TORONTO, Feb. 24 /CNW/ - Housing affordability in Saskatchewan improved
in the fourth quarter of 2010 for the second consecutive period despite
higher home prices, according to the latest Housing Trends and
Affordability report released today by RBC Economics.
"Saskatchewan's market finished 2010 on an enviable note as the cost of
homeownership fell even though home prices, for the most part, rose
slightly in the fourth quarter," said Robert Hogue, senior economist,
RBC. "The price gains that occurred in the provincial market were too
small to negate the beneficial effect of lower mortgage rates. Solid
forward momentum in home resales through the second half of last year
helped to re-establish a stronger balance between demand and supply,
and set a firmer tone for prices."
The RBC report notes that affordability in Saskatchewan improved for all
housing categories in the fourth quarter of 2010.
The RBC Housing Affordability Measures capture the province's proportion
of pre-tax household income needed to service the cost of owning a home
(a decline in measure means that owning a home is more affordable). The
measure for the benchmark detached bungalow dropped by 1.1 percentage
points to 37.9 per cent, the standard two-storey home fell 0.6
percentage points to 40.1 per cent, and the standard condominium eased
by a solid 1.0 per cent to 25.4 per cent in the fourth quarter.
Nonetheless, the levels for all measures remained modestly above
historical averages in the province.
"Saskatchewan's housing market will take its current affordability
position in stride as a rebound in provincial economic growth and
strong migration inflows will continue to housing demand this year,"
Elsewhere in the country, a majority of provinces saw improvements in
affordability in the fourth quarter. Only the standard two-storey
benchmark became less affordable in Ontario and Quebec, as did the
standard condominium apartment in Quebec and the Atlantic region.
RBC's Housing Affordability Measure for a detached bungalow in Canada's
largest cities is as follows: Vancouver 68.7 per cent (down 0.4
percentage points from the last quarter), Toronto 46.8 per cent (down
0.5 percentage points), Montreal 41.3 per cent (down 0.4 percentage
points), Ottawa 38.7 per cent (up 0.5 percentage points), Calgary 34.9
per cent (down 3.1 percentage points) and Edmonton 31.0 per cent (down
2.4 percentage points).
The RBC Housing Affordability Measure, which has been compiled since
1985, is based on the costs of owning a detached bungalow, a reasonable
property benchmark for the housing market in Canada. Alternative
housing types are also presented including a standard two-storey home
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: Buying a home in B.C. became slightly more affordable in the fourth
quarter of 2010, due primarily to a small drop in mortgage rates. After
experiencing some declines in the previous quarter, home prices rose
modestly for most housing categories; condominium apartments bucked the
trend, however, and depreciated slightly. Prices were supported by a
tightening in market conditions with home resales picking up smartly
following substantial cooling in the spring and summer that saw sellers
lose their edge in setting property values. Demand and supply in the
province are judged to be quite balanced at this point. RBC's
Affordability Measures fell between 0.8 and 1.0 percentage points in
the fourth quarter which came on the heels of much more substantial
drops (1.7 to 4.8 percentage points) in the third quarter.
Notwithstanding these declines, affordability remains poor and will
weigh on housing demand going forward.
Alberta: Alberta officially became the most affordable provincial market in the
country in the fourth quarter, according to the RBC Measures which fell
once again by 1.0 to 2.4 percentage points, extending their declines
since late-2007. In addition to the lower mortgage rates, the further
depreciation of home prices contributed to lowering homeownership
costs. Property values were negatively affected by a substantial
downswing in demand in the spring and early summer, which put buyers in
the drivers' seat. The significant improvement in affordability is near
the end of its line, however, as demand has shown more vigour in recent
months - alongside a provincial economy that is gaining more traction -
and the market has become better balanced. RBC expects that this will
stem price declines this year, thereby removing a potential offset to
the negative effect of projected rise in interest rates on
Manitoba: Manitoba's market enjoyed the best of both worlds in the fourth quarter
of 2010 as home price were higher but ownership costs were lower.
Thanks to lower mortgage rates in the quarter and continued growth in
household income, the negative effect of small gains in property values
on affordability was more than offset. The RBC Measures eased between
0.1 and 0.6 percentage points in the fourth quarter, keeping Manitoba
among the only two provincial markets in Canada (with Alberta) in which
Affordability Measures stand below long-term averages for all housing
categories. Sales of existing homes ramped up considerably in the fall,
reaching near historical peaks by December. Housing demand is being
boosted by the strongest net international immigration in the province
since the mid 1950s and by improved job prospects - Manitoba boasts the
lowest unemployment rate in Canada (as of the fourth quarter of 2010)
and RBC expects this to continue in 2011.
Ontario: Concerns last year that the housing market would falter have now
largely dissipated as home resale activity picked up smartly in the
fall and property values resumed their appreciation trend in the
closing months of 2010. The slowdown in market activity in the spring
and summer last year largely reflected various transitory factors -
including the introduction of the HST and changes in mortgage lending
rules - that brought demand forward to the start of the year. The
silver lining of this slowdown, however, has been an improvement in
affordability. The RBC Measures edged lower for the second consecutive
time for most housing categories in the fourth quarter, down by 0.2 to
0.3 percentage points. The only exception was two-storey homes, which
became marginally less affordable amid notable price gains. RBC expects
affordability will play a neutral role for demand in Ontario with RBC
Measures close to their long-run average.
Quebec: Higher home prices in the fourth quarter of 2010 caused some
deterioration in affordability following meaningful improvement in the
previous period. Home resales strengthened in the latter part of 2010,
contributing to tightened market conditions that gave sellers a
stronger hand in negotiating prices, particularly for two-storey homes.
Price gains and rising household income dominated the positive effects
of lower mortgage rates on affordability in the fourth quarter for all
housing types except detached bungalows (where a small improvement was
registered). RBC Measures rose marginally by 0.1 to 0.2 percentage
points for two-storey homes and condominium apartments, and fell by 0.6
percentage points for detached bungalows; however, the levels of all
Measures still modestly exceeded long-term averages in the province.
RBC expects that modestly strained affordability in Quebec will further
deteriorate in the period ahead when interest rates rise.
Atlantic Canada: Home resale activity sputtered late in 2010 and reversed some of the
gains achieved at the end of the summer and early fall. This has not
disrupted property values in the fourth quarter as home prices
generally appreciated; yet, housing affordability improved for most
housing categories because declines in interest rates provided a
dominant offset. Only condominium apartments saw a slim deterioration
in affordability as the RBC Measures rose by 0.1 percentage point
compared with declines of 0.5 percentage points for detached bungalows
and two-storey homes. Affordability levels continue to be mostly
attractive in Atlantic Canada from both historical and cross-country
perspectives. RBC projects that is likely to remain so in the near-term
despite our expectation of higher interest rates. Market conditions
have recently swung in favour of buyers which will exert downward
pressure on prices in coming months.
The full RBC Housing Trends and Affordability report is available
online, as of 8 a.m. ET today at www.rbc.com/economics/market/pdf/house.pdf.
For further information:
Robert Hogue, RBC Economics Research, 416-974-6192
Elyse Lalonde, Media Relations, RBC, 416-974-8810