TORONTO, March 15 /CNW/ - Canada's overall housing affordability improved
in the fourth quarter of 2006, according to the latest Housing Affordability
report released today by RBC Economics.
"The improvement was driven by faster income growth, slowing house price
increases, a small decline in mortgage rates and lower utility bills," said
Derek Holt, assistant chief economist, RBC. "Overall, there is the potential
for better housing affordability conditions in 2007, especially in Western
Canada, as the market moves into more balanced territory."
RBC notes that while there were significant variations in the pace of the
current housing market slowdown across the country, the common trends in the
fourth quarter were a weaker pace in resale activity, an increase of homes on
the market, and more moderate price growth.
The RBC Affordability report captures the proportion of pre-tax household
income needed to service the costs of owning a home. The most affordable
housing class remains the standard condo, requiring 27.5 per cent of income. A
standard townhouse is next at 31.7 per cent, followed by a detached bungalow
at 39.4 per cent. A standard two-storey home, while improving, remains the
least affordable housing type at 44.9 per cent.
According to the RBC report, the western provinces continue to show signs
of price growth topping out, with British Columbia, Alberta and Saskatchewan
having likely reached the peak of price appreciation. These provinces, along
with Manitoba, reported some affordability improvements. In fact, Alberta's
housing affordability deteriorated for the fifth consecutive quarter, but
appears to have slowed significantly. In Central and Eastern Canada, housing
affordability improved across-the-board as housing markets continued to soften
alongside weaker economic growth.
RBC's Affordability measure for detached bungalows in Canada's largest
cities is as follows: Vancouver 68.5 per cent, Toronto 42.6 per cent, Calgary
40.9 per cent, Montreal 35.3 per cent and Ottawa 30 per cent.
Also included in the report are housing affordability conditions for a
broader sampling of smaller cities across the country. 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:
- 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.
- Ontario: As Ontario's housing market continued to cool, affordability
improved across all classes. 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.
- 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