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British Columbia's housing affordability notably improved but still has far to go, says RBC
8 W& g$ V$ D& ]2 ]/ Z7 y8 C TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the I& _# t! |( s7 n' x
middle of a significant correction that is partly reversing the extensive1 @5 w& K2 {+ ?# ?# t1 M9 N3 f# a2 Q
gains of recent years and which is helping restore affordability conditions,: m. e# Y1 C- d. w* \' G: q, p# u
according to the latest housing report released today by RBC Economics.1 i4 N5 L( a, x$ g6 B$ Q6 H! z
"The province's housing markets remain under heavy downward pressure,"
) s( q9 Z h' q4 l4 Ysaid Robert Hogue, senior economist, RBC. "While housing affordability is! v3 Z9 d6 E0 B+ N$ o
improving as the correction process runs its course. RBC's affordability
( Z0 P* w, `' F5 Dmeasures for the province are still at levels far off historical averages."
0 S# u/ q- c3 Q+ r9 X2 c: e3 U RBC notes that the sharp rise in unemployment since last summer is
' A* N0 q; l9 j, Tworrying households in the province and weighing down demand for housing,0 V/ X: e, ?9 ~& H5 C& j1 D
which runs well short of available supply. Such weak market conditions have; e5 U, K- q# J* S# O
sustained the declining trend in prices for both existing and new homes.
# e+ k# I/ n2 b) V L2 y The RBC Affordability measure for British Columbia, which captures the" x4 C1 Z; m' l: n6 Y: Q" o) B2 C6 Z
proportion of pre-tax household income needed to service the costs of owning a6 v: z2 R6 M$ x# p: d
home, improved across all housing segments in the last quarter of 2008.% T; S- m& K9 G @, d4 c5 r9 p
Affordability of detached bungalows in the province moved to 66 per cent, the K$ N9 ^* l) }
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and r7 A1 D0 u$ ]. g6 B6 W# O# l
the standard two-story home to 73.7 per cent.
3 F9 t( {1 i* U) z( I7 Y9 I According to the report, there are signs that the B.C. housing markets0 k2 b5 N' T* o. N1 {: e) |2 u
may be stabilizing as sales of existing homes appear to have bottomed out in& f% _5 x: T* q; h( f! z
the closing months of 2008 and the first two in 2009 - although at/ f$ V) l9 M# s8 H; s& |
historically depressed levels.
! a3 x2 Q% H* P. Y- O/ m Despite sharply declining house prices and lower mortgage rates, the cost2 ?: y+ q5 p" n6 r/ [3 S
of homeownership in Vancouver is still the highest in the country. House
& f8 Q' P/ D) l9 |7 Kprices continue to rapidly decline and pricing power remains firmly in the5 O8 d" E$ a# U6 ?. _4 R- U( x; C
hands of buyers with the sales-to-new listings ratio at historical lows. "This
1 @; Y8 G4 {. f. t% H! [enormous imbalance suggests that prices will likely further correct in the- g3 z/ d: P0 f- x$ J3 p
months ahead," added Hogue.5 @2 N* W) e$ W$ R6 U) t( X
RBC's Affordability measure for a detached bungalow for Canada's largest
! i6 D/ X# N: b4 ]cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
& n% z! _1 O' A' q$ ^7 F42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.8 m% H4 O- R3 \/ y5 V9 P, n
The report also looked at mortgage carrying costs relative to incomes for& }: ^- s+ x- x! A8 l3 ]' G$ v& _: L
a broader sampling of cities across the country, including Victoria. For these% X6 `9 L. ~4 A8 i/ U" v7 i
cities, RBC has used a narrower measure of housing affordability that only+ @# ]/ U) {5 n o+ b% A
takes mortgage payments relative to income into account.0 |; H9 O0 C1 [5 Q
The Housing Affordability measure, which RBC has compiled since 1985, is
