The worst appears to be over for Ontario housing market: RBC Economics

    Greater affordability sets the stage for a rebound in activity

    TORONTO, July 8 /CNW/ - Ontario experienced a surge in home resale
activity this past spring following a year-long period of repair in housing
affordability, signaling that the overall housing market in the province may
have seen the worst of its downturn, according to the latest housing report
released today by RBC Economics.
    "After falling heavily during the fall and early winter, Ontario's
housing market is seeing a resurgence, due in large part to greater
affordability," said Robert Hogue, senior economist at RBC. "Average prices
for existing homes have started to rise again, climbing back to where they
were in mid-2008, with spring resales figures showing a surprising surge of
activity across the province."
    The RBC Housing Affordability measure for Ontario, which captures the
proportion of pre-tax household income needed to service the costs of owning a
home, dropped below long-term averages for detached bungalows and condominiums
over the first quarter of 2009. Affordability of the benchmark detached
bungalow in Ontario moved to 38.6 per cent, the standard townhouse to 31.8 per
cent, the standard condo to 27.0 per cent and the standard two-storey home to
44.2 per cent.
    In the Toronto area, RBC's Affordability measures have now been restored
to historical averages for all housing types, with homeownership costs
declining sizably by a range of 3.9 to 7.0 percentage points in the first
quarter. Resale activity has bounced back, with signs that prices are moving
up again.
    In Ottawa, sales of existing homes reached a new record in May and home
prices are showing signs of a swift recovery. While RBC Affordability measures
for the Ottawa area showed a meaningful decline in homeownership costs for the
first quarter - moving down by 2.2 to 3.7 percentage points - the reduction
has been moderate in comparison to most other major cities over the last year
and still stand above long-term averages for all housing types.
    "Recent signs indicate that Ontario has seen the worse of the correction,
but it is still too early to wave the 'all clear' sign," Hogue added.
"Economic uncertainty is still a factor in some regions of the province -
particularly those reliant on the manufacturing sector - and the healing
process may be long and difficult."
    RBC's Affordability measure for a detached bungalow for Canada's largest
cities is as follows: Vancouver 62.6 per cent, Toronto 45.9 per cent, Ottawa
39.1 per cent, Montreal 36.5 per cent and Calgary 35.1 per cent.
    The report also looked at mortgage carrying costs relative to incomes for
a broader sampling of cities across the country, including Kitchener, London,
St. Catharines, Thunder Bay and Windsor. For these cities, RBC has used a
narrower measure of housing affordability that only takes mortgage payments
relative to income into account.
    The property benchmark for the Housing Affordability measure, which RBC
has compiled since 1985, is based on the costs of owning a detached bungalow.
Alternative housing types are also presented including a standard two-storey
home, a standard townhouse and a standard condominium. The higher the reading,
the more costly it is to afford a home. For example, an Affordability reading
of 50 per cent means that homeownership costs, including mortgage payments,
utilities and property taxes, take up 50 per cent of a typical household's
monthly pre-tax income.

    Highlights from across Canada:

    -   British Columbia: In the first quarter, housing affordability in B.C.
        showed the sharpest improvements since 1991. Sales of existing homes
        have picked up vigorously since the November-January lows, prices
        appear to be levelling off and more balanced supply and demand
        conditions are expected to emerge in coming months.
    -   Alberta: The drop in mortgage rates and sinking home prices have
        fully restored homeownership affordability in the province. Sales of
        existing units have rebounded smartly this spring from earlier
        depressed levels and market conditions have tightened. Alberta's
        housing market is likely at the point of turning the corner.
    -   Saskatchewan: Significant improvement in affordability has helped the
        Saskatchewan housing market pick up pace again after bottoming at the
        start of the year. Moderately stronger sales of existing homes this
        spring and a slower pace of home sale listings have restored some
        balance into the market.
    -   Manitoba: Supported by relatively favourable affordability rates,
        Manitoba's market continues to be among the most resilient in the
        country. A relatively robust economy, steady population growth and
        recent improvement in affordability should support housing demand in
        the period ahead.
    -   Quebec: Resale activity has rebounded quickly in Quebec, reflecting a
        homeownership market that is now more accessible than has generally
        been the case in the province since the mid-1980s. Home prices have
        generally stayed their upward course, even through the period of
        weaker resale activity earlier this year.
    -   Atlantic region: The costs of owning a home in Atlantic Canada
        continue to improve, with housing affordability rates among the best
        in the country. Favourable affordability levels in Atlantic Canada
        have given the region some protection against the housing storm with
        minimal declines in property value.

    The full RBC Housing Affordability report is available online, as of 8
a.m. EDT today at www.rbc.com/economics/market/pdf/house.pdf.

For further information: Robert Hogue, RBC Economics, (416) 974-6192;
Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124