TORONTO, March 15 /CNW/ - Alberta's housing affordability continued to
erode in the fourth quarter of 2006, albeit at a significantly slower pace
than prior quarters, according to a new report released today by RBC
"Since the start of 2005, housing affordability across Alberta has been
eroding at an aggressive pace," said Derek Holt, assistant chief economist,
RBC. "While the final quarter of 2006 saw an across-the-board deterioration,
the pace of erosion appears to have topped out and has slowed significantly
from the very strong deterioration observed in the third quarter."
According to the RBC report, the affordability measures deteriorated by
one to two per cent in the fourth quarter for all housing types, compared to a
12-15 per cent deterioration in the third quarter of 2006.
The RBC Affordability measure captures the proportion of pre-tax
household income needed to service the costs of owning a home. It stood at
37.7 per cent for a detached bungalow in Alberta, 25.2 per cent for a standard
condo in the province, and a townhouse was at 27.8 per cent. A two-storey home
remained the least affordable with a reading of 41.7 per cent.
While some of the market's strength is supported by solid fundamentals
including very tight labour markets and robust income gains, annual house
price gains in the 50 per cent range are unsustainable. "Going forward, price
increases are expected to moderate and volumes decline although they will
remain near historically high levels," said Holt.
While housing markets still remain tight in Calgary and Edmonton, the
dramatic price gains witnessed over the past couple of years are beginning to
take a bite out of sales while providing a boost to supply on the market.
Affordability in Calgary continued to deteriorate in the final quarter of 2006
but at a decelerating pace. Edmonton enjoyed its first dose of housing
affordability relief in over a year as its two-storey and townhome segments
reported modest improvements.
RBC's Affordability measure for detached bungalows in Canada's largest
cities is as follows: Vancouver 68.5 per cent, Toronto 42.6 per cent, Montreal
35.3 per cent and Ottawa 30 per cent.
Also included in the report are housing affordability conditions for a
broader sampling of select cities across the country. For these select cities,
RBC has used a narrower measure of housing affordability that only takes
mortgage payments relative to income into account.
The Housing Affordability report, which RBC has compiled since 1985, is
based on the costs of owning a detached bungalow, a reasonable property
benchmark for the housing market. Alternative housing types are also
presented, including a standard two-storey home, a standard townhouse and a
standard condo. The higher the reading, the more costly it is to afford a
home. For example, an Affordability measure 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: The final quarter of 2006 provided some relief for
B.C. homeowners with affordability improving for the two-storey and
detached bungalow segments. However, condos and townhomes continued a
fifth straight quarter of deterioration. Overall, B.C.'s housing
affordability should continue to improve over the next year.
- Saskatchewan: For a fifth consecutive quarter, affordability eroded in
three out of four home classes - detached bungalow, townhouse and
condo. Saskatchewan's annual house price gains, which are in the
10 per cent range, outweighed any mortgage rate relief or household
income growth that would have helped offset costs.
- Manitoba: After declining affordability in the first half of 2006,
Manitoba saw a marked improvement for the second half of the year. The
strongest improvement came from the condo sector, reversing much of
the deterioration that occurred in the early part of 2006.
- Ontario: As Ontario's housing market continued to cool, affordability
improved across all classes. Softer price growth, a decline in
mortgage rates and lower utility bills combined to bring monthly
payments down by one to two per cent for all four housing segments.
- Quebec: Led by improvement in two-storey homes, housing affordability
recovered significantly for the first time in over a year as the
long-anticipated soft landing continues to unfold. Supply and demand
fundamentals in Quebec's housing market are cooling off in tandem and
the effects are overflowing to improve affordability conditions for
- Atlantic region: Strong household income growth, lower monthly utility
bills and a modest drop in mortgage rates contributed to improve
conditions across Atlantic Canada.
The full RBC Housing Affordability report is available online, as of
8 a.m. E.D.T. today at www.rbc.com/economics/market/pdf/house.pdf.
For further information:
For further information: Derek Holt, RBC Economics, (416) 974-6192;
Jackie Braden, RBC Media Relations, (416) 974-2124