TORONTO, March 14 /CNW/ - British Columbia's affordability conditions
deteriorated across every housing segment at the end of 2007, and the province
remained the least affordable province in Canada to purchase a home, according
to the latest housing report released today by RBC Economics.
"The housing market in B.C. sits at its most stressed point on record in
terms of affordability conditions. Two-storey homes have carried the brunt of
the deterioration as the hot Vancouver market remains in deeply-stressed
territory," said Derek Holt, assistant chief economist, RBC. "However, we
believe B.C.'s housing market is poised for some affordability relief in 2008
as cooler price gains and lower interest rates push through."
The RBC Affordability measure for British Columbia, which captures the
proportion of pretax household income needed to service the costs of owning a
home, deteriorated across all housing segments as the detached bungalow moved
to 68.5 per cent, the standard townhouse to 52 per cent, the standard condo to
37 per cent, and the standard two-story home to 74 per cent.
There are several key fundamentals indicating a gradual re-balancing of
the province's housing market. The sales-to-new listings ratio is declining
and five-year fixed mortgage rates are expected to drift approximately 75
basis points lower than current levels.
Although house price growth picked up at the end of 2007, the province's
weakening economy is expected to dampen demand for existing homes and push
house price gains to approximately seven per cent this year, down from 12 per
cent in 2007.
In Vancouver, the pace of rising housing prices continues to pressure
affordability conditions across the market. The sharp erosion in the city's
housing conditions will start to filter through the resale market in 2008,
slowing the pace of housing activity. The new home market continues to be
driven by sales in condos and townhouses - which soared by more than 45 per
cent in February. Despite the surge, housing starts should begin to moderate
in 2008. A general weakening in Vancouver's economy will affect job and income
growth, and as a result, will also weigh heavily on the housing sector going
"Two-storey homes are driving most of the affordability erosion in
Vancouver. The average selling price is close to $650,000, which is 35 per
cent above the average price for a comparable home in Toronto," noted Holt.
The report also presents a comparison of Canadian and U.S. household
finances, and shows that Americans are still modestly richer, but much more
heavily leveraged and further in debt with less liquidity. That, in turn,
makes them more vulnerable to ongoing credit market turmoil and risks towards
house prices than Canadians. In fact, the sharp depreciation in the U.S.
dollar over the past six years has made Canadians relatively richer over time,
by raising the value of what their wealth will buy in world markets compared
to that of their American counterparts.
The report also looked at mortgage carrying costs relative to incomes for
a broader sampling of cities across the country, including Victoria. For these
smaller cities, RBC has used a narrower measure of housing affordability that
only takes mortgage payments relative to income into account.
RBC's Affordability measure for a detached bungalow for Canada's largest
cities is as follows: Vancouver 74 per cent, Toronto 47 per cent, Calgary 42
per cent, Montreal 37 per cent and Ottawa 32 per cent.
The Housing Affordability measure, 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 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:
- Alberta: At the end of 2007, the province witnessed broad-based
affordability improvements across all housing segments for the first
time in over three years. Rapidly cooling prices put the province on
watch, but should result in improved affordability for 2008.
- Saskatchewan: Saskatchewan has become the new Alberta. Constraints in
the existing home market have pushed into overflowing demand in the
new home market. As the national leader for growth in housing starts,
house prices, residential building permits, and resale activity, the
province saw substantial erosion in affordability in 2007. In 2008,
affordability conditions should gradually stabilize.
- Manitoba: Housing markets across the province continue to heat up.
Resale markets continue to drive strong price gains, but as household
income continues to grow at the third-fastest rate in the country,
affordability conditions remain steady.
- Ontario: Even though housing affordability deteriorated across all
housing segments, the pace has slowed. The province should see
improvements in 2008 from a cooling economy, lower mortgage rates,
and softer price gains.
- Quebec: A generally balanced market has helped keep housing
affordability in check. In 2008, a slower pace of house price gains
and softer income growth should contribute to improved affordability
- Atlantic region: Affordability continued to erode in the final
quarter of 2007. A combination of income growth, moderate house price
gains and anticipated mortgage rate relief across all home segments
should improve affordability in 2008.
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; Amy
Goldbloom, RBC Economics, (416) 974-0579; Jackie Braden, RBC Media Relations,