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British Columbia's housing affordability notably improved but still has far to go, says RBC
0 c: X4 W* O% ^/ b7 c* { TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
& H( k# I2 {. o) Q! U& r9 amiddle of a significant correction that is partly reversing the extensive5 W# D- O! F. C. q) U8 C
gains of recent years and which is helping restore affordability conditions,5 i1 N$ b( d- a4 H9 K
according to the latest housing report released today by RBC Economics.
" F! h6 Y) |' U6 [: k$ k+ S3 e "The province's housing markets remain under heavy downward pressure,"
, |3 {$ e3 v z6 h0 m. u$ lsaid Robert Hogue, senior economist, RBC. "While housing affordability is
4 r# e7 r# s$ ]+ o5 V+ b/ gimproving as the correction process runs its course. RBC's affordability' ?6 A- i# ~" G1 r
measures for the province are still at levels far off historical averages."3 X$ n# y1 }/ |0 Y; V9 Q9 w* w
RBC notes that the sharp rise in unemployment since last summer is1 |, P: J+ g: z( h! D
worrying households in the province and weighing down demand for housing,' T7 e0 h* V2 M- E* Y
which runs well short of available supply. Such weak market conditions have
; v/ D$ Y: P# e- Ssustained the declining trend in prices for both existing and new homes.
) B& @. [6 K2 S B* t: i1 _ The RBC Affordability measure for British Columbia, which captures the6 V* v' q8 l0 \# ?6 a
proportion of pre-tax household income needed to service the costs of owning a; g9 ?% ?/ m1 Q: ~- B1 ^$ ?7 ^# Q
home, improved across all housing segments in the last quarter of 2008.+ A( D& @: j0 F) L: |4 A
Affordability of detached bungalows in the province moved to 66 per cent, the# N' |" X4 n" b
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
* s! y+ c1 m+ r4 S6 b4 Jthe standard two-story home to 73.7 per cent.( y$ d- x; A$ Z9 e( r
According to the report, there are signs that the B.C. housing markets
7 i5 D. }' X$ Y, T. Qmay be stabilizing as sales of existing homes appear to have bottomed out in1 h3 A* F+ ]: M) R J. {' u- y5 T: ^
the closing months of 2008 and the first two in 2009 - although at( ?+ ?) J8 O* Z" M% F7 t0 _
historically depressed levels.4 i% g7 [* h: L+ s6 f9 _* X
Despite sharply declining house prices and lower mortgage rates, the cost
4 x0 x: Z; f8 O/ M2 w8 [$ e1 ~of homeownership in Vancouver is still the highest in the country. House+ q5 h: U% ?& E) ?. i, [6 e
prices continue to rapidly decline and pricing power remains firmly in the
9 u5 D& j u+ Vhands of buyers with the sales-to-new listings ratio at historical lows. "This
; x- w1 Z" M- \4 F% x2 d6 G0 ^* uenormous imbalance suggests that prices will likely further correct in the7 {' |8 P* `2 Q" s! N' z1 j
months ahead," added Hogue.
0 ]! r' D" i9 r/ d2 }. G# C RBC's Affordability measure for a detached bungalow for Canada's largest) F8 l( x% W1 d
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
! x( M: Z" K8 x42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
6 D! B& W; m5 g+ x) e1 H The report also looked at mortgage carrying costs relative to incomes for
+ f+ k4 V6 l0 F$ ?* |! n2 pa broader sampling of cities across the country, including Victoria. For these
2 R+ S5 X7 `: E4 k# X4 r5 Icities, RBC has used a narrower measure of housing affordability that only+ B ?2 U( g4 E) L
takes mortgage payments relative to income into account.
