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British Columbia's housing affordability notably improved but still has far to go, says RBC
/ l* Q% K* H9 E" i- z: R TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the( S& X8 P& X+ X% O7 X
middle of a significant correction that is partly reversing the extensive- }9 H3 E7 G: L; d0 |" P: ^, S
gains of recent years and which is helping restore affordability conditions,3 ?+ M f/ p: F" G3 }
according to the latest housing report released today by RBC Economics.
* \/ m; a& f" G6 C "The province's housing markets remain under heavy downward pressure,"
$ r' H# D/ H$ `9 G ]said Robert Hogue, senior economist, RBC. "While housing affordability is: @: y/ O8 n3 j: H( i) R
improving as the correction process runs its course. RBC's affordability
1 z; M- x; l# @% `measures for the province are still at levels far off historical averages." u# {3 B% j9 B; w5 P0 w
RBC notes that the sharp rise in unemployment since last summer is4 p6 d5 S) k9 u l' E8 J
worrying households in the province and weighing down demand for housing,0 i$ g. M9 ?. ]7 P6 F! p" @. J
which runs well short of available supply. Such weak market conditions have
4 U) v: @$ z4 nsustained the declining trend in prices for both existing and new homes.
; _$ V6 ~9 c5 L# h$ ^: y The RBC Affordability measure for British Columbia, which captures the9 A+ ~+ Y" O, a A& l8 v& P
proportion of pre-tax household income needed to service the costs of owning a( |' F* W ^4 N4 J/ v4 @
home, improved across all housing segments in the last quarter of 2008.
6 {9 n% b" J9 [Affordability of detached bungalows in the province moved to 66 per cent, the
3 K9 p( D8 H) o6 bstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
' n0 v# v1 k& y4 ~8 |5 D, q' Athe standard two-story home to 73.7 per cent.- C- O5 T6 q& C
According to the report, there are signs that the B.C. housing markets) P* K$ o! \3 E5 j% n& U L/ L& d9 \
may be stabilizing as sales of existing homes appear to have bottomed out in
, \" y( M, ~: l9 O5 c0 O7 M3 c1 wthe closing months of 2008 and the first two in 2009 - although at# X: G+ `! b' w9 X& |& r
historically depressed levels.
$ I& A- w# W" ]0 s& n% u Despite sharply declining house prices and lower mortgage rates, the cost( B0 o6 J( X, E6 v! @
of homeownership in Vancouver is still the highest in the country. House4 n8 z) P2 a! d0 N; }& r/ Z2 Y
prices continue to rapidly decline and pricing power remains firmly in the
, W% g7 u, O5 f/ V: V' V. o. Lhands of buyers with the sales-to-new listings ratio at historical lows. "This/ q M C# q3 q7 D
enormous imbalance suggests that prices will likely further correct in the
?$ `- O6 B# I/ f9 b1 {months ahead," added Hogue.
