Affordability measures for Alberta improved the most among Canada's
Affordability conditions continued to deteriorate in Toronto and
segments of the Vancouver market
TORONTO, June 22, 2015 /CNW/ - Housing trends across provinces largely counteracted one another in the
first quarter of 2015, leaving affordability relatively unchanged at
the national level compared to late-2014, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
RBC says that mortgage rate declines that took place earlier this year
contributed to improved levels of affordability in many markets and
housing categories where home price increases were subdued, but that
deterioration was noted in markets with stronger price gains.
"Canadian markets heavily associated with the oil and gas industry -
Calgary and Edmonton in particular - were impacted earlier this year by
the plunge in oil prices which tipped the market in favour of buyers
due to softening home prices and ownership costs," said Craig Wright,
senior vice-president and chief economist, RBC. "At the other end of
the spectrum, solid price increases continued to erode housing
affordability in Toronto and Vancouver which remain Canada's hottest
Following a temporary slowdown over the harsh winter, home resales
picked up smartly in the spring with resales rising 11.2 per cent
between February and May to 521,400 units nationally - 11.1 per cent
above the 10-year average. RBC says that demand continues to be
strongest in Vancouver and Toronto, though there were signs that demand
in some previously soft markets, including Montreal and Ottawa, began
to pick up.
RBC anticipates Canada's home resales will rise modestly by 1.5 per cent
to 488,500 units in 2015, up from 481,200 units in 2014. The increase
mainly reflects strength in British Columbia and Ontario, with mild
gains in other oil-consuming provinces also making a contribution. The
forecast expects partial offsets from declines in Alberta (down nearly
21 per cent) and Saskatchewan (down close to 13 per cent).
Contrasting regional affordability pictures across Canada are likely to
continue in the near term, RBC says, with balanced demand-supply
conditions in the majority of local markets supporting modest price
increases and somewhat stable levels of affordability overall.
"It's likely that we'll see small price declines in the markets
dependent on oil, which suggests that home ownership costs may fall
further in Alberta, Saskatchewan and possibly markets in Atlantic
Canada as well," said Wright. "We also anticipate strong price momentum
to further erode affordability in Toronto and Vancouver, particularly
in the single-detached home segments."
RBC points out that the eventual normalization of monetary policy, which
is expected to begin in Q2 2016, could adversely impact affordability
levels across Canada. Wright comments: "Exceptionally low interest
rates have been a key factor keeping housing affordability levels in a
largely manageable state in recent years. The knock-on effect of the
anticipated rise in rates would be most visible in high-priced
The report indicates that affordability generally remains neutral in
Canada, with limited signs of stress being exerted on home buyers
outside Vancouver and Toronto. RBC's measures are still quite close to
their long-term averages, suggesting that current conditions are within
The RBC Housing Affordability measure captures the proportion of pre-tax
household income that would be needed to service the costs of owning a
specified category of home at current market values (a decrease in the
measure represents an improvement in affordability). During Q1 2015,
affordability measures at the national level edged lower by 0.3
percentage points to 27.1 per cent for condominiums and 0.2 percentage
points to 47.9 per cent for two-storey homes. The measure for detached
bungalows was unchanged at 42.7 per cent.
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in Q1 2015 is as follows: Vancouver 85.6 (up
2.8 percentage points from Q4 2014); Toronto 57.3 (up 0.6 percentage
points); Montreal 37.2 (down 0.2 percentage points); Ottawa 35.4 (down
0.6 percentage points); Calgary 32.8 (down 1.0 percentage points);
Edmonton 32.8 (down 0.8 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
home ownership 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: Vancouver skews provincial affordability
Q1 developments varied by housing categories, but still signaled
greater-than-average pressure on affordability. RBC's measures eased
0.4 percentage points for condos and 0.1 percentage points for
two-storey homes, and rose 1.0 percentage points for bungalows.
Alberta: plummeting oil prices contributed to improvement in affordability
Housing affordability improved significantly across the province during
the first quarter, with RBC measures falling across all categories
(between 1.0 and 0.6 percentage points).
Saskatchewan: slower resale activity combined with moderating household income mutes
impact on affordability
Home resales plummeted more than 16 per cent in the province during Q1,
contributing to price declines across housing segments. The impact on
affordability was partly muted by a moderation in household income.
RBC's measures fell 0.1 percentage points for condos, rose 0.3
percentage points for bungalows and remained unchanged for two-storey
Manitoba: affordability stands close to long-run averages
Affordability of single-detached homes and condos evolved in opposite
directions in Q1. RBC's measures rose by 0.3 percentage points for both
bungalows and two-storey homes, while the measure for condos fell
noticeably by 1.1 percentage points.
Ontario: affordability theme continues to be split
For the past four years, owning a single-detached home at market prices
in the province has become less and less affordable, whereas the weight
of owning a condo has remained fairly constant. RBC's measures for
bungalows and two-storey homes rose by 0.3 percentage points, while the
measure for condos edged lower by 0.2 percentage points.
Quebec: affordability at multi-year best levels
After remaining steady for years, housing affordability improved in the
province over the course of 2014 and the trend continued in Q1 2015.
RBC's measures fell across all three categories tracked (between 0.3
and 0.1 percentage points).
Atlantic Canada: affordability still attractive and improving
The lingering effect of earlier softness in home resale markets led to
further improvement in housing affordability in the Atlantic region in
Q1. RBC's affordability measures fell 0.7 percentage points for
bungalows and 0.5 percentage points for two-storey homes. The measure
for condos was unchanged.
The full RBC Housing Trends and Affordability report is available online as of 8:00 a.m. ET today.
For further information:
Craig Wright, Chief Economist, RBC Economics Research, 416-974-7457
Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635