Q8 Q9 b4 t reasonably well. Some of the persisting market strength can be; f7 _) A k$ W: N" `# I
ascribed to sensible affordability levels, which had eroded only
; b3 C9 d' U% x modestly in recent years.
7 [' U9 j. P5 A1 T( k/ D - Atlantic region: Markets have largely remained stable against the
" L6 T: d& } h; f/ ^# ], ]# G general housing downturn, with St. John's becoming the housing hot
" R( P0 W% P3 N4 ]" ^& O spot in Canada and Halifax and Saint John maintaining steady upward
% L$ {% j3 U3 E3 } price momentum. The region is benefiting from improving affordability
" C5 |3 }1 @& |) Q- ` following two years of deterioration.
2 b0 L1 ?4 b/ y" N4 h' d+ v! E" { >> |
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