TORONTO, March 15 /CNW/ - As Ontario's housing market continued to cool,
affordability improved across all classes in the fourth quarter of 2006,
according to a new housing report issued today by RBC Economics.
"All the fundamentals that drive housing affordability came together to
deliver improved conditions right across the board," said Derek Holt,
assistant chief economist, RBC. "An easing of market demand exerted downward
pressure on prices and actually drove quarterly price declines for both the
detached bungalow and condo segments."
RBC's Housing Affordability measure for Ontario captures the proportion
of pre-tax household income needed to service the costs of owning a home. The
measure for a detached bungalow improved in the fourth quarter to 36.4 per
cent and for the standard two-storey home to 42.1 per cent. The cost required
for maintaining the standard townhouse and standard condo improved to 29.9 per
cent and 27.1 per cent respectively.
Softer price growth, a decline in mortgage rates and lower utility bills
combined to bring monthly payments down by one to two per cent for all four
housing segments. The report noted that a two-storey home, for example, saw
average monthly payments drop by $39, of which 75 per cent was driven by lower
mortgage payments and the remaining 25 per cent by cheaper monthly utility
Of the key metro housing markets in Canada, Toronto saw the strongest
affordability improvements. Conditions were primarily driven by several
factors - slowing house price gains, more attractive mortgage rates, a sharp
drop in monthly utility costs and improved household income growth. Both
detached bungalows and condos experienced price declines in Toronto. While
this marks the second consecutive quarterly price decline for condos, with
average prices falling from $266,705 in the second quarter of last year down
to $259,934 by year end, annual gains remain healthy at around six per cent.
"At the end of 2006, the pace of improvement was strong enough to reverse
most of the affordability deterioration that hit Toronto's market during the
second and third quarters," said Holt.
Ottawa's housing affordability finally improved across all four classes,
reversing some of the deterioration witnessed over the past year. The pace of
price gains slowed to less than one per cent and utility costs dropped nearly
six per cent to help boost affordability. However the slowdown in Ottawa's
housing market appears to have bottomed out and may spark potential buying
opportunities. After several months of decline, resale activity was up 16 per
cent in January, compared to a year ago and new listings down four per cent.
The very recent build up of demand in Ottawa's housing market may filter into
stronger, but still relatively soft price growth for the upcoming year, noted
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 measure, 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.
The report also looked at mortgage carrying costs relative to incomes for
a broader sampling of smaller cities across the province, including London,
Kitchener, Windsor, St. Catharines, Brantford and North Bay. Ontario's smaller
cities witnessed a broadly-based fourth quarter affordability improvement. 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 detached bungalows in Canada's largest
cities is as follows: Vancouver 68.5 per cent, Calgary 40.9 per cent, Montreal
35.3 per cent and Ottawa 30 per cent.
Highlights from across Canada:
- British Columbia: The final quarter of 2006 provided some relief for
B.C. homeowners with affordability improving for the two-storey and
detached bungalow segments. However, condos and townhomes continued a
fifth straight quarter of deterioration. Overall, B.C.'s housing
affordability should continue to improve over the next year.
- Alberta: Since the start of 2005, housing affordability across Alberta
has been eroding at an aggressive pace. While the most recent quarter
reported another across-the-board deterioration, the pace of erosion
appears to have topped out and has slowed significantly.
- Saskatchewan: For a fifth consecutive quarter, affordability eroded in
three out of four home classes - detached bungalow, townhouse and
condo. Saskatchewan's annual house price gains, which are in the
10 per cent range, outweighed any mortgage rate relief or household
income growth that would have helped offset costs.
- Manitoba: After declining affordability in the first half of 2006,
Manitoba saw a marked improvement for the second half of the year. The
strongest improvement came from the condo sector, reversing much of
the deterioration that occurred in the early part of 2006.
- Quebec: Led by improvement in two-storey homes, housing affordability
recovered significantly for the first time in over a year as the long-
anticipated soft landing continues to unfold. Supply and demand
fundamentals in Quebec's housing market are cooling off in tandem and
the effects are overflowing to improve affordability conditions for
- Atlantic region: Strong household income growth, lower monthly utility
bills and a modest drop in mortgage rates contributed to improve
conditions across Atlantic Canada.
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