Toronto area the only market where affordability slips in all categories
TORONTO, Feb. 25, 2014 /CNW/ - Housing affordability in Ontario remained
somewhat strained in the fourth quarter of 2013, although there was
some modest reprieve in the detached homes categories for the first
time in a year, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
RBC notes that the persistence of possible affordability-related stress
in the single-detached homes categories may have contributed to a
moderation in housing market activity in the closing quarter of last
"Home resales fell 4.0 per cent between the third and fourth quarters of
2013 in Ontario, yet the level of market activity in Ontario
essentially matched the 10-year average, which is hardly a sign of
weakness," said Craig Wright, senior vice-president and chief
economist, RBC. "A drop in new listings may have also contributed to
the moderation in activity, possibly frustrating some potential buyers
who may have opted to wait for more suitable offerings at a later
RBC's housing affordability measures, which capture the proportion of
pre-tax household income needed to service the costs of owning a home
at market values, eased slightly in Ontario in the fourth quarter of
2014 (a decline in the measure represents an improvement in
RBC's measures declined by 0.1 percentage points for bungalows and
two-storey homes to 44.7 per cent and 50.3 per cent, respectively,
while condo affordability remained unchanged at 29.5 per cent.
Toronto-area affordability erodes across the board in Q4
"Toronto was the only market in Canada that saw across-the-board
deterioration in affordability during the fourth quarter," said Wright.
"While affordability measures rose only mildly, they added to a series
of increases since 2010 and extended the well-entrenched deteriorating
trend in the city, particularly for the single-detached categories."
Owning a two-storey home or a bungalow in Toronto now appears to be a
bit of a stretch for prospective homebuyers, RBC says, as measures for
these categories stand noticeably higher than their historical norms.
Owning a condominium at market value is also somewhat of a stretch, but
not nearly as much as that for detached homes.
RBC's measures rose for all housing categories in the fourth quarter: by
0.2 percentage points for both two-storey homes (to 63.7 per cent) and
condominium apartments (to 33.9 per cent), and by 0.1 percentage points
for bungalows (to 55.6 per cent).
The RBC report notes that while affordability tensions may have been a
factor in a 6.3 per cent decline in home resales, the weather -
including a major ice storm in December,- and a slowdown in new
listings in the second half of 2013 were likely the more dominant
Ottawa - Employment uncertainty could be eroding buyer confidence
Home resales in the Ottawa area fell to their lowest levels since
mid-2010 in the fourth quarter of 2013. The drop - which may reflect
increased employment uncertainty in the area after a loss of 20,000
jobs in the Ottawa-Gatineau area during the first three quarters of
2013 - followed a year during which activity maintained a fairly steady
pace near its 10-year average.
"Ottawa's supply-demand conditions evolved mostly in favour of buyers
over the past two years and more recently buyers used this stronger
negotiating power to drive housing prices lower," said Wright. "This
has lead to an improvement in affordability in the Ottawa area."
RBC measures for Ottawa declined by 0.4 percentage points for both
two-storey homes and bungalows to 38.4 and 36.7 per cent, respectively.
The measure for condominium apartments remained unchanged at 25.1 per
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in the fourth quarter of 2013 is as follows:
Vancouver 81.6 (down 2.3 percentage points from the previous quarter);
Toronto 55.6 (up 0.1 percentage points); Montreal 38.8 (unchanged);
Ottawa 36.7 (down 0.4 percentage points); Calgary 33.8 (down 0.2
percentage points); Edmonton 33.3 (up 0.1 percentage points).
The RBC Housing Affordability Measure, which has been compiled since
1985, is based on the costs of owning a detached bungalow (a reasonable
property benchmark for the housing market in Canada) at market value.
Alternative housing types are also presented, including a standard
two-storey home and a standard condominium apartment. The higher the
reading, the more difficult it is to afford a home at market values.
For example, an affordability reading of 50 per cent means that
homeownership costs, including mortgage payments, utilities and
property taxes, would take up 50 per cent of a typical household's
monthly pre-tax income.
It is important to note that RBC's measure is designed to gauge
ownership costs associated with buying a home at present market values.
It is not a representation of the actual costs incurred by current
owners, the vast majority of whom have bought in the past at
significantly different values than those prevailing in the latest
Highlights from across Canada:
Alberta's homes become even more affordable
Owning a home at market value in Alberta became slightly more affordable
for most housing categories in the final quarter of 2013 and continued
to compare favourably against historical and national averages. RBC's
measures fell by 0.5 percentage points for two-storey homes and by 0.2
percentage points for bungalows. The measure for condominiums edged
higher by 0.1 percentage points.
Saskatchewan's affordability trends sideways
Housing affordability in the province continued to play a predominantly
neutral role in home-buying decisions with levels standing close to
historical norms. RBC's affordability measures declined 1.1 percentage
points for two-storey homes and 0.2 percentage points for bungalows.
The measure for condominiums was up by 0.4 percentage points.
Manitoba's surge in listings lends a hand to affordability
A surge in newly listed homes for sale weakened demand-supply conditions
in Manitoba during the second half of 2013, which ultimately helped to
improve affordability with RBC measures for two-storey homes and
bungalows slipping by 1.1 percentage points and 0.6 percentage points,
respectively. The measure for condominiums rose by 0.8 percentage
Quebec's affordability conditions little changed from the third quarter
The only observable variation in affordability conditions in Quebec
during the fourth quarter was in the two-story homes category, with
RBC's measure inching higher by 0.2 percentage points. The measures for
bungalows and condominium apartments remained unchanged. All measures
continued to stand near their long-run averages.
Atlantic Canada retains decent affordability conditions
Housing affordability in the region remained at generally neutral levels
in the fourth quarter, and still compared favourably against the
majority of markets across Canada. RBC's measures fell by 0.6
percentage points for two-storey homes and by 0.1 percentage points for
bungalows. The measure for condominiums rose by 0.2 percentage points.
The full RBC Housing Trends and Affordability report is available
online, as of 8 a.m. ET today, at rbc.com/economics/economic-reports/canadian-housing-forecast.html.
For further information:
Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635