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British Columbia's housing affordability notably improved but still has far to go, says RBC
* ?# P- \7 ]" z- {% h, } TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the& t8 E+ z5 m( d8 X
middle of a significant correction that is partly reversing the extensive
( A$ @. o& c L% Ggains of recent years and which is helping restore affordability conditions,
: ?0 O& R2 Q5 ]5 F7 _& [0 I2 I' [according to the latest housing report released today by RBC Economics.
4 X2 p' d7 q2 v3 i "The province's housing markets remain under heavy downward pressure,"
' l% B& g* \( Z( s* G0 `* v, rsaid Robert Hogue, senior economist, RBC. "While housing affordability is
% C" m i0 x* f; O% b# l( Himproving as the correction process runs its course. RBC's affordability: E; d3 E* O6 c3 v0 d
measures for the province are still at levels far off historical averages." G" z* K" H5 K% E! n5 D% [2 j3 p
RBC notes that the sharp rise in unemployment since last summer is
6 p# O( O* o! i' p3 hworrying households in the province and weighing down demand for housing,: i9 Z. {! e$ n0 D
which runs well short of available supply. Such weak market conditions have6 `6 `, z* U$ S7 l7 s% x8 G
sustained the declining trend in prices for both existing and new homes.3 l+ o" B# |0 P7 w T
The RBC Affordability measure for British Columbia, which captures the% w" Y9 o: f; E1 u7 d8 x- a( P+ J& a' y+ A
proportion of pre-tax household income needed to service the costs of owning a
1 h9 y: ~5 [# w' hhome, improved across all housing segments in the last quarter of 2008.9 A: P7 D& ?, k6 J! d% D) V# `
Affordability of detached bungalows in the province moved to 66 per cent, the
/ O2 K* b; a( x8 W2 N+ x/ a8 Ostandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
" M g7 N% C/ ]* ]' \# r/ @the standard two-story home to 73.7 per cent.1 @9 v& a" y, J8 q1 U0 M
According to the report, there are signs that the B.C. housing markets
0 X) @* _1 m9 t3 J7 K& lmay be stabilizing as sales of existing homes appear to have bottomed out in
& _: F& k/ \ Bthe closing months of 2008 and the first two in 2009 - although at
6 y. ~" ~' j3 [( Uhistorically depressed levels.
" }. P3 I8 ]! a/ Q: h6 O& ^/ ^ Despite sharply declining house prices and lower mortgage rates, the cost
' F- e# G3 Y. b: J Oof homeownership in Vancouver is still the highest in the country. House M0 X* c0 Q$ Q5 ? ?
prices continue to rapidly decline and pricing power remains firmly in the+ o( e, w+ o4 |: b" W" y
hands of buyers with the sales-to-new listings ratio at historical lows. "This
' `3 q: ~( U/ @0 R+ `: Jenormous imbalance suggests that prices will likely further correct in the& p% n6 p# N% v! s3 p! K9 t
months ahead," added Hogue.
+ P3 `; Z) L! T3 G4 Y# B: I" i RBC's Affordability measure for a detached bungalow for Canada's largest
8 t, E$ a6 m0 d. m! B+ {) Qcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
7 W5 X: a! B& n5 a7 q8 _42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
1 D' W: Y& N% R' c& { The report also looked at mortgage carrying costs relative to incomes for
% F) Q. \- q8 G5 v* f4 |4 r- Aa broader sampling of cities across the country, including Victoria. For these
6 G" [; u6 R& W; A' O1 f1 Vcities, RBC has used a narrower measure of housing affordability that only$ s7 T9 o7 ~+ z0 r e1 b V) L. ?
takes mortgage payments relative to income into account.
