Toronto and Ottawa homebuyers experience a slight erosion in
TORONTO, May 20 /CNW/ - Ontario's housing affordability remained fairly
stable in the early part of 2011, and home prices and resale activity
increased at a steady rate, according to the latest Housing Trends and
Affordability Report issued today by RBC Economics.
"Ontario's housing market has reached a cruising speed since the end of
2010 and seems to be on a sustainable path so far this year. The
demand-supply equation has remained balanced for the most part, but has
firmed just enough to give the sellers a slightly stronger hand," said
Robert Hogue, senior economist, RBC. "The provincial market will likely
face some headwinds in the coming months, however, as stricter mortgage
lending rules and an expected rise in interest rates weigh on homebuyer
The RBC housing affordability measures for Ontario, which capture the
province's proportion of pre-tax household income needed to service the
costs of owning a home, changed little at the start of 2011 and stand
very close to the long-term averages. The measure for the benchmark
detached bungalow increased to 39.3 per cent (up 0.5 of a percentage
point from the previous quarter) and the standard condominium raised a
slim 0.1 of a percentage point to 27.5 per cent, while the standard
two-storey home eased to 44.6 per cent (down 0.6 of a percentage
The RBC report notes that the Toronto-area housing market maintained its
momentum in the first quarter, with home resale activity recovering
much of the ground lost during its downswing last spring and summer.
"Toronto's strength earlier this year is likely in part a reflection of
the changes in mortgage lending rules that took effect in March and
April, which pulled activity forward that would have otherwise occurred
later in the year. Consequently, some of this vigour could very well be
reversed in the coming months," said Hogue. "Somewhat tense market
conditions in the first quarter fuelled appreciation in property values
and led to some erosion in affordability."
Toronto-area affordability measures rose for detached bungalows and
standard condominiums (up 0.8 and 0.1 of a percentage point,
respectively) in the latest period, but eased for standard two-storey
homes by 0.9 of a percentage point to 55.6 per cent.
"Despite signs of deterioration, affordability levels in Toronto remain
close to their long-term averages, indicating that the cost of owning a
home has not yet reached dangerously high levels in the GTA," added
Over the first three months of 2011, homeownership also became a little
less affordable in the Ottawa area, as residential property values
increased for the second consecutive quarter and boosted the ownership
costs of most housing types.
"Market conditions in Ottawa tightened early this year because of a
decline of new properties being offered for sale," noted Hogue.
"Nevertheless, the impact of rising prices on homebuyer's ability to
afford a home was tempered by continued income gains in the city, which
provided some extra budget room."
RBC measures for the Ottawa-area increased modestly in the first quarter
by 0.4 of a percentage point for both detached bungalows and two-storey
homes and recorded no change for standard condominiums. It is expected
that deteriorating affordability in the area will increasingly restrain
housing demand going forward.
The majority of Canadian markets experienced weakened affordability in
the first quarter of 2011. Most notable was the sizeable deterioration
in British Columbia. More specifically, Vancouver saw significant gains
in property values, which drove the already elevated cost of
homeownership even higher. Quebec's homebuyers also faced noticeable
rises in ownership costs, while those in Atlantic Canada saw their
affordability advantage somewhat diminish. The picture remained mixed
in other areas of the country, with Ontario, Alberta and Saskatchewan
experiencing ups and downs in ownership costs, depending on the housing
"Despite the latest erosion in affordability, provincial levels
generally continue to stand near their long-term averages, suggesting
that owning a home remains affordable or, at worst, slightly
unaffordable across Canada - with Vancouver being a notable exception,"
RBC's housing affordability measure for a detached bungalow in Canada's
largest cities is as follows: Vancouver 72.1 per cent (up 3.4
percentage points from the last quarter), Toronto 47.5 per cent (up 0.8
of a percentage point), Montreal 43.1 per cent (up 2.0 percentage
points), Ottawa 39.0 per cent (up 0.4 of a percentage point), Calgary
35.9 per cent (up 0.9 of a percentage point) and Edmonton 31.5 per cent
(up 0.5 of a percentage point).
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. Alternative
housing types are also presented including a standard two-storey home
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: Strong home price increases reduced affordability in the province in the
first quarter. The RBC measures for British Columbia rose between 0.8
of a percentage point and 1.8 percentage points, the most significant
increases of all the provinces. The lack of affordability will continue
to weigh on local demand and could potentially cause painful market
disruptions in the period ahead.
Vancouver affordability continued to wane, as measures climbed between
1.0 percentage point and 3.4 percentage points, and moved closer to
Alberta: Stable or slightly declining prices, contributed to substantial
improvements in affordability in Alberta last year. While market
conditions have become more balanced in recent months, there remains
very little pricing momentum in the province. The RBC measures for all
housing categories in Alberta stood below their long-term average in
the first quarter.
There are tentative signs that the Calgary market is finally firming up.
Area homebuyers are benefiting from attractive affordability, which
remained the best among Canada's major cities.
Saskatchewan: Following solid performance in the second half of last year, some
softening in property values in the early months of 2011 led to a
further decrease in the cost of owning a home in Saskatchewan. The RBC
measures for bungalows and two-storey homes fell by 0.7 of a percentage
point in the first quarter, representing a third consecutive quarterly
improvement in affordability. Condominium apartments bucked this trend
and saw their affordability modestly deteriorate in the face of higher
Manitoba: Housing affordability continues to be attractive in Manitoba, with
little change registered in the first quarter. Measures rose by 0.1 of
a percentage point for detached bungalows, declined by 0.2 of a
percentage point for condominium apartments and stayed even for
two-storey homes. Manitoba is still one of only two provincial markets
(alongside Alberta) where affordability measures stand below long-term
averages for all housing categories.
Quebec: Quebec homebuyers faced higher ownership costs in the first quarter,
which weighed significantly on affordability. RBC measures rose by 1.1
percentage points for detached bungalows and 1.3 percentage points for
two-storey homes, both representing the second largest increases behind
those recorded in British Columbia. All measures in Quebec stand
slightly above their long-term averages, corresponding to a moderate
strain in affordability in the province.
Montreal's affordability measures rose between 0.1 of a percentage point
and 2.8 percentage points in the first quarter of 2011, pushing levels
for all housing types above national and long-term averages for the
Atlantic Canada: In the first quarter, rebounding housing market activity has boosted
property values in Atlantic Canada. Home resales in the region climbed
solidly for the second consecutive period and further reversed some of
the declines that occurred last year. The downside has been a modest
fall in the region's affordability position. Affordability measures for
Atlantic Canada increased between 0.6 and 0.9 of a percentage point in
the latest period, although levels hovered near long-term averages and
remained among the lowest in the country.
The full RBC Housing Trends and Affordability report is available
online, as of 8 a.m. ET today at www.rbc.com/economics/market/pdf/house.pdf.
For further information:
Robert Hogue, RBC Economics Research, 416-974-6192
Elyse Lalonde, Media Relations, RBC, 416-974-8810