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British Columbia's housing affordability notably improved but still has far to go, says RBC
& [1 ~# T. Q/ v- ^+ `9 {3 ? TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
4 c/ y! O# d/ Smiddle of a significant correction that is partly reversing the extensive
7 g$ x7 Q9 \+ `( Sgains of recent years and which is helping restore affordability conditions,
+ M3 z8 H- u8 ^+ v5 f; gaccording to the latest housing report released today by RBC Economics., \: N4 m* E3 l* m
"The province's housing markets remain under heavy downward pressure,"& f# O; n' S" m3 t6 [1 I, t
said Robert Hogue, senior economist, RBC. "While housing affordability is
/ h, s4 s# P( {2 W3 N# ~improving as the correction process runs its course. RBC's affordability( S% c j/ D! F7 f
measures for the province are still at levels far off historical averages."( }' G4 a- d; c+ [
RBC notes that the sharp rise in unemployment since last summer is
8 o8 \; a$ K7 A& y7 Bworrying households in the province and weighing down demand for housing, H( @# H' `- U3 k4 Q& H
which runs well short of available supply. Such weak market conditions have- F% Q) H% Z+ c3 G5 \4 s( A
sustained the declining trend in prices for both existing and new homes.
) u) T! i, H7 k: P% A' d# G The RBC Affordability measure for British Columbia, which captures the7 ^) N6 i6 R5 ?
proportion of pre-tax household income needed to service the costs of owning a
& c$ w& Z' k. e6 m+ J- ?+ ^! Dhome, improved across all housing segments in the last quarter of 2008.1 t# W6 G- j, [) B2 w/ u* H
Affordability of detached bungalows in the province moved to 66 per cent, the
/ Y, U% K! v# w7 ustandard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and" V# G3 T" z4 S4 ]. x. o# D
the standard two-story home to 73.7 per cent.5 K8 a( |* w& p
According to the report, there are signs that the B.C. housing markets
- ]* k4 h$ m5 L$ d: M( dmay be stabilizing as sales of existing homes appear to have bottomed out in) d! j, d9 J0 f8 M% I
the closing months of 2008 and the first two in 2009 - although at
. A4 ?# v- J/ S: n5 c6 I Mhistorically depressed levels.
( f: C6 J& e+ d. G: { Despite sharply declining house prices and lower mortgage rates, the cost
8 i0 j* P, G) q& ~" z9 rof homeownership in Vancouver is still the highest in the country. House
7 W+ L) F1 j& K* e* m- P9 vprices continue to rapidly decline and pricing power remains firmly in the
9 A! L2 P7 R, Jhands of buyers with the sales-to-new listings ratio at historical lows. "This% n; ~) U' t7 Y. j. x* J: V
enormous imbalance suggests that prices will likely further correct in the
v6 {: [8 u n* ?! L# _months ahead," added Hogue. o6 K/ Q& M T: |$ i8 h- ]% ~
RBC's Affordability measure for a detached bungalow for Canada's largest
G& f3 R, e" e! `0 A& }/ icities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
9 ]2 ~* y% D* {5 L2 A2 K3 R: R: Y42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
$ \. k# Y3 |; H: m V( V% a% p The report also looked at mortgage carrying costs relative to incomes for
" b3 Q3 v8 N# x* l( \a broader sampling of cities across the country, including Victoria. For these
. y7 ]0 K% M. [% c& a( O+ Bcities, RBC has used a narrower measure of housing affordability that only) P8 ?9 m% n9 W2 N3 \2 ]2 \
takes mortgage payments relative to income into account.+ H' w5 ^5 C$ g W9 O" }1 O" H
The Housing Affordability measure, which RBC has compiled since 1985, is- N x7 [7 H! {8 x: X1 k2 C
