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British Columbia's housing affordability notably improved but still has far to go, says RBC
+ f$ I, ?2 I, }" K6 Y B% ]. I TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
* h& v0 h5 |' z" R4 J) @7 omiddle of a significant correction that is partly reversing the extensive( M( _- C2 I, z* V' n
gains of recent years and which is helping restore affordability conditions,8 X7 {3 M1 Z8 ~( N+ l
according to the latest housing report released today by RBC Economics.
6 o$ y$ Z3 D' E: r* Q- ~/ [1 I% j "The province's housing markets remain under heavy downward pressure,"& A% o, S+ d1 `3 m
said Robert Hogue, senior economist, RBC. "While housing affordability is
) L/ m/ v3 |0 g) U7 {. [; u$ Rimproving as the correction process runs its course. RBC's affordability
' {- b% c' g+ z& Vmeasures for the province are still at levels far off historical averages."
% W. q. N2 T: G5 J RBC notes that the sharp rise in unemployment since last summer is
' a Y1 s; A m& \; n& q- T" Jworrying households in the province and weighing down demand for housing,! H3 S, w9 B/ l" ~" D
which runs well short of available supply. Such weak market conditions have6 T7 r% v. x$ z0 y$ \
sustained the declining trend in prices for both existing and new homes.% p" P I6 k/ `$ P. H
The RBC Affordability measure for British Columbia, which captures the; |0 w' {% s" A2 x7 n# E2 l; E+ `/ M
proportion of pre-tax household income needed to service the costs of owning a7 d9 a, B2 d! n4 T, r0 o8 u
home, improved across all housing segments in the last quarter of 2008.5 G8 d: K- Q( | y
Affordability of detached bungalows in the province moved to 66 per cent, the! K* Q, {, T3 G) y8 S1 @
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
' x" B: v! A9 athe standard two-story home to 73.7 per cent.
: {' _' ^& ^8 { According to the report, there are signs that the B.C. housing markets7 s0 x' i' I: X2 R3 \9 Q
may be stabilizing as sales of existing homes appear to have bottomed out in
1 N6 K i& G! L, E" H$ ], d0 tthe closing months of 2008 and the first two in 2009 - although at
" o) J' u5 \6 `+ Xhistorically depressed levels.
/ V% Z( F" p0 z Despite sharply declining house prices and lower mortgage rates, the cost7 x8 M# v7 }; B0 z( E! m$ }; l: ]
of homeownership in Vancouver is still the highest in the country. House
' W6 b8 m1 v! K' S% n. Nprices continue to rapidly decline and pricing power remains firmly in the
' F& g5 P* U' h/ h2 u# Y6 m3 V- thands of buyers with the sales-to-new listings ratio at historical lows. "This/ k, @/ ~5 ^5 o" M. p
enormous imbalance suggests that prices will likely further correct in the |% U @* F. `9 m/ x. U
months ahead," added Hogue.
) }% V( @( Y \7 _" ` RBC's Affordability measure for a detached bungalow for Canada's largest4 A1 A$ f9 @; O! @1 v
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
$ W+ X& ]5 A X+ X4 O1 a" |42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
' \; Y3 D& Z: C* | The report also looked at mortgage carrying costs relative to incomes for8 X" H+ m* J8 }% u- k
a broader sampling of cities across the country, including Victoria. For these
5 C/ O- y4 j/ a& s; L' O0 i* ^cities, RBC has used a narrower measure of housing affordability that only3 A% N& _1 P) v: z0 w3 v4 x8 E# m
takes mortgage payments relative to income into account.
$ f; n9 t- S0 h7 l# Z$ O0 L The Housing Affordability measure, which RBC has compiled since 1985, is
: |6 k* e2 L+ l r2 c% ?) ubased on the costs of owning a detached bungalow, a reasonable property
) a& @# W" c+ _& _7 t- Z9 T# \# _benchmark for the housing market. Alternative housing types are also presented9 H' V; A( g# H/ Q. v5 c
including a standard two-storey home, a standard townhouse and a standard8 R' ~: R1 q& g
condominium. The higher the reading, the more costly it is to afford a home.
$ F% L! T5 ?8 k& @: sFor example, an Affordability reading of 50 per cent means that homeownership& J' b' v# y8 p9 O$ u, \
costs, including mortgage payments, utilities and property taxes, take up 503 n7 x1 T0 p) t
per cent of a typical household's monthly pre-tax income.2 T8 o) |& T9 [
" v5 B& J; U+ c$ P. ?# C- E <<) {* V6 ]' e4 F( j
Highlights from across Canada:
, d) O7 [' B* C. f4 h; }
7 W* V9 z3 m% j) g - Alberta: Since last fall, the declining Alberta economy has5 m8 n5 ]9 E( S- x: U# U
intensified the downdraft on the province's housing markets, causing9 b$ K# B8 T7 v- V/ z
home resales to drop to a 12-year low at the end of 2008 and rebound4 e8 @ `1 G; b% \4 {# n
only modestly since. Affordability has been on an improving track W. ~; H9 {0 e7 p7 v- G
since about the middle of 2007.
; o( a. V3 R3 g" i! y - Saskatchewan: Market activity has cooled considerably from the
1 c' y" I2 T, _6 i frenzied pace from 2006 to early 2008 and prices have begun to
( y5 C/ R' {& R8 x O3 K1 {9 P; f decline. Nonetheless, economic and demographic fundamentals are still; i6 l0 q8 K( l4 b- h& k
largely supportive of the housing market and overshadow extremely3 D& n( T( f0 ?, r& u, P' H! m
poor affordability levels.9 y* |, D1 T3 l6 V1 R. L
- Manitoba: Manitoba's housing markets have fared much better than the8 e7 [% m% @) L: R4 V# g
vast majority in Canada: resale activity has slowed moderately and% n. t8 H7 w% s; R
prices have either held their own or edged down just slightly.
9 t7 @+ p& F2 m8 O7 G: h Affordability has been kept out of the danger zone, helping to! |) q0 z0 D: \: i- s
minimize any downside risks.8 y7 l3 s0 J- h$ _( H
- Ontario: With the recession pounding many communities, housing market0 m0 P& a% v9 k. B( v7 s% `) @
conditions have deteriorated considerably. However, the impact is
, A. a- f: l" K! l. f2 w: ] unlikely to develop into an all-out rout similar to that of the early* m* A0 a+ S, q6 y9 R
1990s. Affordability, while still causing some stress, is quickly c, h/ _: C; G$ x4 y. z% I3 p# h
being restored to levels closer to long-term averages.' ~# [. f1 I$ l9 W5 r5 L
- Quebec: The province's housing markets have been among the last in
3 S$ Z! G; i. }8 ?, p" L+ p& ] Canada to yield to the weakening trend. The main sign of cooling thus
D; O$ H s- ^# `5 \% K far has been a drop in resale activity, as prices have held up( `% o4 s6 q+ v9 m
reasonably well. Some of the persisting market strength can be) b5 _3 z' P- Y, m
ascribed to sensible affordability levels, which had eroded only; [8 C* I: n& z
modestly in recent years.3 u/ J" q4 U* [8 y& p+ y! f0 f
- Atlantic region: Markets have largely remained stable against the- x4 d) q" Z7 E; k' L6 E; C3 ~! ?
general housing downturn, with St. John's becoming the housing hot; u! H( `, z0 w* S, j
spot in Canada and Halifax and Saint John maintaining steady upward" p2 c S$ A9 V. c8 a) F2 U
price momentum. The region is benefiting from improving affordability
* m# T: ^$ u q) I following two years of deterioration.+ {3 ^! n1 f4 Z3 g8 Y& _
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