TORONTO, Jan. 24 /CNW/ - After homeownership costs climbed steadily
through 2007, nationwide housing affordability should to start to improve in
2008, according to the latest Housing Affordability report released today by
"Almost every house class in every province and major city saw
affordability deteriorate last year," said Derek Holt, assistant chief
economist, RBC. "Unlike the late 1980s and early 1990s when both unemployment
rates and interest rates pushed into double digits and led to declining
affordability, the prime culprit this time around has been a long string of
house price gains that have outstripped income gains."
The RBC Affordability report measures the proportion of pre-tax household
income needed to service the costs of owning a home. In the most recent
quarter, the affordability of all four housing classes eroded, with the
exception of slight improvements in Calgary's condos and Edmonton's detached
bungalows. Across the country, the standard condo remained the most affordable
housing type, requiring about 30 per cent of pre-tax household income. A
standard townhouse was next at 34 per cent, followed by a detached bungalow at
42 per cent while a standard two-storey home remained the least affordable
housing type at 47 per cent.
According to RBC, new record highs for the amount of household income
going towards homeownership costs are being set across most housing classes in
British Columbia, Alberta and Saskatchewan. While their provincial economies
are strong, the gains have been increasingly leveraged. The
Saskatchewan-Manitoba border remains the dividing line between over-heated
housing markets in Canada: everything from Manitoba eastward remains well
below previous record highs for affordability set in the late 1980s and early
Canada's rate of resale house price appreciation is likely to slow to
between five and seven per cent in 2008. New home construction volumes and
income growth are also expected to decline. The popular five-year mortgage
rate is anticipated to drift about 50 to 75 basis points lower by year-end,
and the Bank of Canada's overnight rate is forecast to drop by a further 100
RBC's Affordability measures for a detached bungalow for Canada's largest
cities are as follows: Vancouver, 72 per cent, Calgary, 46 per cent, Toronto,
46 per cent, Montreal, 37 per cent and Ottawa, 32 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
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.
In addition to major urban centres, the report includes 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
Highlights from across Canada:
- British Columbia: Housing affordability reached into uncharted
territory late last year as affordability deteriorated to its worst
level since 1985 when RBC started tracking conditions. Modest
improvements are expected for 2008.
- Alberta: Many prospective homebuyers were priced out of the market
last year as housing affordability conditions eroded, pushing markets
into unsustainable territory. With a softer influx of migrants, the
housing market is poised for a significant slowdown and improved
- Saskatchewan: Housing affordability deteriorated sharply across all
home segments last year as a sudden influx of migrants strained
existing housing capacity. In 2008, housing affordability conditions
are expected to stabilize.
- Manitoba: The province's housing market is still running at full
tilt. Affordability should improve as rising costs start to weigh on
demand and help rebalance the market in 2008.
- Ontario: Income growth is expected to cool amidst toughening economic
conditions in the province. On balance, our affordability forecast in
2008 points to overall improving conditions as mortgage rates drift
lower and price gains moderate even further.
- Quebec: Housing affordability continued to deteriorate last year.
Stable and modest price gains combined with some mortgage rate relief
this year should translate into an overall improvement in
affordability conditions across all four home segments in 2008.
- Atlantic region: Strong house price gains and rising mortgage rates
chipped away at affordability conditions in 2007. In 2008, Atlantic
Canada is expected to move onto a softer growth trajectory as housing
construction activity gears down.
The full RBC Housing Affordability report is available online, as of
8 a.m. E.S.T. today at www.rbc.com/economics/market/pdf/house.pdf.
For further information:
For further information: Derek Holt, RBC Economics, (416) 974-6192; Amy
Goldbloom, RBC Economics, (416) 974-0579; Jackie Braden, RBC Media Relations,