based on the costs of owning a detached bungalow, a reasonable property
) u3 N- r5 f' z1 W( ~5 Z1 a$ zbenchmark for the housing market. Alternative housing types are also presented: R! Z) J5 `3 F. x y, r/ d
including a standard two-storey home, a standard townhouse and a standard
6 ~- u$ F: Q6 o8 J, ]: n4 X. ocondominium. The higher the reading, the more costly it is to afford a home. |. [9 D! l/ p& C, r; K3 g
For example, an Affordability reading of 50 per cent means that homeownership
4 \/ z+ I9 Z8 Y5 M7 _7 C, lcosts, including mortgage payments, utilities and property taxes, take up 506 ~( Y! C/ G% R( D8 u
per cent of a typical household's monthly pre-tax income. ~3 y2 p# a0 z: K1 C1 c0 e! b! p
. ?" }" _) o, s, ^+ l
<<2 |( h8 a3 ?7 { G: H+ @
Highlights from across Canada:
2 g7 E) O9 l# y- p9 ]1 o" L9 G# _
: y& D7 ^, b+ { - Alberta: Since last fall, the declining Alberta economy has
. {3 t+ Z# p- v3 P7 o0 v intensified the downdraft on the province's housing markets, causing
) m2 X. x) `1 ~7 w8 i3 n5 |& ~ home resales to drop to a 12-year low at the end of 2008 and rebound
' o- w+ U: y; b only modestly since. Affordability has been on an improving track* h3 F7 G) W" z! T, E
since about the middle of 2007., `" @2 G) c; W) s6 b% Z
- Saskatchewan: Market activity has cooled considerably from the
' w9 M; c% n! b5 v- W3 ] N: } frenzied pace from 2006 to early 2008 and prices have begun to8 b. g& ~ S: g+ W
decline. Nonetheless, economic and demographic fundamentals are still; X) @. J8 H/ B9 h$ H: w
largely supportive of the housing market and overshadow extremely% t% ^) @! `7 n. K6 @7 i
poor affordability levels.# A! {8 |) t6 k
- Manitoba: Manitoba's housing markets have fared much better than the
# G- F- {1 [! Y7 I' }1 c" o vast majority in Canada: resale activity has slowed moderately and- c/ c B" N/ V: ^0 c
prices have either held their own or edged down just slightly.+ S Q+ ~7 u$ D" {# n0 h Q# m
Affordability has been kept out of the danger zone, helping to" K: |$ w& j4 ?) w
minimize any downside risks.
2 _* T$ r0 D8 a" _' E - Ontario: With the recession pounding many communities, housing market; p, X4 v# p- f& T
conditions have deteriorated considerably. However, the impact is; }, I7 q9 {% L+ ?
unlikely to develop into an all-out rout similar to that of the early
3 y$ a) X9 d H9 P9 k 1990s. Affordability, while still causing some stress, is quickly2 `9 D( a* r- G; f& s0 y
being restored to levels closer to long-term averages.
+ g O3 B1 x$ J/ _" \ - Quebec: The province's housing markets have been among the last in, e# `/ }2 s( I0 e4 v
Canada to yield to the weakening trend. The main sign of cooling thus
4 B2 ^7 w. r) V: A far has been a drop in resale activity, as prices have held up
7 L( S* V6 {( n2 r! D$ E% ] reasonably well. Some of the persisting market strength can be
$ Y6 G5 b* j2 _0 L1 s ascribed to sensible affordability levels, which had eroded only7 q" }' f! `2 O7 V4 d: x% l$ m( Y0 R# Y
modestly in recent years.
) f* I8 L8 b4 L - Atlantic region: Markets have largely remained stable against the
$ A" H! i% U% N6 {( l) K6 Z% h2 ?2 \6 i general housing downturn, with St. John's becoming the housing hot
3 m( Q/ M8 I- g, l spot in Canada and Halifax and Saint John maintaining steady upward
- g" v* ?) o( o A% I6 z) C) S price momentum. The region is benefiting from improving affordability) u, |& |" _1 _4 a2 u0 Z
following two years of deterioration.# x* n8 Q7 c% Z2 H
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