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British Columbia's housing affordability notably improved but still has far to go, says RBC
! Y; T) A, E2 g( o/ ` TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
- X Q* S9 D. \middle of a significant correction that is partly reversing the extensive
5 N1 k7 R$ T- w; ]3 ygains of recent years and which is helping restore affordability conditions,' k4 D5 n$ D" k8 G" G& w% P3 a
according to the latest housing report released today by RBC Economics.
* e) V$ @1 @% j, c C "The province's housing markets remain under heavy downward pressure,"5 o8 O4 g/ F8 }0 p
said Robert Hogue, senior economist, RBC. "While housing affordability is9 Z2 P- E% E; A4 K/ [: o+ s! P
improving as the correction process runs its course. RBC's affordability
7 b, j. I4 F- c* hmeasures for the province are still at levels far off historical averages."
, X$ H1 ?# X* i3 q RBC notes that the sharp rise in unemployment since last summer is
% l1 p+ t7 F) h& j& H( b- v" [worrying households in the province and weighing down demand for housing,; h# `4 D ]# {- \! c% ], C" u
which runs well short of available supply. Such weak market conditions have
8 G; @# e# _( Q' P& u: A' _) _! wsustained the declining trend in prices for both existing and new homes.
P7 x3 V. G8 X* k The RBC Affordability measure for British Columbia, which captures the6 C( \, N( f7 T5 s. n/ x( H
proportion of pre-tax household income needed to service the costs of owning a) M" P; a/ k/ k- g
home, improved across all housing segments in the last quarter of 2008.
0 L z1 e; F Z7 K( t+ I/ {% d# [Affordability of detached bungalows in the province moved to 66 per cent, the
% d% v6 G% Z% e& y5 c8 L7 _9 dstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
7 m) v) x! T# qthe standard two-story home to 73.7 per cent.6 F/ a& f. }# Q$ I2 o
According to the report, there are signs that the B.C. housing markets" s! ^2 e+ x8 N. Y' Q. Z% X% Y
may be stabilizing as sales of existing homes appear to have bottomed out in
8 H* {! z# g4 w5 ^4 u; k2 ?the closing months of 2008 and the first two in 2009 - although at
2 U2 { y q% U* V; ~historically depressed levels." P& \7 x$ j1 C
Despite sharply declining house prices and lower mortgage rates, the cost
9 N2 z2 s5 [4 D' v6 [) N% ^of homeownership in Vancouver is still the highest in the country. House/ z& G" r" d/ X1 X7 z
prices continue to rapidly decline and pricing power remains firmly in the
+ T$ m( l$ t& N ]* ?hands of buyers with the sales-to-new listings ratio at historical lows. "This) g& E7 y- W" }0 L& C
enormous imbalance suggests that prices will likely further correct in the) I( s M$ @- L6 I9 G6 j) m/ D+ y
months ahead," added Hogue.
' f4 i) c2 |9 k2 p RBC's Affordability measure for a detached bungalow for Canada's largest
* c9 o6 r( ~ V; hcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
; G7 H7 ^* f& C' E0 v% y42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
2 z' ?' h8 C8 [9 O; w- b+ I The report also looked at mortgage carrying costs relative to incomes for! @" M2 T0 Y/ C% f7 w% o9 O
a broader sampling of cities across the country, including Victoria. For these
1 H1 ?8 e1 K: h, |/ Z- jcities, RBC has used a narrower measure of housing affordability that only
5 U8 c7 }3 V5 Y" F5 otakes mortgage payments relative to income into account.3 V! a$ c$ m, |; l) Z5 i
The Housing Affordability measure, which RBC has compiled since 1985, is
6 r5 m' q( D1 S3 Ibased on the costs of owning a detached bungalow, a reasonable property* k9 J0 R# B8 v; P" i/ G: I
benchmark for the housing market. Alternative housing types are also presented, ?4 n* n9 k" ]1 @; X5 T+ [# Q
