TORONTO, April 16 /CNW/ - While the Canadian housing market has felt the
strain of the contraction in the domestic economy since the fourth quarter of
2008, improved housing affordability is mitigating some of the stress felt by
home buyers, according to the latest housing report released today by RBC
"Declining consumer confidence amid dimming employment prospects and the
turmoil in credit markets have had a predictable impact on Canada's housing
markets - home sales have dropped; prices have given into intense downward
pressure; and residential construction has slowed substantially," said Robert
Hogue, senior economist, RBC. "As the recession rages on with the
all-important spring season upon us, the ongoing cyclical correction will put
the entire housing sector to the test in coming months."
However, while the pain will likely persist for many homeowners and
industry participants, there are encouraging signs on the affordability front.
The sharp deteriorating trend in RBC's affordability measures from mid-2004 to
early 2008 has reversed in the past year.
The RBC Affordability measure captures the proportion of pre-tax
household income needed to service the costs of owning a home. During the
fourth quarter of 2008, the RBC Affordability measure at the national level
improved across all housing segments, as the detached bungalow moved to 43.7
per cent, the standard townhouse to 35.4 per cent, the standard condo to 30.1
per cent, and the standard two-story home to 50 per cent.
Compared with a year earlier, RBC's measures improved 2.3 to 3.5
percentage points due primarily to lower lending rates. According to the
report, lower mortgage rates account for the largest portion of the
improvement in almost all major urban areas in Canada. Rising family income
also contributed positively across the country. Only in Calgary, Edmonton and
Vancouver was price a constructive factor in the year-over-year change, though
the influences of price on affordability in the rest of the country grew in
"Going forward, low mortgage rates and persisting downward pressure on
housing prices will continue to help repair affordability although slowing
income growth will act as a restraint," added Hogue.
RBC's Affordability measure for a detached bungalow for Canada's largest
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
42.7 per cent, Ottawa 42.7 per cent and Montreal 39.4 per cent.
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
condominium. 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.
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: Robert Hogue, RBC Economics Research, (416)
974-6192; Jackie Braden, Media Relations, RBC, (416) 974-2124