TORONTO, Sept. 12 /CNW/ - British Columbia's housing affordability
deteriorated even further across all four housing segments in the second
quarter of 2007, according to the new report released today by RBC Economics.
"Housing conditions across the province continued to erode affordability
as rising mortgage rates and house prices squeezed out prospective
home-buyers," said Derek Holt, assistant chief economist, RBC. "The relief
seen in the two-storey home segment earlier this year was reversed this
The RBC Affordability measure captures the proportion of pre-tax
household income needed to service the costs of owning a home. A detached
bungalow in British Columbia during the second quarter stood at 65 per cent
while a standard condo was 34 per cent. The index for a standard townhouse was
48 per cent and the standard two-storey at 68 per cent.
RBC notes that the arrival of long amortization products is changing the
cyclical dynamics of the housing market. For example, opting for a 40-year
mortgage instead of the more traditional 25-year term, sees the affordability
level for a two-storey B.C. home drop from 68 per cent of income to 61 per
According to the report, although the Vancouver market has loosened, it
remains a seller's market and continues to support strong price gains. Rising
mortgage rates and price gains eroded affordability in all housing segments in
"Even though trends for Vancouver are shifting to a slower pace and
moving towards moderation, the near-term result is another hit to already
stretched affordability conditions," added Holt.
RBC's Affordability measure for a detached bungalow in Canada's largest
cities is as follows: Vancouver 71 per cent, Toronto 45 per cent, Calgary 45
per cent, Montreal 36 per cent and Ottawa 31 per cent.
Also included in the report are housing affordability conditions 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 incomes into account.
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: Housing affordability deteriorated significantly in the
second quarter of 2007. Alberta's house prices have been growing at a
pace well above incomes and in a short time have created stressed
- Saskatchewan: The Saskatchewan housing market suffered its worst ever
quarterly deterioration of affordability on record. At the start of
the year, the influx of people caught the housing supply off guard,
forcing affordability to deteriorate. This momentum continued into the
second quarter as the pace of annual price gains soared into the
double digit range.
- Manitoba: With house price gains picking up pace and mortgage rates
continuing to rise, the province's housing affordability has
deteriorated for a second straight quarter. Manitoba saw the greatest
quarterly decline in affordability in more than a year.
- Ontario: After modest improvements earlier in the year, Ontario's
housing affordability deteriorated sharply in the second quarter. A
combination of higher house prices, rising mortgage rates and
increasing utility costs have forced a substantial deterioration in
affordability across all housing classes.
- Quebec: Despite only modest increases in house prices this past
quarter, climbing mortgage rates, utilities and taxes drove an erosion
in Quebec's housing affordability. However, the province's decent
economic fundamentals still support housing markets, with job growth
at a healthy two per cent rate this year and incomes keeping pace with
gains in house prices.
- Atlantic region: An environment of rising mortgage rates and strong
price gains created pricier second quarter housing conditions in
Atlantic Canada. While each of the housing segments witnessed a
significant affordability deterioration, it was the two-storey and
condo segments that saw the sharpest erosion.
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