MONTREAL, March 14 /CNW/ - The nationwide deterioration in housing
affordability has not hit Quebec with the same intensity as the rest of the
country. Heading into 2008, affordability in the province is expected to
improve, according to the latest housing report released today by RBC
"The erosion in housing affordability seen across the country was felt in
a more muted way in Quebec," said Derek Holt, assistant chief economist, RBC.
"The province's generally balanced market has helped keep affordability
conditions relatively in check."
The RBC Housing Affordability measure which captures the proportion of
pre-tax household income needed to service the costs of owning a detached
bungalow was about 37.7 per cent of income in Quebec. For a standard
townhouse, the measure stood at 33.2 per cent, and for a two-storey home at
46.1 per cent. The amount of pre-tax income required to purchase a condo in
Quebec was 30.6 per cent.
According to the report, Quebec's house prices continue to modestly
outpace income gains. However, the gap between these two measures is expected
to narrow in 2008, as price growth stabilizes around the five per cent range.
New home construction is expected to slow modestly with 46,000 units in 2008,
and more significantly in 2009 with only 40,000 units being built as housing
markets shift into lower gear.
In contrast to market conditions across the country, Montreal's housing
affordability remained somewhat steady. House price growth continues to rise
at an annual five per cent rate across all housing segments. However, the
combination of softening household income growth and rising mortgage rates,
has led to a mild erosion in affordability. Fewer price pressures and lower
mortgage rates should cause overall affordability to improve in 2008.
The report also presents a comparison of Canadian and U.S. household
finances, and shows that Americans are still modestly richer, but much more
heavily leveraged and further in debt with less liquidity. That, in turn,
makes them more vulnerable to ongoing credit market turmoil and risks towards
house prices than Canadians. In fact, the sharp depreciation in the U.S.
dollar over the past six years has made Canadians relatively richer over time,
by raising the value of what their wealth will buy in world markets compared
to that of their American counterparts.
Also included in the report are housing affordability conditions for
Quebec City and a broader sampling of cities across the country. For these
smaller cities, RBC has used a narrower measure of housing affordability that
only takes mortgage payments relative to income into account.
RBC's Affordability measure for a detached bungalow for Canada's largest
cities is as follows: Vancouver 74 per cent, Toronto 47 per cent, Calgary 42
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 measure, 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: Although affordability conditions deteriorated to
their worst level on record at the end of 2007, the province is
poised for some affordability relief in 2008 as a result of cooler
price gains and lower interest rates.
- Alberta: At the end of 2007, the province witnessed broad-based
affordability improvements across all housing segments for the first
time in over three years. Rapidly cooling prices put the province on
watch, but should result in improved affordability for 2008.
- Saskatchewan: Saskatchewan has become the new Alberta. Constraints in
the existing home market have pushed into overflowing demand in the
new home market. As the national leader for growth in housing starts,
house prices, residential building permits, and resale activity, the
province saw substantial erosion in affordability in 2007. In 2008,
affordability conditions should gradually stabilize.
- Manitoba: Housing markets across the province continue to heat up.
Resale markets continue to drive strong price gains, but as household
income continues to grow at the third-fastest rate in the country,
affordability conditions remain steady.
- Ontario: Even though housing affordability deteriorated across all
housing segments, the pace has slowed. The province should see
improvements in 2008 from a cooling economy, lower mortgage rates,
and softer price gains.
- Atlantic region: Affordability continued to erode in the final
quarter of 2007. A combination of income growth, moderate house price
gains and anticipated mortgage rate relief across all home segments
should improve affordability in 2008.
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: Derek Holt, RBC Economics, (416) 974-6192;
Raymond Chouinard, RBC Media Relations, (514) 874-6556; Jimmy Jean sera
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