- l! E: r7 q+ E5 A2 F" c T3 @ RBC's Affordability measure for a detached bungalow for Canada's largest
" \; Y4 r, i {' [9 Q, Lcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
8 u6 g# Y$ Z5 b42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.( u b! v4 z: s2 w) ^. {
The report also looked at mortgage carrying costs relative to incomes for
2 L6 u2 C; r5 c7 ea broader sampling of cities across the country, including Victoria. For these
" i9 A5 {+ }1 T9 {& r( ccities, RBC has used a narrower measure of housing affordability that only
8 v$ C6 @5 p1 T; d4 Y. Jtakes mortgage payments relative to income into account.( S5 R$ V- Z, f1 r4 u# y) z
The Housing Affordability measure, which RBC has compiled since 1985, is
) o. a/ l7 P& T- V+ |7 _based on the costs of owning a detached bungalow, a reasonable property8 f' O- V W: D
benchmark for the housing market. Alternative housing types are also presented
1 Q# L! U* N' r; F4 \! s, Nincluding a standard two-storey home, a standard townhouse and a standard* W- w, ]) d2 C9 ~
condominium. The higher the reading, the more costly it is to afford a home.5 d& R4 o$ f/ Y2 U
For example, an Affordability reading of 50 per cent means that homeownership
2 c# l& }/ k# J7 pcosts, including mortgage payments, utilities and property taxes, take up 50) t% _+ j7 ^7 H5 ^. B2 b7 w" I# _
per cent of a typical household's monthly pre-tax income.. t2 s: O% X/ h) N1 r" p9 A
* _1 f: i3 l( d" ~7 U2 L/ p' s, A
<<6 ^1 b2 s2 Z! |# s5 x
Highlights from across Canada:
0 k8 C$ a5 H! ?0 i- o1 A: L7 X+ O. V5 }9 z
- Alberta: Since last fall, the declining Alberta economy has& S9 ]- h" q8 W# [7 P; G
intensified the downdraft on the province's housing markets, causing
" v A9 h: K* G( k* B home resales to drop to a 12-year low at the end of 2008 and rebound( L' e+ L% A/ O' Z0 o3 o+ Y; `$ q1 F
only modestly since. Affordability has been on an improving track
' z% \5 m( K. X since about the middle of 2007.
$ r/ o/ \4 y: l - Saskatchewan: Market activity has cooled considerably from the( g/ M3 s {9 G" ~# k) g8 Q9 a3 u
frenzied pace from 2006 to early 2008 and prices have begun to/ R! z/ V! a3 G8 T; A' A0 D6 U5 W
decline. Nonetheless, economic and demographic fundamentals are still3 U, v1 i+ \( G8 _, f3 P' V) e
largely supportive of the housing market and overshadow extremely/ X7 w" C8 U" Y" p
poor affordability levels.* n% ]5 N2 _3 j9 V& J
- Manitoba: Manitoba's housing markets have fared much better than the
5 U* W0 Z8 o3 N: s# s5 I7 e# `3 k vast majority in Canada: resale activity has slowed moderately and; m' j( C2 R- R; _' a- L5 r
prices have either held their own or edged down just slightly.
! I: a! ~* i7 u4 _: x Affordability has been kept out of the danger zone, helping to
0 q# ?8 T. Q( E* V minimize any downside risks.1 U5 M% }" \+ R# Q; X1 {: i
- Ontario: With the recession pounding many communities, housing market0 k5 ~) F) N) e- w" \! k2 b
conditions have deteriorated considerably. However, the impact is( N8 W: q3 _8 i& k W
unlikely to develop into an all-out rout similar to that of the early- y4 l6 `& k, }, Q
1990s. Affordability, while still causing some stress, is quickly u! W9 l2 k1 E! ]( ?, h+ q
being restored to levels closer to long-term averages.. j6 U/ f. {2 g
- Quebec: The province's housing markets have been among the last in+ z+ [1 t5 b& i% k& z2 t
Canada to yield to the weakening trend. The main sign of cooling thus. r, R2 L/ Y* d1 D- f: D. G" B" b
far has been a drop in resale activity, as prices have held up. p, C6 b/ W' U' Q4 P2 E: c u! L
reasonably well. Some of the persisting market strength can be
. k6 Z: @* p, |2 u* }; b ascribed to sensible affordability levels, which had eroded only
& E0 g, I0 E% e( @ modestly in recent years." X$ u. x% q1 p( ]3 K# g! o
- Atlantic region: Markets have largely remained stable against the
; Z3 ^) k4 f7 d: ^0 o general housing downturn, with St. John's becoming the housing hot. Y; A2 }5 b% @6 v- @3 J8 \5 G
spot in Canada and Halifax and Saint John maintaining steady upward6 l7 D9 t' R! z) q* { ^
price momentum. The region is benefiting from improving affordability# }9 Q$ t3 H# g2 }0 Z& b6 u
following two years of deterioration.' u# P- [$ |5 O1 K
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