7 l% W8 P0 O: C# T7 ?4 A The Housing Affordability measure, which RBC has compiled since 1985, is2 n# u" a( @1 Q( h+ i W
based on the costs of owning a detached bungalow, a reasonable property5 q3 g2 `( [4 [7 q1 o: i/ }
benchmark for the housing market. Alternative housing types are also presented; M: R6 r0 z1 _
including a standard two-storey home, a standard townhouse and a standard* {$ b& m+ C/ u6 N6 T3 e
condominium. The higher the reading, the more costly it is to afford a home." G a4 i4 }) s* `6 r
For example, an Affordability reading of 50 per cent means that homeownership9 ]5 c# q9 z/ u" A8 Z
costs, including mortgage payments, utilities and property taxes, take up 50
, K8 H" w% y) C. |per cent of a typical household's monthly pre-tax income. Z, v! a. l; M2 W7 Q
5 M# b7 b V- I ]8 C2 o <<
- C8 u# j' v+ c Highlights from across Canada:- Q* v2 e6 r# _
4 ^! \7 ]% n8 \9 {( y: z/ r! Y - Alberta: Since last fall, the declining Alberta economy has, C I! B* A" g, j' I
intensified the downdraft on the province's housing markets, causing
( }7 r; i: k% j. b! k home resales to drop to a 12-year low at the end of 2008 and rebound3 B/ F9 ?, d6 p9 U$ u) B
only modestly since. Affordability has been on an improving track: m* {+ y' ?% c t2 E, ?, q
since about the middle of 2007.
0 |8 o' u/ X3 Y: ?, b6 |. W - Saskatchewan: Market activity has cooled considerably from the
2 S6 v8 W" i" D7 f2 r& q+ \6 W2 i frenzied pace from 2006 to early 2008 and prices have begun to
( s. l6 _: U% e9 M6 ~7 a0 Q! d decline. Nonetheless, economic and demographic fundamentals are still
+ u7 d( ?/ M7 _. k6 L7 ] largely supportive of the housing market and overshadow extremely
& f% P( U; e6 e5 G poor affordability levels.
4 g) e, s3 t& F - Manitoba: Manitoba's housing markets have fared much better than the
& e6 U/ H% t/ a8 \6 S vast majority in Canada: resale activity has slowed moderately and- L5 `, d, Y8 I5 C, Q8 D
prices have either held their own or edged down just slightly.
3 H3 O1 l6 ^4 W Affordability has been kept out of the danger zone, helping to
% u" z8 z& h6 E5 \& D2 | minimize any downside risks.8 \% _& v6 T1 y9 A* ]6 [, P
- Ontario: With the recession pounding many communities, housing market" K1 b( W5 l; X Q# H
conditions have deteriorated considerably. However, the impact is
0 W+ ?5 B2 k8 I) |2 O9 E( W: ^! B3 g unlikely to develop into an all-out rout similar to that of the early6 E. r! L0 v, g- H% h
1990s. Affordability, while still causing some stress, is quickly2 H% ?" D* b5 q# C. f" L9 {: {
being restored to levels closer to long-term averages.! A& w' h+ x, y$ }4 j5 y6 P; G
- Quebec: The province's housing markets have been among the last in
0 A+ l4 m6 u; z l8 p8 o Canada to yield to the weakening trend. The main sign of cooling thus/ |6 @/ j5 O0 ]! |
far has been a drop in resale activity, as prices have held up2 V+ ~1 A$ h( O$ v# T" x+ A# z
reasonably well. Some of the persisting market strength can be# y1 V8 x* `4 R. N* N# v
ascribed to sensible affordability levels, which had eroded only
5 o! h* z! D; [2 Y modestly in recent years.' v5 q% M( y( U b; c" b
- Atlantic region: Markets have largely remained stable against the" [* x6 m( [" w4 D
general housing downturn, with St. John's becoming the housing hot
/ c7 @/ |4 \2 G- w/ k4 r( s spot in Canada and Halifax and Saint John maintaining steady upward
2 C3 j1 _: Q1 i( K: P price momentum. The region is benefiting from improving affordability
, i# A3 |* g6 _8 G4 `1 ~ following two years of deterioration.$ L1 e2 U# N- ?# F! @: k4 ~
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