. O5 V% \$ C' l: D! _, J' _ The Housing Affordability measure, which RBC has compiled since 1985, is
8 h( f( i! w5 R- M6 Dbased on the costs of owning a detached bungalow, a reasonable property
1 }: {8 Z0 W2 Y ibenchmark for the housing market. Alternative housing types are also presented+ P6 m& K6 H( @2 B
including a standard two-storey home, a standard townhouse and a standard' e z/ j) L2 C, K7 M) a+ \& |$ \
condominium. The higher the reading, the more costly it is to afford a home.
! s, o0 z6 K' n1 P3 E: A# \& h# EFor example, an Affordability reading of 50 per cent means that homeownership* s) y" ~0 V7 k. B8 T# W
costs, including mortgage payments, utilities and property taxes, take up 50
5 N: @8 L o& x4 ]/ Q4 v1 X: g+ f8 eper cent of a typical household's monthly pre-tax income.8 L& C0 c2 O. Y6 w. j6 X/ F6 N
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; w% y! G+ U- M* Y" D0 ? Highlights from across Canada:. g* M3 G3 P' G1 ^( w$ H. k9 `2 t
" z. I1 M* t" N! a; L - Alberta: Since last fall, the declining Alberta economy has& {7 j. h1 G( l
intensified the downdraft on the province's housing markets, causing
! Z6 b' j- _2 U7 s home resales to drop to a 12-year low at the end of 2008 and rebound
! G! N" l0 k/ o( u- [: o) Q. S* L only modestly since. Affordability has been on an improving track
1 |6 g& N( K% O* c" Z since about the middle of 2007.
/ M, a# Y3 n3 R6 J" p% W- D2 s/ Y - Saskatchewan: Market activity has cooled considerably from the
; w6 }/ v# D* g4 G frenzied pace from 2006 to early 2008 and prices have begun to
0 ~" M: `" {7 f- p: | decline. Nonetheless, economic and demographic fundamentals are still: p( f/ r6 H7 R5 }
largely supportive of the housing market and overshadow extremely2 R4 v/ a4 j8 i6 c" j
poor affordability levels.
5 T9 o8 _ L: v1 W4 B/ Q - Manitoba: Manitoba's housing markets have fared much better than the% O* v+ _5 ^* m4 b2 }0 m% B
vast majority in Canada: resale activity has slowed moderately and& \/ r( |6 V! y* K* ]( \: X8 f
prices have either held their own or edged down just slightly.
$ E/ K3 \- w7 `, N Affordability has been kept out of the danger zone, helping to
( y- r0 ]1 A6 P7 _3 n0 R1 [ minimize any downside risks.
A+ _ H2 A3 c# S' }( |" r - Ontario: With the recession pounding many communities, housing market
" Y, E3 N3 `1 T' t, g* `' A conditions have deteriorated considerably. However, the impact is- q# C; g' x( W# R
unlikely to develop into an all-out rout similar to that of the early: p$ j, [7 S% C) M- @
1990s. Affordability, while still causing some stress, is quickly# Y. P7 ~+ f& t) `0 u- V% v
being restored to levels closer to long-term averages.
! r( e) Y" ?3 h$ R5 V% h - Quebec: The province's housing markets have been among the last in' y/ ~& b9 p/ v; D7 Z: e; e; D, n& |/ E
Canada to yield to the weakening trend. The main sign of cooling thus
' g& ?2 r l0 Q' u8 l" \ far has been a drop in resale activity, as prices have held up2 z8 M* u5 p. ?4 F" L
reasonably well. Some of the persisting market strength can be
$ X" C9 I. t k ascribed to sensible affordability levels, which had eroded only
! y: v( v6 X0 c% _" y modestly in recent years.
% w+ c& p. N; F5 ?( s - Atlantic region: Markets have largely remained stable against the
2 w- S4 Y+ ?& Z" [ general housing downturn, with St. John's becoming the housing hot
5 f4 `* h3 Z6 ?- ~9 e spot in Canada and Halifax and Saint John maintaining steady upward
E3 ?6 \' H7 f6 _0 W price momentum. The region is benefiting from improving affordability
* n( ]( x3 S: e' z2 \. @ following two years of deterioration.
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