TORONTO, Aug. 28, 2014 /CNW/ - Housing affordability in British Columbia
improved broadly during the second quarter of 2014 - condos and
two-storey homes reaching their most attractive levels since 2009 - yet
it remained a stretch for the average household to own a home in a
market like Vancouver, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
"British Columbia's housing market experienced brisk activity in the
second quarter," said Craig Wright, senior vice-president and chief
economist, RBC. "Home resales rose to a five-year high. Thankfully, the
pace of new listings picked up sufficiently to keep the demand-supply
equation in balance."
The report notes that price pressures remained in check overall, though
there was a slight divergence; the single-family home segments
experienced modestly stronger price gains relative to the condo
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, fell for all housing types in the
second quarter of 2014 (an fall in the measure represents an
improvement in affordability).
RBC's affordability measures dropped fairly significantly for two-storey
homes, down 2.0 percentage points to 72.0 per cent. The measure for
detached bungalows declined by 1.3 percentage points to 67.0 per cent
while the measure for condos fell by 0.9 percentage points to 32.6 per
Vancouver homebuyers welcome lower rates
"Affordability in higher-priced housing markets benefits
disproportionately from a fall in mortgage rates relative to
lower-priced markets if all else remains constant," said Wright. "This
was the case in the Vancouver-area market in the second quarter, when a
decline in fixed mortgage rates helped affordability across the board,
despite prices recording some of the faster increases among Canada's
RBC's measures for Vancouver decreased by 0.3 percentage points to 81.8
per cent for bungalows and by 1.3 percentage points to 85 per cent for
two-storey homes. Condos declined for the third straight quarter by 0.8
percentage points to 39 per cent.
This modest improvement in affordability may have been among the factors
contributing to a quarterly rise of 8.7 per cent in home resales in the
second quarter, RBC says; however, the extent likely was limited as
affordability levels remain poor in the area.
"Owning a home in Vancouver continues to be very difficult for an
average household to afford," added Wright. "Measures stand well above
historical norms. This likely explains in large part why home resales
were still more than 6.0 per cent below the 10-year average."
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in the second quarter of 2014 is as follows:
Vancouver 81.8 (down 0.3 percentage points from the previous quarter);
Toronto 55.9 (down 0.2 percentage points); Montreal 37.3 (down 1.6
percentage points); Ottawa 36.0 (down 0.4 percentage points); Calgary
33.6 (down 0.8 percentage points); Edmonton 31.7 (down 1.1 percentage
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) 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:
Alberta: housing affordability remains attractive
Escalating prices in the province were largely taken in stride by
Alberta homebuyers in Q2 as lower mortgage rates and solid growth in
household incomes provided offset. Affordability in the province
improved modestly with RBC measures easing between 0.2 and 0.9
Saskatchewan: homebuyers face little undue affordability pressure
The provincial housing market rebounded strongly in the second quarter
with home resales jumping to a new record-high. At the same time, RBC's
affordability measures for Saskatchewan fell between 1.3 and 0.8
percentage points, and stood close to their historical averages.
Manitoba: new home listings surge; affordability plays largely neutral
The big housing market story in Manitoba was a surge of homes being
offered for sale with new listings growing to levels almost 14 per cent
above where they were a year ago. RBC's affordability measures fell
between 0.5 and 1.5 percentage points but remained close to long-run
averages, suggesting that affordability likely plays a neutral role in
home buying decisions in the province.
Ontario: homebuyers undisturbed by affordability strains
Housing affordability changed very little in Ontario in the second
quarter and homebuyers did not appear to be overly concerned by the
fact that affordability remained somewhat stretched for single-family
homes. Lower rates were the main factor contributing to marginal
declines in RBC's measures for Ontario, which edged lower between 0.1
and 0.2 percentage points.
Quebec: improved affordability helps halt housing market slide
Quebec's housing market activity, which had been falling since early
2012, stabilized in Q2. Home resales rose modestly and the supply of
homes for sale grew. Second quarter affordability measures for the
province eased for all housing types - between 0.9 and 1.8 percentage
points. This improvement in affordability likely helped stabilize the
market at the margin in the latest quarter.
Atlantic Canada: attractive affordability conditions
The region's housing affordability conditions improved quite noticeably
in the second quarter thanks to lower mortgage rates and subdued price
pressures. RBC's measures for Atlantic Canada dropped between 0.9 and
1.8 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 Research, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635