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British Columbia's housing affordability notably improved but still has far to go, says RBC
' Z, g' i- A. h& C TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the4 i1 M* F! D" I8 `! m
middle of a significant correction that is partly reversing the extensive
9 X {2 Y# T8 y: @: ~' Cgains of recent years and which is helping restore affordability conditions,
2 q C) @6 V' v+ ~) D3 Baccording to the latest housing report released today by RBC Economics.% _4 V3 U) F) p0 u7 z% I) {1 G
"The province's housing markets remain under heavy downward pressure,"/ E! P2 {& p2 h2 n! Y, c
said Robert Hogue, senior economist, RBC. "While housing affordability is
# {' j1 ]# H; {, r- K' Kimproving as the correction process runs its course. RBC's affordability
) V0 o$ J- O6 d7 G# R) e! l2 n/ Omeasures for the province are still at levels far off historical averages."- Z3 o! j$ y/ t2 v" h
RBC notes that the sharp rise in unemployment since last summer is
7 f0 X# A" l4 }0 X9 tworrying households in the province and weighing down demand for housing,/ X, Y# U+ K4 p9 A& z8 J3 R$ [! u6 r
which runs well short of available supply. Such weak market conditions have: ~: e0 S# ]+ G4 A! Y
sustained the declining trend in prices for both existing and new homes.
3 _& ]8 P v# G2 U The RBC Affordability measure for British Columbia, which captures the+ Q& d& Q1 |3 [9 J& {3 v
proportion of pre-tax household income needed to service the costs of owning a
7 y3 l4 h0 B( y0 e) q7 M9 g V: fhome, improved across all housing segments in the last quarter of 2008.: n+ d; Z* V9 _
Affordability of detached bungalows in the province moved to 66 per cent, the
9 }8 ?6 f* R# y, M- `standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
7 b- S f7 p% `) @- o& Z H/ b* @the standard two-story home to 73.7 per cent.
3 M+ m% n* P) [# ] According to the report, there are signs that the B.C. housing markets
0 G2 q% r& z2 F$ i3 ^) Lmay be stabilizing as sales of existing homes appear to have bottomed out in
. f: D& Q( ~* @: K% O& Ithe closing months of 2008 and the first two in 2009 - although at7 j, P; e3 K1 Y# _/ n
historically depressed levels.
3 n$ a- O. i2 f Despite sharply declining house prices and lower mortgage rates, the cost. D: l* ^5 I) p& _
of homeownership in Vancouver is still the highest in the country. House8 ~, l- ~' V/ O% S3 I
prices continue to rapidly decline and pricing power remains firmly in the
' L; b% C+ X; r$ nhands of buyers with the sales-to-new listings ratio at historical lows. "This3 Y6 [: }( w* f! V6 R
enormous imbalance suggests that prices will likely further correct in the
, h' }( {8 N9 x! l. Pmonths ahead," added Hogue.1 e- n* Z0 x$ }/ o u; c5 K, E
RBC's Affordability measure for a detached bungalow for Canada's largest9 V( F3 x4 ^7 S& M7 n
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary; H( e1 Z7 _3 k8 h: e! [% j
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.9 V2 S( @- w! Z5 a
The report also looked at mortgage carrying costs relative to incomes for( d% N) o9 U7 V4 u2 C
a broader sampling of cities across the country, including Victoria. For these
! J1 ^2 s6 u! Z- Fcities, RBC has used a narrower measure of housing affordability that only
% L4 n& E% [& v: E3 ~takes mortgage payments relative to income into account.5 E: V8 l' i X; a- M' c2 O+ K ~
The Housing Affordability measure, which RBC has compiled since 1985, is
: V* D; I& a$ L) E" g P. [! \8 sbased on the costs of owning a detached bungalow, a reasonable property0 ^2 X7 R3 l% R5 g
benchmark for the housing market. Alternative housing types are also presented
) |& }+ }1 j, q3 U/ k% c( t) xincluding a standard two-storey home, a standard townhouse and a standard; S4 s' S2 |# q8 Q0 {
condominium. The higher the reading, the more costly it is to afford a home.
