TORONTO, March 3, 2015 /CNW/ - The state of Alberta's housing
affordability in the fourth quarter of 2014, while still generally
positive, has been overshadowed by the effect of plunging oil prices on
confidence in the market, according to the latest Housing Trends and Affordability Report issued today by RBC Economics.
The report indicates that home resales in Alberta plummeted during
December and January, falling 35 per cent cumulatively following a
strong summer and early fall.
"We've also seen evidence of shaken confidence in Alberta's housing
market on the supply side with listings surging," said Craig Wright,
senior vice-president and chief economist, RBC. "While we have yet to
see this translate into widespread price declines, the earlier strong
rate of property appreciation moderated substantially in Q4."
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, remained mostly unchanged in the fourth
quarter (a decrease in the measure represents an improvement in
RBC's affordability measures for Alberta were stable for both two-storey
homes (33.9 per cent) and condos (20.4), while the measure for detached
bungalows eased by 0.4 percentage points to 32.4 per cent.
Affordability continued to be fairly attractive from a historical
perspective and compared to other provinces.
Drop in market confidence supersedes affordability conditions in Calgary
Housing affordability in Calgary improved in the fourth quarter of 2014.
Homebuyers in the area did not give this much consideration, however,
as they exited the market en masse in December and into January. RBC
says that major cutbacks announced by the oil industry contributed to a
drop in housing market confidence.
"Large increases in new listings during October and November represented
early signs of nervousness for sellers, but it really was the 26 per
cent freefall in home resales during December that gave compelling
proof that the unease spread among all market participants," said
A further 24 per cent monthly drop in resales in January confirmed the
turn of events was no fluke - demand-supply conditions swung in favour
of buyers, setting the stage for some weakening in prices.
RBC's measures for Calgary fell 0.2 percentage points to 20.0 per cent
for condos, 0.4 percentage points to 33.9 per cent for two-storey homes
and 0.6 percentage points to 33.7 per cent for bungalows in Q4 2014.
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in Q4 of 2014 is as follows: Vancouver 82.4
(down 1.2 percentage points from Q3); Toronto 56.8 (up 0.8 percentage
points); Montreal 37.3 (unchanged); Ottawa 36.0 (up 0.2 percentage
points); Calgary 33.7 (down 0.6 percentage points); Edmonton 33.5 (up
0.1 percentage points).
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: Small improvement in affordability conditions
Housing affordability slightly improved across all categories of homes
measured by RBC, primarily reflecting stronger household income arising
from brighter economic prospects in the province. During Q4, RBC's
measures eased between 0.1 and 0.7 percentage points.
Saskatchewan: Price declines translate to improved affordability
Price declines in the province during the fourth quarter of 2014
contributed to the fifth consecutive quarter of affordability
improvements. RBC's measures fell by 0.6 percentage points for both
bungalows and two-storey homes. The measure for condos, however, rose
by 0.6 percentage points.
Manitoba: Affordability improves across the provincial housing market
It became more affordable to buy a home in Manitoba during the fourth
quarter of 2014 with RBC's measures falling across all housing
categories (between 0.1 and 0.4 percentage points over the third
Ontario: Robust housing market conditions impact affordability
Ontario's housing market bucked the generally improving trend in
affordability across Canada in Q4, 2014. RBC's measures rose in all
categories between 0.2 percentage points and 1.0 percentage points.
Quebec: Broad-based improvements in affordability continue
Steady improvements in Quebec's housing affordability continued in the
fourth quarter of 2014 with RBC's measure declining across all
categories tracked. Measures fell by 0.6 percentage points for
two-storey homes and by 0.4 percentage points for both bungalows and
Atlantic Canada: Among the most affordable markets in Canada
The region's homebuyers continued to face some of the most affordable
conditions across the country in Q4 of 2014. RBC's affordability
measures fell for both the two-storey and bungalow segments, by 0.5 and
0.1 percentage points, respectively. The measure for the condo segment
edged higher by 0.1 percentage points.
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, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635