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British Columbia's housing affordability notably improved but still has far to go, says RBC
8 Y/ o! |: {; F; E7 A6 Z TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the( g* |+ `# w* I; D4 l% w
middle of a significant correction that is partly reversing the extensive; j3 C3 }/ M3 X" s
gains of recent years and which is helping restore affordability conditions,, G1 H, T7 q# y) k2 X, J
according to the latest housing report released today by RBC Economics.4 h( e3 ?3 `0 T4 M* d; ~. H
"The province's housing markets remain under heavy downward pressure,"
5 _) K5 k+ r% I( a: Osaid Robert Hogue, senior economist, RBC. "While housing affordability is9 l7 T3 I' k( ]5 {8 X
improving as the correction process runs its course. RBC's affordability" O7 L O7 o6 r' K
measures for the province are still at levels far off historical averages."# R/ r' t! w$ w' d+ u
RBC notes that the sharp rise in unemployment since last summer is
3 d0 R \1 w6 C& z1 _8 [worrying households in the province and weighing down demand for housing,
" a# D9 ^3 o8 N! P/ dwhich runs well short of available supply. Such weak market conditions have6 _' r+ k' n, p2 d
sustained the declining trend in prices for both existing and new homes.. M% ]+ t; y2 u: b
The RBC Affordability measure for British Columbia, which captures the, g$ M2 j; |9 N) v
proportion of pre-tax household income needed to service the costs of owning a
3 s6 l; x6 h+ K& U$ q2 J$ D# nhome, improved across all housing segments in the last quarter of 2008.- b; r( \- A' ]! `# i
Affordability of detached bungalows in the province moved to 66 per cent, the
( V/ ^4 O: W/ X f4 I9 K$ G! Ustandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and4 h2 J# |, w3 n4 u d
the standard two-story home to 73.7 per cent.+ \3 _: p2 c5 ~. o7 p. B2 T& _2 _& W
According to the report, there are signs that the B.C. housing markets
3 r, o% t9 ^, _# hmay be stabilizing as sales of existing homes appear to have bottomed out in1 Y9 o! ]+ K/ Y+ L
the closing months of 2008 and the first two in 2009 - although at
5 n4 A( Z" ^# dhistorically depressed levels.
- J _0 s1 X( o, K Despite sharply declining house prices and lower mortgage rates, the cost0 [! ^! }* ?, Y h8 V1 |' `) |6 I
of homeownership in Vancouver is still the highest in the country. House' I" j* v& n M; s/ e
prices continue to rapidly decline and pricing power remains firmly in the) K9 ~, f4 X* H- s% ?
hands of buyers with the sales-to-new listings ratio at historical lows. "This8 b5 ^7 I$ }. V
enormous imbalance suggests that prices will likely further correct in the' c% @1 f- E: a7 C) y
months ahead," added Hogue.
* `/ B" W, u4 y) ` RBC's Affordability measure for a detached bungalow for Canada's largest
s- z+ r7 e3 o A9 s7 G$ Jcities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
% @+ ]- q( {% U9 }1 b* f# `42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.+ O8 e; k+ A2 |; q
The report also looked at mortgage carrying costs relative to incomes for) v3 r' u* r) i; [
a broader sampling of cities across the country, including Victoria. For these8 S# o9 ~0 n8 ?; k2 m% k& A$ t
cities, RBC has used a narrower measure of housing affordability that only
. } q! Z+ R$ V$ btakes mortgage payments relative to income into account.
1 Z: b8 {. j1 k. q- H8 ?6 p1 g& i& S The Housing Affordability measure, which RBC has compiled since 1985, is Q( a9 W8 D7 A" y1 `) S
based on the costs of owning a detached bungalow, a reasonable property
. V1 s6 O4 B8 e6 U, E. y% bbenchmark for the housing market. Alternative housing types are also presented0 ]: v0 a% N3 b& j
including a standard two-storey home, a standard townhouse and a standard
8 {( K. r. d1 E" L* _" O/ s* g" |condominium. The higher the reading, the more costly it is to afford a home.
! V3 j: \3 ?! j' R" f' MFor example, an Affordability reading of 50 per cent means that homeownership
1 i# C. h# h* z/ Ecosts, including mortgage payments, utilities and property taxes, take up 50% P! I+ {0 n: L' S! A/ o! U! u: ~
per cent of a typical household's monthly pre-tax income.
- {8 ?2 E; r, Y! a) Q
/ M q5 l6 ~7 x% F7 } <<
# M6 `* v) R: T, C$ X2 h! A o0 C Highlights from across Canada:0 y" k# F Z$ r
- n; P @) u1 p( W7 g" _
- Alberta: Since last fall, the declining Alberta economy has$ Y% ]+ V! \. u& e' A! S
intensified the downdraft on the province's housing markets, causing
8 J! w8 O$ E; H: W1 c6 f. m home resales to drop to a 12-year low at the end of 2008 and rebound
8 c9 G; ]5 Z3 @5 B, k, ` only modestly since. Affordability has been on an improving track
. ]9 \, h1 \! P3 ^: G* h% t since about the middle of 2007.
4 o( G/ g* |' k - Saskatchewan: Market activity has cooled considerably from the, }# \, p9 q3 J: k1 y$ k1 F
frenzied pace from 2006 to early 2008 and prices have begun to
& x2 G( G- v5 C decline. Nonetheless, economic and demographic fundamentals are still
a6 |1 q# Y: ^* K largely supportive of the housing market and overshadow extremely
5 E& E% J$ Q. o7 B% s poor affordability levels.
6 Q2 K( X, |7 ^' I1 J - Manitoba: Manitoba's housing markets have fared much better than the; H6 W, _2 B$ W/ j: @$ P; z
vast majority in Canada: resale activity has slowed moderately and3 Q2 S" L0 E$ g; Q; S
prices have either held their own or edged down just slightly.* g% @, x$ ]: n; O8 C
Affordability has been kept out of the danger zone, helping to
6 A7 Q# S* w6 E" i minimize any downside risks.% z5 M1 b$ T; D' J) i
- Ontario: With the recession pounding many communities, housing market
* h: R1 o: S* l( I! K5 K) E5 g conditions have deteriorated considerably. However, the impact is
( x8 W4 S; ?1 [# A% s5 y( S unlikely to develop into an all-out rout similar to that of the early6 [( T2 K" N \" L" T
1990s. Affordability, while still causing some stress, is quickly# ], P/ ]- \5 l
being restored to levels closer to long-term averages.
- i7 r8 Y2 P. F7 I3 Y - Quebec: The province's housing markets have been among the last in
5 O& S( }. r+ o. W0 g$ x- n Canada to yield to the weakening trend. The main sign of cooling thus
: K+ T# W) J9 m" y5 E far has been a drop in resale activity, as prices have held up) V! @- q( E! i x ^
reasonably well. Some of the persisting market strength can be# B, d+ \/ [8 [" i
ascribed to sensible affordability levels, which had eroded only- F. Q6 H; C: r% Z7 q
modestly in recent years.
1 C( D- G9 T3 h2 D& F3 l - Atlantic region: Markets have largely remained stable against the' I) N* w7 \, i: S k
general housing downturn, with St. John's becoming the housing hot
* `$ i' I2 w5 K1 ] F spot in Canada and Halifax and Saint John maintaining steady upward3 {* g- ~0 u5 c. f
price momentum. The region is benefiting from improving affordability
' ?! p4 h7 i. U5 t% ?2 U+ T# Z D* I following two years of deterioration.
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