3 W; a& K: q9 v0 o4 v0 VFor example, an Affordability reading of 50 per cent means that homeownership; ]/ u3 g8 y# p1 E4 `
costs, including mortgage payments, utilities and property taxes, take up 50, \/ ?0 v1 m* k' Q8 k; b8 H
per cent of a typical household's monthly pre-tax income.
& e \6 y- c2 c2 \) ]3 ^+ o5 v/ A! f! j9 v+ X* c
<<( \1 w8 F; q* t1 u
Highlights from across Canada:. P. m# { M: U4 z7 S7 r& j# @
" W; M1 G/ }! q3 |
- Alberta: Since last fall, the declining Alberta economy has+ W5 B- u7 D. ~- \( |- s p) d
intensified the downdraft on the province's housing markets, causing6 w6 w; J$ n/ @; ]8 X( Z
home resales to drop to a 12-year low at the end of 2008 and rebound
' a- k$ b' w% }( b: B. i c only modestly since. Affordability has been on an improving track
, c7 `' ]' H* e! W since about the middle of 2007.- v; ^% A: H5 V0 }3 d1 M% j, F; R
- Saskatchewan: Market activity has cooled considerably from the. m$ ] h% K1 }; k! I! n4 q n! V6 w
frenzied pace from 2006 to early 2008 and prices have begun to' j+ O* ~$ G2 M; O& X
decline. Nonetheless, economic and demographic fundamentals are still+ Y% D2 C9 N' S3 S
largely supportive of the housing market and overshadow extremely
% i( s4 m: Z5 M poor affordability levels.
6 S6 T* W! M6 l$ Y+ i& Q - Manitoba: Manitoba's housing markets have fared much better than the3 ]' O" Q Y2 J7 X7 s4 }1 [5 P
vast majority in Canada: resale activity has slowed moderately and8 C' c0 S) j( s* x7 J0 O
prices have either held their own or edged down just slightly.
7 x1 l' M* u6 b7 [: x Affordability has been kept out of the danger zone, helping to7 q- V* ]) ]" b& P5 n# B9 V0 G1 f
minimize any downside risks.
7 S2 U! y5 i) J2 s! W - Ontario: With the recession pounding many communities, housing market
' f8 V6 c5 @& o! b1 J conditions have deteriorated considerably. However, the impact is
' K2 ?- d2 O7 [7 u! i# T unlikely to develop into an all-out rout similar to that of the early: ~- ~* c' E( U( u
1990s. Affordability, while still causing some stress, is quickly
- i% {) D$ [# E6 w3 b being restored to levels closer to long-term averages.
; s' F3 Y+ q2 g1 h# O, h - Quebec: The province's housing markets have been among the last in
4 W, j% h2 U4 j% _! g Canada to yield to the weakening trend. The main sign of cooling thus
' h8 X. g- e2 g% D far has been a drop in resale activity, as prices have held up( V1 D' C5 z% V
reasonably well. Some of the persisting market strength can be4 P1 j# I' q/ L( Z4 _5 F8 ^; [* U
ascribed to sensible affordability levels, which had eroded only
0 j9 A, ~1 y8 f9 F; R( q modestly in recent years.
) d2 c+ n6 |0 g/ _6 n1 g - Atlantic region: Markets have largely remained stable against the
' d( g" m3 ^ M& R4 D& S _& I) G general housing downturn, with St. John's becoming the housing hot. r' ?9 a, W7 R% n. P
spot in Canada and Halifax and Saint John maintaining steady upward! J; ~% G& x, f
price momentum. The region is benefiting from improving affordability4 r0 [( `7 x' o+ [4 p/ A
following two years of deterioration.' u0 Z2 Y$ P" g" r: ~7 l* ]
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