TORONTO, May 27, 2014 /CNW/ - Divergent affordability levels between
single-family homes and condos grew in British Columbia in the first
quarter of 2014, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
RBC notes that strong price increases in British Columbia's single
family homes categories - detached bungalows and two-storey homes - led
to a deterioration in affordability in Q1 2014. Price appreciation in
the condo segment was comparatively contained, keeping affordability
levels unchanged in that category.
"British Columbia's housing market activity softened in the first
quarter with resales falling 4.3 per cent - still, they were 20 per
cent higher than at the same period in 2013," said Craig Wright, senior
vice-president and chief economist, RBC. "This slowing of market
activity during the winter months followed substantial increases
earlier in 2013. Last year's rebound countered concerns that a downturn
in the province's housing market would linger."
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, rose for two of the three housing
categories tracked in the first quarter of 2014 (an increase in the
measure represents deterioration in affordability).
RBC's affordability measures increased by 0.9 percentage points to 68.4
for bungalows and 1.2 per cent to 74.2 per cent for two-storey homes;
the affordability of condos remained unchanged at 33.6 per cent.
Vancouver: rising prices boost confidence, worsen affordability
Sentiment in the Vancouver-area market visibly improved since the fall
of last year when resales reversed losses that occurred in late
2012-early 2013. RBC says the rising trend in prices, however, is a
more convincing sign that the market was back on track.
After what was close to a year-long slide, rising prices in the
Vancouver-area have helped re-instil market confidence, RBC says. And
though first quarter home resales fell, continued price increases
likely made a bigger impression on both buyers and sellers, dispelling
possible doubts that the market may slump again. The RBC report notes
that home resales fell by 6.5 per cent in the area in Q1 2014, standing
8.5 per cent below the 10-year average.
"The upside from current resale levels may be limited given the market's
long-standing poor affordability conditions," said Wright. "With prices
back in growth mode, the improvements we've seen in Vancouver's
affordability levels over the last two years will be difficult to
RBC's measures for Vancouver increased by 0.9 percentage points to 82.4
per cent for bungalows and 0.6 percentage points to 86.5 per cent for
two-storey homes. Condos declined for the third straight quarter by 1.0
percentage points to 39.9 per cent.
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in the first quarter of 2014 is as follows:
Vancouver 82.4 (up 0.9 percentage points from the previous quarter);
Toronto 56.1 (up 0.2 percentage points); Montreal 38.9 (up 0.1
percentage points); Ottawa 36.4 (down 0.5 percentage points); Calgary
34.5 (up 0.9 percentage points); Edmonton 32.9 (down 0.2 percentage
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:
Alberta: attractive housing affordability conditions
The provincial housing market continues to be among the stronger in
Canada, supported by a booming economy, rapidly rising population and
attractive affordability. RBC's measures rose a slight 0.1 percentage
points to 32.6 per cent for bungalows and 0.4 percentage points to 20.2
per cent for condominiums. The measure for two-storey homes was
unchanged at 34.4 per cent.
Saskatchewan: affordability plays a neutral role
Owning a home in Saskatchewan became slightly more affordable for the
most part in Q1 2014. RBC's measures fell in two of the three
categories - bungalows by 0.6 percentage points to 36.4 per cent and
condominiums by 0.1 percentage points to 25.4 per cent. The rise in the
measure for two-storey homes - 0.5 percentage points to 40.7 per cent -
reversed a decline that took place in the previous quarter.
Manitoba: housing becomes more affordable
Manitoba homebuyers benefited from some improvement in affordability in
the first quarter of 2014. RBC measures for both bungalows and
condominiums fell in the first quarter to their lowest levels in nearly
a year - by 0.4 percentage points and 0.6 percentage points,
respectively. Although the measure for two-storey homes rose by 0.3
percentage points, it stands at a lower level than last spring.
Ontario: affordability deteriorates in single-family homes
First quarter affordability measures point to a consistently eroding
affordability picture in the province, particularly for single-family
homes. RBC's measures stood at 24-year highs for bungalows at 44.9 per
cent and two-storey homes at 51.0 per cent. The measure for
condominiums was 29.4 per cent - not much below its multi-decade peak.
Quebec: housing affordability levels sit close to historical averages
Housing affordability in the province did not erode much or at all in
the first quarter and largely remain close to historical norms. RBC's
measures edged higher by 0.2 percentage points for bungalows to 34.5
per cent and 0.1 percentage points for two-storey homes to 43.7 per
cent. The measure for condominiums fell 0.1 percentage points to 26.6
Atlantic: favourable affordability conditions do little to energize
The region's housing affordability conditions largely improved in the
first quarter, but did little to pull the market out of its slump. RBC
measures declined 0.4 percentage points to 31.2 per cent for bungalows
and 0.4 percentage points to 25.9 per cent for condominiums. The
measure for two-storey homes rose by 0.2 percentage points to 36.2, but
remained below its long-term average.
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