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British Columbia's housing affordability notably improved but still has far to go, says RBC
# @6 w+ T1 V7 {/ S" E TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the9 l, C5 @+ A5 v
middle of a significant correction that is partly reversing the extensive5 P3 z5 N9 q+ {9 M8 ]/ c, }
gains of recent years and which is helping restore affordability conditions,
3 f0 d% @+ R' K9 b2 B1 Jaccording to the latest housing report released today by RBC Economics.3 g* F0 X0 p2 l* }" o
"The province's housing markets remain under heavy downward pressure,"0 E* a$ D2 I, z7 \- M
said Robert Hogue, senior economist, RBC. "While housing affordability is. T6 l' e$ y" K
improving as the correction process runs its course. RBC's affordability* b# j+ c6 |; \6 a* w) X0 o
measures for the province are still at levels far off historical averages."* o7 B, N/ B) h$ }! p
RBC notes that the sharp rise in unemployment since last summer is
4 m0 o! N! O0 k O cworrying households in the province and weighing down demand for housing,6 V R; _& D: \5 J" ~8 N9 u: D
which runs well short of available supply. Such weak market conditions have
# D$ M/ V2 G/ P0 Esustained the declining trend in prices for both existing and new homes.
) @% a% C0 ?% g% Z, l- X o The RBC Affordability measure for British Columbia, which captures the1 a+ A4 I3 Q! |2 X1 I7 n
proportion of pre-tax household income needed to service the costs of owning a
/ r5 E& N- Y. phome, improved across all housing segments in the last quarter of 2008.+ ^# \& d% X' S5 }* H/ w9 |- `
Affordability of detached bungalows in the province moved to 66 per cent, the
6 D* @" h3 Y6 qstandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
0 I7 A) W/ ^ H, O$ L Kthe standard two-story home to 73.7 per cent.2 O7 c+ i M% s
According to the report, there are signs that the B.C. housing markets
/ {2 ]/ {8 r nmay be stabilizing as sales of existing homes appear to have bottomed out in
M% p8 O& p+ A* u( B4 Nthe closing months of 2008 and the first two in 2009 - although at
' \% s- P* e0 E# {historically depressed levels.
6 i2 p" ~4 D" a% K) j Despite sharply declining house prices and lower mortgage rates, the cost" D7 Y m' X1 s8 b0 |9 f, v3 B5 z8 o
of homeownership in Vancouver is still the highest in the country. House
; z! a( {7 r( V! w. cprices continue to rapidly decline and pricing power remains firmly in the* ^7 p1 q: h* n1 O2 b8 M/ Y
hands of buyers with the sales-to-new listings ratio at historical lows. "This
0 }, Y9 S& `1 [enormous imbalance suggests that prices will likely further correct in the
8 p! g/ d4 I7 d$ hmonths ahead," added Hogue.
& I5 t, R3 |) ] RBC's Affordability measure for a detached bungalow for Canada's largest
. Y2 Z Q/ b5 P8 e; q6 M' r; ucities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
$ m' `6 D5 }& W, W# G2 u42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
+ @$ l7 Y, v6 I The report also looked at mortgage carrying costs relative to incomes for
' D% i" C* L/ T4 O1 L) Aa broader sampling of cities across the country, including Victoria. For these' ]7 s" i" z& f2 n
cities, RBC has used a narrower measure of housing affordability that only }( N( T8 [, F3 @/ W2 p. z6 F" z
takes mortgage payments relative to income into account.+ X" D& H. ^6 c' ~6 L
The Housing Affordability measure, which RBC has compiled since 1985, is9 s c3 }* J$ |0 {. A
based on the costs of owning a detached bungalow, a reasonable property+ g: P1 d/ V# p r& Z5 v
benchmark for the housing market. Alternative housing types are also presented2 J$ A' j2 J) d
including a standard two-storey home, a standard townhouse and a standard
/ I# {! V3 P' _* b* r& X( ccondominium. The higher the reading, the more costly it is to afford a home.
[+ ?: w( u% T+ s$ oFor example, an Affordability reading of 50 per cent means that homeownership
5 i7 [' f1 m: T! g( s( }( @costs, including mortgage payments, utilities and property taxes, take up 505 U y* m; R' S$ b
per cent of a typical household's monthly pre-tax income.5 W$ d, T- L y% E: Y6 S: X
! m1 l1 M9 [! h% }1 q <<7 I. e. N, ?4 W7 f! ?& _/ q) f
Highlights from across Canada:
* {' ^9 s) {2 O: y! t- |
4 } O6 f" u$ k# i6 L" H# y - Alberta: Since last fall, the declining Alberta economy has
, M' Q3 c$ t+ A intensified the downdraft on the province's housing markets, causing+ a/ ^% t/ o- x6 ~ P% w
home resales to drop to a 12-year low at the end of 2008 and rebound
1 V. _* F6 \# b" S: b0 I6 S( P! M4 m: ? only modestly since. Affordability has been on an improving track9 x/ e( t7 X! H) ^; i6 W X
since about the middle of 2007.
( }/ r# @% ]1 F - Saskatchewan: Market activity has cooled considerably from the- ]. t: d& B1 M. E8 B5 i8 E- s
frenzied pace from 2006 to early 2008 and prices have begun to
8 `* a. T" `$ ]- @; ^, V decline. Nonetheless, economic and demographic fundamentals are still: p4 E- b. l. C4 ^$ t3 c" A
largely supportive of the housing market and overshadow extremely
# M8 w" \# B* F. K7 V poor affordability levels.
9 w4 ^2 f- K% r* e& \ - Manitoba: Manitoba's housing markets have fared much better than the
" L. Y/ S. R" p! r/ g2 N/ @ i vast majority in Canada: resale activity has slowed moderately and
) s' H: e6 e( L. ~ prices have either held their own or edged down just slightly.. u3 U$ i; M/ h) L0 V# q4 t1 A
Affordability has been kept out of the danger zone, helping to
2 U8 P/ h$ M" |) l. {( j) p9 U+ k minimize any downside risks.
$ p% x2 E9 }0 w* w( i - Ontario: With the recession pounding many communities, housing market! y5 e, k& q' i
conditions have deteriorated considerably. However, the impact is, z: s5 |9 ?2 j" Y7 a
unlikely to develop into an all-out rout similar to that of the early
: A2 w- K \2 I 1990s. Affordability, while still causing some stress, is quickly
, |, Y" t' J1 A# r% m being restored to levels closer to long-term averages.
) V, v8 n5 Q( T _% G - Quebec: The province's housing markets have been among the last in
* n1 Y( f, S' O+ e$ }9 T5 T Canada to yield to the weakening trend. The main sign of cooling thus
+ \- _2 n q7 {$ @1 R far has been a drop in resale activity, as prices have held up0 g# ?6 b) g$ M7 [. N8 y
reasonably well. Some of the persisting market strength can be2 @+ m3 ~& [; \/ j6 z" |
ascribed to sensible affordability levels, which had eroded only
) m' w* Z. v# e3 Q/ [/ M \ modestly in recent years.
( b2 }4 ?! }3 I4 f7 E - Atlantic region: Markets have largely remained stable against the
3 `/ y- q& g' G; m8 M3 P- g& t general housing downturn, with St. John's becoming the housing hot" X# U A5 u6 F- e5 c
spot in Canada and Halifax and Saint John maintaining steady upward* ^9 }: x- s( A+ P) h' n) I' s, u
price momentum. The region is benefiting from improving affordability% W" ~- _! @* @# }5 {
following two years of deterioration.* l" ~4 M6 `% S1 N
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