TORONTO, May 27, 2014 /CNW/ - First quarter trends continued to paint a
consistently eroding picture of Ontario's housing affordability,
particularly for single-family homes, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
Home resales fell 7.5 per cent to a level that was more than 7.0 per
cent below the 10-year average, mainly because of poor weather and a
lack of listings. However, RBC says stretched affordability may have
also contributed to easing market activity.
"Ontario's affordability measures continued to deteriorate in the first
quarter with levels for both bungalows and two-storey homes at 24-year
highs. And while barely rising in recent years, affordability for
condominiums was not much below its multi-decade peak," said Craig
Wright, senior vice-president and chief economist, RBC. "These
challenging affordability trends make owning a home - and especially a
detached home in major markets such as Toronto - a bigger stretch for
most homebuyers in Ontario."
The RBC housing affordability measures, which capture the province's
proportion of pre-tax household income needed to service the costs of
owning a home at market values, modestly eroded in the first quarter of
2014 (an increase in the measure represents deterioration in
RBC's affordability measure for two-storey homes increased 0.4
percentage points to 51.0 per cent. RBC's measure for condominiums
eased by 0.3 percentage points to 29.4 per cent, while the measure for
bungalows stayed flat at 44.9 per cent.
"Ontario homebuyers will undoubtedly take little comfort in the fact
that affordability eroded only minimally in the first quarter despite
considerable price increases in some of the province's major markets,"
Lack of supply heats up Toronto housing market
News of bidding wars and rates of price increases exceeding 7.0 per cent
certainly make a strong argument for the Toronto-area market heating
up. RBC says, however, that Toronto's recent market heat stemmed
primarily from a lack of homes available for sale.
"Home resales fell by 7.5 per cent in the first quarter, likely due to
poor weather, and stood 7.3 per cent below the 10-year average," said
Wright. "However, it was the fact that new listings plummeted by 8.6
per cent cumulatively in the past two quarters that contributed most to
fairly tight demand-supply conditions in the area."
The associated strong price increases obviously had negative
implications for housing affordability, RBC says. Toronto-area trends have deteriorated substantially in recent years,
particularly for single-family home categories, and this trend
continued in the first quarter.
RBC measures for two-storey homes increased by 1.3 percentage points to
65.3, bungalows rose by 0.2 percentage points to 56.1 per cent and
condominiums slightly edged up by 0.1 percentage points to 34.2 per
Ottawa's housing market still lacklustre, but affordability not an issue
The RBC report says that despite some improvements in affordability,
market activity in the Ottawa-area remained lacklustre for the first
quarter of 2014. Home resales declined for the second-straight quarter
by 3.3 per cent, reaching their lowest levels since mid-2010, and
demand-supply conditions weakened further due to new listings edging
higher by 0.9 per cent.
"A strong supply of homes for sale in Ottawa transferred more power to
the buyers, which applied downward pressure on home prices and caused
price increases to stall for the majority of housing types in Q1," said
Wright. "The upside to these developments has been that housing
affordability improved in the market, remaining close to historical
averages and continuing to suggest that there is little undue stress on
homebuyers in the area."
RBC's measures fell by 0.5 percentage points for bungalows to 36.4 per
cent, two-storey homes to 38.1 per cent and condo apartments to 24.7
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in the first quarter of 2014 is as follows:
Vancouver 82.4 (up 0.9 percentage points from the previous quarter);
Toronto 56.1 (up 0.2 percentage points); Montreal 38.9 (up 0.1
percentage points); Ottawa 36.4 (down 0.5 percentage points); Calgary
34.5 (up 0.9 percentage points); Edmonton 32.9 (down 0.2 percentage
The RBC Housing Affordability Measure, which has been compiled since
1985, is based on the calculated costs of owning a detached bungalow (a
reasonable property benchmark for the housing market in Canada) at
market value. Alternative housing types are also presented, including a
standard two-storey home and a standard condominium apartment. The
higher the reading, the more difficult it is to afford a home at market
values. For example, an affordability reading of 50 per cent means that
homeownership costs, including mortgage payments, utilities and
property taxes, would take up 50 per cent of a typical household's
monthly pre-tax income.
It is important to note that RBC's measure is designed to gauge
ownership costs associated with buying a home at present market values.
It is not a representation of the actual costs incurred by current
owners, the vast majority of whom have bought in the past at
significantly different values than those prevailing in the latest
Highlights from across Canada:
British Columbia: single-family homes less affordable
Housing affordability continues to be poor in British Columbia. RBC
measures rose 1.2 percentage points for two-storey homes and 0.9
percentage points for bungalows to 74.2 per cent and 68.4 per cent,
respectively. The measure for condos remained unchanged at 33.6 per
Alberta: attractive housing affordability conditions
The provincial housing market continues to be among the stronger in
Canada, supported by a booming economy, rapidly rising population and
attractive affordability. RBC's measures rose a slight 0.1 percentage
points to 32.6 per cent for bungalows and 0.4 percentage points to 20.2
per cent for condominiums. The measure for two-storey homes was
unchanged at 34.4 per cent.
Saskatchewan: affordability plays a neutral role
Owning a home in Saskatchewan became slightly more affordable for the
most part in Q1 2014. RBC's measures fell in two of the three
categories - bungalows by 0.6 percentage points to 36.4 per cent and
condominiums by 0.1 percentage points to 25.4 per cent. The rise in the
measure for two-storey homes - 0.5 percentage points to 40.7 per cent -
reversed a decline that took place in the previous quarter.
Manitoba: housing becomes more affordable
Manitoba homebuyers benefited from some improvement in affordability in
the first quarter of 2014. RBC measures for both bungalows and
condominiums fell in the first quarter to their lowest levels in nearly
a year - by 0.4 percentage points and 0.6 percentage points,
respectively. Although the measure for two-storey homes rose by 0.3
percentage points, it stands at a lower level than last spring.
Quebec: housing affordability levels sit close to historical averages
Housing affordability in the province did not erode much or at all in
the first quarter and largely remain close to historical norms. RBC's
measures edged higher by 0.2 percentage points for bungalows to 34.5
per cent and 0.1 percentage points for two-storey homes to 43.7 per
cent. The measure for condominiums fell 0.1 percentage points to 26.6
Atlantic: favourable affordability conditions do little to energize
The region's housing affordability conditions largely improved in the
first quarter, but did little to pull the market out of its slump. RBC
measures declined 0.4 percentage points to 31.2 per cent for bungalows
and 0.4 percentage points to 25.9 per cent for condominiums. The
measure for two-storey homes rose by 0.2 percentage points to 36.2, but
remained below its long-term average.
The full RBC Housing Trends and Affordability report is available online as of 8 a.m. ET today.
For further information:
Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635