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British Columbia's housing affordability notably improved but still has far to go, says RBC
) F% F8 \0 g, F, f& G TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the! }" R4 ^: K) N8 j" i4 G) g! U
middle of a significant correction that is partly reversing the extensive
0 \) R: e7 [9 E$ _gains of recent years and which is helping restore affordability conditions,
7 T1 Y$ {- _6 q; J& V8 Laccording to the latest housing report released today by RBC Economics. n9 r/ W6 a4 t0 z
"The province's housing markets remain under heavy downward pressure," b8 E, e W+ ?6 `& L
said Robert Hogue, senior economist, RBC. "While housing affordability is
5 x( J3 Y- W! `# s5 Yimproving as the correction process runs its course. RBC's affordability
- H3 S% U/ h1 g/ i) a# smeasures for the province are still at levels far off historical averages."8 K# Q9 j) G3 G& a9 V3 K( J
RBC notes that the sharp rise in unemployment since last summer is8 R g$ T7 Y- U! W
worrying households in the province and weighing down demand for housing,
6 ]2 x( n) i. D! B# vwhich runs well short of available supply. Such weak market conditions have
# V4 R+ Q. O+ b; dsustained the declining trend in prices for both existing and new homes.
$ {) z- \2 b7 R& ` The RBC Affordability measure for British Columbia, which captures the' `' U+ l% z+ r% ], A F4 ?2 [$ M
proportion of pre-tax household income needed to service the costs of owning a( E& Q4 L S; K" ~! T
home, improved across all housing segments in the last quarter of 2008.
0 L S6 b+ x1 B$ f7 D8 n, A2 BAffordability of detached bungalows in the province moved to 66 per cent, the% P0 Z5 a8 T, K# V$ [. ]
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and" @( R U1 C* A! L, W8 x+ I1 {% L
the standard two-story home to 73.7 per cent.
, h# w! \) T- }, q r According to the report, there are signs that the B.C. housing markets
B {- {/ b* N# hmay be stabilizing as sales of existing homes appear to have bottomed out in* Y( x( I& B5 B$ {8 G/ R8 I
the closing months of 2008 and the first two in 2009 - although at3 w8 z& P! O2 l
historically depressed levels.7 j0 O: l) W$ T$ o7 S
Despite sharply declining house prices and lower mortgage rates, the cost1 s; r0 m2 z. f) t
of homeownership in Vancouver is still the highest in the country. House
3 i5 i9 t* l" ^4 p) @5 iprices continue to rapidly decline and pricing power remains firmly in the3 u7 }' B& q0 W% h. J
hands of buyers with the sales-to-new listings ratio at historical lows. "This2 b! o, x4 @8 L& ]/ Y! F
enormous imbalance suggests that prices will likely further correct in the
% h0 y7 y! U# R* D/ s5 p0 gmonths ahead," added Hogue.0 J) J/ j, N/ Z: a& q, h
RBC's Affordability measure for a detached bungalow for Canada's largest
) r4 w4 B0 A& Kcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
0 w5 ]8 e# D# ~42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.3 p& K4 S. }+ _* I2 w
The report also looked at mortgage carrying costs relative to incomes for- ~& L& t+ M4 a7 o. x
a broader sampling of cities across the country, including Victoria. For these8 b' z5 S" v5 \
cities, RBC has used a narrower measure of housing affordability that only
6 g3 k" x3 r ntakes mortgage payments relative to income into account.2 _7 x1 T+ f3 u2 O Q, u8 g; }9 q
The Housing Affordability measure, which RBC has compiled since 1985, is
3 N+ R z+ _; Cbased on the costs of owning a detached bungalow, a reasonable property/ f3 ?# ^0 |3 a. V! ]! i% R
benchmark for the housing market. Alternative housing types are also presented
5 i9 U3 h0 u/ V6 y) Vincluding a standard two-storey home, a standard townhouse and a standard
1 r9 X0 U% J& Z D7 w* [+ qcondominium. The higher the reading, the more costly it is to afford a home.
. ?0 \+ B$ t: A" M' VFor example, an Affordability reading of 50 per cent means that homeownership
3 o4 v; c2 m" O) F0 B! Jcosts, including mortgage payments, utilities and property taxes, take up 50
& e( j+ N1 O& ]/ rper cent of a typical household's monthly pre-tax income.6 u$ J- Y3 B$ v( H1 i0 r
- p: N; b! d$ A <<! ~+ m) T7 g* u2 z. s
Highlights from across Canada:
9 B5 o8 l$ ]% I$ P( G$ `
4 v9 Q( l$ U0 \7 j! ? - Alberta: Since last fall, the declining Alberta economy has# g9 A. w4 V6 X- l1 N; I
intensified the downdraft on the province's housing markets, causing
, ?3 @2 L! `( V8 A0 T9 S* d home resales to drop to a 12-year low at the end of 2008 and rebound: g0 [' @& N& P. h
only modestly since. Affordability has been on an improving track
$ ]! _( O6 q" }1 U4 C since about the middle of 2007.
' j; R1 k" M. ~3 Z; }3 N - Saskatchewan: Market activity has cooled considerably from the
( G. Y0 O1 p/ B* G7 B frenzied pace from 2006 to early 2008 and prices have begun to0 r2 q4 P( N) I q: g
decline. Nonetheless, economic and demographic fundamentals are still# a# } L6 {$ }
largely supportive of the housing market and overshadow extremely5 D; L$ I# ~9 P/ D
poor affordability levels.$ {* }9 g3 a* @8 ~$ O0 H; v
- Manitoba: Manitoba's housing markets have fared much better than the* `8 r/ k5 _% ?& n$ O
vast majority in Canada: resale activity has slowed moderately and
8 `$ H" ]9 M3 v- I' x; q% y1 ` prices have either held their own or edged down just slightly.# O8 w2 J4 ]( g7 o/ j5 p& X
Affordability has been kept out of the danger zone, helping to
$ \9 Y5 a$ s0 j minimize any downside risks.
: M0 t/ B, M8 _' K& n( Z - Ontario: With the recession pounding many communities, housing market+ O8 r1 w, I( p- v
conditions have deteriorated considerably. However, the impact is( j2 j. Y6 _# n! ~ C
unlikely to develop into an all-out rout similar to that of the early/ k, v6 b {% d9 P
1990s. Affordability, while still causing some stress, is quickly7 J: X' z a$ y. `5 K
being restored to levels closer to long-term averages., G& O0 {! X! A6 j2 D& Y
- Quebec: The province's housing markets have been among the last in
! i+ r6 ~& ^/ t4 u2 n2 s* g Canada to yield to the weakening trend. The main sign of cooling thus
9 u8 [9 V- v0 Q5 S8 C' Z far has been a drop in resale activity, as prices have held up
4 t& ]' {- z3 D2 b. v& z! u' B reasonably well. Some of the persisting market strength can be1 \, f2 i/ L1 M3 e( g5 U! G* {3 n
ascribed to sensible affordability levels, which had eroded only" i. v; D/ t. Y5 F- z7 K* _
modestly in recent years.
! `- ~# [; Y9 ~7 d* o0 K. } - Atlantic region: Markets have largely remained stable against the
' P$ z6 f- C- ?7 _8 M; } general housing downturn, with St. John's becoming the housing hot
* n9 e( n) y7 j; r9 X& B spot in Canada and Halifax and Saint John maintaining steady upward: a. \$ P. m" D' L. a
price momentum. The region is benefiting from improving affordability/ T- N2 P. W/ Z0 o1 E, |/ }
following two years of deterioration.- I% N% R7 c: C j
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