Housing affordability rolls on but improvement could be running out of steam, says RBC Economics



    TORONTO, Sept. 9 /CNW/ - Home ownership in Canada became more affordable
for the fifth straight quarter with modest improvement registered across the
country, according to the second quarter housing report released today by RBC
Economics Research.
    "Following the biggest quarterly improvements on record in the first
quarter and continued improvement in the second quarter, the national home
affordability level has been restored to pre-housing boom levels," said Robert
Hogue, senior economist, RBC. "However, the recuperative phase of the
affordability cycle seems to be drawing to a close with housing prices firming
up in many parts of the country and mortgage rates no longer trending
downward."
    The RBC Housing Affordability measure captures the proportion of pre-tax
household income needed to service the costs of owning a home. During the
second quarter of 2009, the RBC Affordability measure at the national level
improved modestly across all housing segments, as the benchmark detached
bungalow moved down to 39.1 per cent, the standard townhouse down to 31.5 per
cent, the standard condo down to 26.9 per cent and the standard two-storey
home down to 44.4 per cent respectively.
    The report found that measures fell at the national level by 0.4
percentage points for standard condominiums and 0.6 percentage points for
two-storey homes, detached bungalows and standard townhouses - marking the
fifth consecutive quarterly decline in home ownership costs (the lower the
measure, the more inexpensive it is to afford a home).
    "The leveling off of home affordability is not expected to stop the
impressive resurgence in the housing market," added Hogue. "Supply of
properties for sale is dropping as demand bounces back, which is working to
heat up prices again in many parts of the country."
    RBC's Affordability measure for a detached bungalow for Canada's largest
cities is as follows: Vancouver 63.4 per cent, Toronto 46.5 per cent, Ottawa
38.6 per cent, Montreal 37.3 per cent and Calgary 35.7 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.

    
    Highlights from across Canada:

    -   British Columbia: In the second quarter, housing affordability in
        B.C. eased once again, further extending the downward trend since the
        start of 2008, although homeownership costs are still significantly
        above long-term levels. Sales of existing homes surged by more than
        125 per cent from their cyclical trough early this year. Market
        conditions have tightened and there has been some firming of prices.

    -   Alberta: The biggest cumulative drop in the history of RBC
        Affordability measures in Alberta deepened further in the second
        quarter, falling to levels not seen since before the housing boom.
        Existing home sales soared by more than 60 per cent between April and
        July, fully reversing last year's slide. Tightening market conditions
        should set the stage for some property value appreciation in the near
        future.

    -   Saskatchewan: Affordability has improved considerably in Saskatchewan
        since early last year, but homeownership costs remain above long-term
        averages. Regardless, sales of existing homes rebounded smartly,
        rising by more than 50 per cent since their lows in March. If this
        trend is sustained, property prices can be expected to eventually
        heat up as well.

    -   Manitoba: The notable easing of homeownership costs in the past year
        has fully repaired affordability in Manitoba, compared to historical
        averages. Resale activity ramped up during spring and summer and
        property prices generally maintained their steady upward trend,
        supported by relatively tight market conditions.

    -   Ontario: Solid improvements in affordability in Ontario have
        supported a strong upturn in the market in recent months. All
        Affordability measures are now below historic averages, indicating
        that homeownership costs are at attractive levels in the province.
        The general tone of the market is generally positive, but local
        demand continues to be held back by the tough economic prospects many
        communities in Ontario continue to face.

    -   Quebec: Housing affordability improved once again in the second
        quarter in Quebec, prolonging a trend that has been ongoing during
        the past year. Sales of existing homes surged by more than 40 per
        cent over the cyclical low reached mid-winter. With a more upbeat
        market sentiment and tightening demand-supply conditions pushing
        property values upward, the Quebec housing market appears to be back
        on track.

    -   Atlantic Canada: Rebounding from a relatively restrained downturn,
        housing affordability in Atlantic Canada continues to improve, albeit
        at a more moderate pace than elsewhere in the country. Affordability
        measures have declined noticeably since early last year and now stand
        below long-term averages. Sales of existing homes climbed by more
        than 18 per cent since January and property values increased
        modestly. Overall, Atlantic Canada is enjoying relatively attractive
        affordability levels, which should support housing activity in the
        period ahead.
    

    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; Matt Gierasimczuk, Media Relations, RBC, (416) 974-2124


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