including a standard two-storey home, a standard townhouse and a standard
6 K# o& o. n- Z9 Tcondominium. The higher the reading, the more costly it is to afford a home.
; Y- Q6 M* I$ s7 a: ^For example, an Affordability reading of 50 per cent means that homeownership
" r' }6 f$ @( Q/ X+ Lcosts, including mortgage payments, utilities and property taxes, take up 50
) }5 y+ `% `2 g# u4 o: a7 a8 uper cent of a typical household's monthly pre-tax income.$ p7 _: l: a% W6 ~* j& w0 |
% T& x9 \6 Z) z: a! w
<<3 p% G5 f6 v0 u: K5 B( ]8 ~' S. V
Highlights from across Canada:0 [9 \* }2 q# o% I
& F( @8 \2 p7 h: g
- Alberta: Since last fall, the declining Alberta economy has
6 v! f' P6 Q' Z: A" w6 M% \ intensified the downdraft on the province's housing markets, causing; `! ]* }( L5 Q) D7 l- @- O+ T4 E
home resales to drop to a 12-year low at the end of 2008 and rebound6 \9 l$ U) b/ Y- @+ Y% y" Y
only modestly since. Affordability has been on an improving track
. S& [2 q+ [1 X' S6 G& T7 E since about the middle of 2007.+ C. i' g9 Q9 O- y6 [
- Saskatchewan: Market activity has cooled considerably from the* d6 Z$ i! v4 J/ Q
frenzied pace from 2006 to early 2008 and prices have begun to7 P; Z' w- B3 F5 q# I
decline. Nonetheless, economic and demographic fundamentals are still
q( ]3 c1 F" ~ largely supportive of the housing market and overshadow extremely
! }8 i( _; t' \' T poor affordability levels.
! p) U; |, q; P6 c# r+ I - Manitoba: Manitoba's housing markets have fared much better than the
4 D( q; a: ]) Z8 T vast majority in Canada: resale activity has slowed moderately and d2 b8 u5 `3 `/ U' C+ y
prices have either held their own or edged down just slightly.
- x M1 P* H7 U0 [' `6 t; p5 G Affordability has been kept out of the danger zone, helping to
) m+ }; ~; p4 E6 E! {1 [3 v minimize any downside risks.9 T+ O! G& a& Z9 b
- Ontario: With the recession pounding many communities, housing market# Q' @1 C f# ]/ J& i) U6 J
conditions have deteriorated considerably. However, the impact is M0 r0 ? D# O. H O' ]
unlikely to develop into an all-out rout similar to that of the early
7 L) j* ?. n0 T1 B6 h 1990s. Affordability, while still causing some stress, is quickly
4 Q" h, _( c3 {2 M being restored to levels closer to long-term averages.$ K$ K; j- `' t" w+ |4 n: ]
- Quebec: The province's housing markets have been among the last in
4 a- \( e/ u* ? Canada to yield to the weakening trend. The main sign of cooling thus
- d+ N) ]8 O- d+ W& Z9 M far has been a drop in resale activity, as prices have held up
# |; v# Z, g" g# ~0 E; ] reasonably well. Some of the persisting market strength can be
$ e0 o. Z5 U, y9 a z$ M# ^ ascribed to sensible affordability levels, which had eroded only
9 T" L- T. c* W2 t5 a, H modestly in recent years./ Y) w; z# j; O% Y0 @7 B
- Atlantic region: Markets have largely remained stable against the
7 _# K& \. |+ ~* @ M! J, y5 j general housing downturn, with St. John's becoming the housing hot
! Z' ~2 c' ]" Q. x; f( S1 ^ spot in Canada and Halifax and Saint John maintaining steady upward
1 ^' @' F0 D; ^. B price momentum. The region is benefiting from improving affordability& i1 ?0 ^9 [1 K, F g8 M+ v* S
following two years of deterioration.; j/ t, e y, t1 M( J# J0 N
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