$ Z+ l0 a$ }6 M0 c4 e8 {based on the costs of owning a detached bungalow, a reasonable property
' q/ V3 w7 X3 D+ gbenchmark for the housing market. Alternative housing types are also presented$ Q+ o" d! f, J' k
including a standard two-storey home, a standard townhouse and a standard
, M* ]* r/ Y2 C, U* ]! _0 v; Jcondominium. The higher the reading, the more costly it is to afford a home./ ^4 M; L. h$ v0 L6 a! I* c
For example, an Affordability reading of 50 per cent means that homeownership
! o/ L$ A) h1 K, G6 P& z* G, o hcosts, including mortgage payments, utilities and property taxes, take up 50
; y' H, a- A9 q1 ?) ] Nper cent of a typical household's monthly pre-tax income.# a' p2 h6 N% c# [5 q
& B9 V) V, I; H, ~ <<
5 }1 W. x- q; k0 n Highlights from across Canada:
3 O5 q& N. f$ y, R0 ]7 E! `- t/ A% Y& e2 E1 q- O+ e9 a) U7 y* m p; F
- Alberta: Since last fall, the declining Alberta economy has5 L" K% P$ J* @9 F: j
intensified the downdraft on the province's housing markets, causing
. i" b* Q& u0 \9 L home resales to drop to a 12-year low at the end of 2008 and rebound
) X% Q- c* F+ Q1 g only modestly since. Affordability has been on an improving track
' V7 f1 S% N' W" u- T( y, b2 m- z since about the middle of 2007.
7 {7 v, S' P# m9 i2 c - Saskatchewan: Market activity has cooled considerably from the
% k; V: R# w4 k frenzied pace from 2006 to early 2008 and prices have begun to
* O( O% B9 W5 ~3 w; v decline. Nonetheless, economic and demographic fundamentals are still' B2 A: z! w- o% \0 f% j- o: ~
largely supportive of the housing market and overshadow extremely
/ b$ F1 L9 M% L$ m poor affordability levels." x2 S& d0 `5 W; I" c
- Manitoba: Manitoba's housing markets have fared much better than the
0 ]& P6 N3 {" i4 n) ? vast majority in Canada: resale activity has slowed moderately and9 i# U0 h' c4 C% d2 h/ q' _& Y
prices have either held their own or edged down just slightly.# c) J- _7 D6 J7 h: R# A( k& Q
Affordability has been kept out of the danger zone, helping to; v# o' [" U6 g& e$ @4 x/ z l
minimize any downside risks.
+ b) b% m( k- @) ~* E, [! l# o - Ontario: With the recession pounding many communities, housing market
1 I! ?7 K8 N* L conditions have deteriorated considerably. However, the impact is
; e0 P/ w% m3 t unlikely to develop into an all-out rout similar to that of the early
T9 P" l9 i) z' ~5 j; B/ B' s2 T 1990s. Affordability, while still causing some stress, is quickly
5 E$ }3 i* ]! r; S% r being restored to levels closer to long-term averages.
! F2 T8 l5 J& E4 N; |+ A) E - Quebec: The province's housing markets have been among the last in
7 a: y* U! o5 |6 W* n' u7 _* ? Canada to yield to the weakening trend. The main sign of cooling thus
2 V) L# j/ i T) U* I5 [- L+ n far has been a drop in resale activity, as prices have held up
; k+ v- f* U3 @ reasonably well. Some of the persisting market strength can be9 P2 T# @" P; m5 b
ascribed to sensible affordability levels, which had eroded only
/ d: P H" @2 v modestly in recent years.0 ^' w: T; s1 s- y
- Atlantic region: Markets have largely remained stable against the
0 I$ H6 V, t- {1 }$ V) t3 K general housing downturn, with St. John's becoming the housing hot
' [. \+ z% s. Z5 u t* @ spot in Canada and Halifax and Saint John maintaining steady upward' S. Z( a. |7 F5 B2 M
price momentum. The region is benefiting from improving affordability
0 \* K8 ~" t* G2 f, h- J; v% z following two years of deterioration.
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