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British Columbia's housing affordability notably improved but still has far to go, says RBC
+ ^8 j9 J( p# H! _ TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the2 L v( f& `1 k! c9 E; k ~ M
middle of a significant correction that is partly reversing the extensive
0 d. p% W- r. e, N4 i3 d! T' v2 @$ Mgains of recent years and which is helping restore affordability conditions,+ Q" m8 c; p5 T
according to the latest housing report released today by RBC Economics.
% G2 J( J v0 ~% E: e- V4 ^ "The province's housing markets remain under heavy downward pressure,": |9 Q0 Q7 D0 Y! l
said Robert Hogue, senior economist, RBC. "While housing affordability is
( O" T/ @/ e ~/ H/ iimproving as the correction process runs its course. RBC's affordability
9 c# z3 h& A, f& e, F$ y* s) Nmeasures for the province are still at levels far off historical averages."7 Y, q- x" D& R+ m+ E
RBC notes that the sharp rise in unemployment since last summer is+ s% D) W$ ]4 r, d6 H$ S
worrying households in the province and weighing down demand for housing,! z1 Q" w* Y0 e j) s! ~
which runs well short of available supply. Such weak market conditions have( l; @) }/ t S1 d& x+ x
sustained the declining trend in prices for both existing and new homes.
% f- p% W8 v/ A) b x2 `$ G+ I The RBC Affordability measure for British Columbia, which captures the' z& a; M7 v. _
proportion of pre-tax household income needed to service the costs of owning a& d4 F9 y8 i/ J
home, improved across all housing segments in the last quarter of 2008.
) i; P* |0 J0 h Y9 JAffordability of detached bungalows in the province moved to 66 per cent, the
( i4 x- [" ~# gstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and) C" v2 V5 c. e6 @% c
the standard two-story home to 73.7 per cent.0 E, ]' h+ c0 t/ W6 h& Q( d7 }5 k
According to the report, there are signs that the B.C. housing markets
( j; Z s1 |+ C, P. P8 }& }may be stabilizing as sales of existing homes appear to have bottomed out in `- m+ I% c% Z; D
the closing months of 2008 and the first two in 2009 - although at
9 h% F N3 `3 l! A3 F# Mhistorically depressed levels.
, K$ k/ Q4 ~1 U Despite sharply declining house prices and lower mortgage rates, the cost
3 ^& R, E/ i8 ~; j3 o$ g% Lof homeownership in Vancouver is still the highest in the country. House
, n9 o/ o D3 Y& [( X4 @. i- ?) ?prices continue to rapidly decline and pricing power remains firmly in the; v* g/ _* F) ~; t) N5 q$ c/ Z
hands of buyers with the sales-to-new listings ratio at historical lows. "This. M" ^9 g, k9 B% M" G
enormous imbalance suggests that prices will likely further correct in the
) ?/ ^, Y9 I" T6 a# Imonths ahead," added Hogue.
1 o2 ~& [$ }3 ~+ x/ b5 \ RBC's Affordability measure for a detached bungalow for Canada's largest
: v4 o2 ]6 y7 ?cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
7 U; W0 x6 ~* p; p7 K42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.8 N O, h# `! Z+ t( j3 ?: F4 w+ Z8 t
The report also looked at mortgage carrying costs relative to incomes for* J4 `, W- T! b# q7 u' G# g' j
a broader sampling of cities across the country, including Victoria. For these5 a r" v9 p' Z
cities, RBC has used a narrower measure of housing affordability that only
" j( \. ?% Y3 g4 [; C, [takes mortgage payments relative to income into account.3 i( b6 Z7 Z' ` u& p3 r
The Housing Affordability measure, which RBC has compiled since 1985, is6 G7 ?0 |$ y$ }" ^
based on the costs of owning a detached bungalow, a reasonable property. W' }- ]/ k0 D; K, f
benchmark for the housing market. Alternative housing types are also presented
. ^! A" G6 Q! `; _including a standard two-storey home, a standard townhouse and a standard
' Y7 ~7 ~9 S. W( {" Zcondominium. The higher the reading, the more costly it is to afford a home." [5 U0 b; m2 c, m& b$ U" j
For example, an Affordability reading of 50 per cent means that homeownership
) U& ?2 c4 K( b$ r' ?& Dcosts, including mortgage payments, utilities and property taxes, take up 50# r( W+ F0 V6 Q0 O
per cent of a typical household's monthly pre-tax income.1 p, a# @/ ?) f! e. n! E& m
/ G! Z- S# a& T- N: f3 e5 b <<
- |; u4 |+ V E$ Q Highlights from across Canada:. a& y8 v& m9 I! f+ D* I, k' s
! Z! [. w2 M+ C, j0 G
- Alberta: Since last fall, the declining Alberta economy has$ i& I9 C+ Z& ^8 q" H
intensified the downdraft on the province's housing markets, causing6 c$ M& ~. P( @7 q- i& @1 ?4 M
home resales to drop to a 12-year low at the end of 2008 and rebound3 W' h2 Z; z) J( P
only modestly since. Affordability has been on an improving track( z; c% }0 n* w0 |9 A; a+ ?4 _
since about the middle of 2007.
) o7 h4 d7 l9 o3 e' ` - Saskatchewan: Market activity has cooled considerably from the
& B1 |2 X# s/ p5 D frenzied pace from 2006 to early 2008 and prices have begun to" L2 G) ]" T" ` j) E2 m$ l$ }* R4 i
decline. Nonetheless, economic and demographic fundamentals are still
9 Q( Y4 x9 D7 |- m largely supportive of the housing market and overshadow extremely; d G# Q/ C( a5 u6 j( s) l' T( _
poor affordability levels.
6 k/ g4 r. [. a- E - Manitoba: Manitoba's housing markets have fared much better than the
/ Q- r S2 n% D: E% O. q vast majority in Canada: resale activity has slowed moderately and% V" t& b4 U, \
prices have either held their own or edged down just slightly.5 o [8 H* ?+ m( e! U7 C
Affordability has been kept out of the danger zone, helping to7 A/ S5 q- j) v! T7 v
minimize any downside risks.( g' {) R" e/ p, u
- Ontario: With the recession pounding many communities, housing market
# w' x7 u w; A' q* l9 U conditions have deteriorated considerably. However, the impact is
- ~2 i% g/ a6 h5 O/ Q' a; F unlikely to develop into an all-out rout similar to that of the early
5 W/ h0 t" V, `% W 1990s. Affordability, while still causing some stress, is quickly# ]9 P7 ?, f4 Z' E
being restored to levels closer to long-term averages.& q* H- T, W; d! S
- Quebec: The province's housing markets have been among the last in# C U( b3 q+ D9 `+ g' l6 i
Canada to yield to the weakening trend. The main sign of cooling thus4 c9 o/ a1 C2 ?2 e/ `
far has been a drop in resale activity, as prices have held up
7 j6 x- ~7 h! K) F' S# z reasonably well. Some of the persisting market strength can be
/ R4 O3 t- @9 D ascribed to sensible affordability levels, which had eroded only+ ` f: c" Z+ A ]
modestly in recent years.# h5 ]. z. D5 ^* O' |
- Atlantic region: Markets have largely remained stable against the5 Y8 `2 c O. I4 K9 k8 Y
general housing downturn, with St. John's becoming the housing hot
8 f$ \) ^( n" R% ]& [# O spot in Canada and Halifax and Saint John maintaining steady upward5 L; \$ u( {% s) u E0 p
price momentum. The region is benefiting from improving affordability; L' K" W. Y* ] h& w9 U* p
following two years of deterioration.
+ X* n9 O; J5 A- s >> |
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