TORONTO, Feb. 24 /CNW/ - Alberta's housing market officially became the
most affordable in Canada in the fourth quarter of 2010, according to
the latest Housing Trends and Affordability report released today by
Thanks to lower mortgage rates and further softening in home prices,
RBC's Affordability Measures for Alberta fell yet again in the fourth
quarter, by 1.0 to 2.4 percentage points, extending their long strings
of declines since late 2007.
"Alberta saw a notable downswing in demand for housing last spring and
early summer, giving buyers the upper hand and pushing prices down,"
said Robert Hogue, senior economist, RBC. "Alberta's reign as the most
affordable housing market may be short lived, however. Demand has shown
more vigour in recent months, alongside a provincial economy that is
gaining more traction, and Alberta's market has become better balanced.
We expect that this will stem price declines this year and erase a
potential offset to the negative effect of a projected rise in interest
rates on affordability."
The RBC Housing Affordability Measures for Alberta, which capture the
province's proportion of pre-tax household income needed to service the
costs of owning a home, eased across all housing categories in the
fourth quarter. The measure for the benchmark detached bungalow moved
down to 30.9 per cent (a drop of 2.4 percentage points from the
previous quarter), the standard condominium to 20.3 per cent (down 1.0
percentage points) and the standard two-storey home to 34.4 per cent
(down 2.2 percentage points).
The RBC report notes that gradual and steady improvements in Calgary's
housing demand have recently started to bolster market conditions as
home resales increased appreciably since June which helped trim down
the slack that kept buyers in the driver's seat.
A return to more balanced market conditions in Calgary, however, did not
succeed in reversing the tide in the fourth quarter of 2010 as home prices continued to weaken for the most part in the fourth
quarter. Nonetheless, this contributed to further material improvement
in affordability. The RBC Measures for Calgary again fell the most
among Canada's largest urban markets, declining by 0.9 to 3.1
"Affordability in the Calgary area is now the best in almost six years
and this attractive level of affordability will support further
increases in demand as the local economy picks up steam in the year
ahead," added Hogue.
Elsewhere in the country, a majority of provinces saw improvements in
affordability in the fourth quarter. Only the standard two-storey
benchmark became less affordable in Ontario and Quebec, as did the
standard condominium apartment in Quebec and the Atlantic region.
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: Buying a home in B.C. became slightly more affordable in the fourth
quarter of 2010, due primarily to a small drop in mortgage rates. After
experiencing some declines in the previous quarter, home prices rose
modestly for most housing categories; condominium apartments bucked the
trend, however, and depreciated slightly. Prices were supported by a
tightening in market conditions with home resales picking up smartly
following substantial cooling in the spring and summer that saw sellers
lose their edge in setting property values. Demand and supply in the
province are judged to be quite balanced at this point. RBC's
Affordability Measures fell between 0.8 and 1.0 percentage points in
the fourth quarter which came on the heels of much more substantial
drops (1.7 to 4.8 percentage points) in the third quarter.
Notwithstanding these declines, affordability remains poor and will
weigh on housing demand going forward.
Saskatchewan: The provincial housing market finished 2010 on an enviable note as
affordability improved even though home prices, for the most part, rose
slightly in the fourth quarter. Generally, the price increases more
than reversed declines in the previous period but were too small to
negate the beneficial effect of lower mortgage rates. The home resale
market gained back solid forward momentum in the second half of 2010,
notwithstanding some softening in the final months, which
re-established a stronger balance between demand and supply. The RBC
Measures fell between 0.6 and 1.1 percentage points in the quarter,
although the levels continue to be modestly above historical averages
in the province. RBC projects the Saskatchewan market will take its
current affordability position in stride as a rebound in provincial
economic growth and continued strong migration inflows will support
housing demand this year.
Manitoba: Manitoba's market enjoyed the best of both worlds in the fourth quarter
of 2010 as home price were higher but ownership costs were lower.
Thanks to lower mortgage rates in the quarter and continued growth in
household income, the negative effect of small gains in property values
on affordability was more than offset. The RBC Measures eased between
0.1 and 0.6 percentage points in the fourth quarter, keeping Manitoba
among the only two provincial markets in Canada (with Alberta) in which
Affordability Measures stand below long-term averages for all housing
categories. Sales of existing homes ramped up considerably in the fall,
reaching near historical peaks by December. Housing demand is being
boosted by the strongest net international immigration in the province
since the mid 1950s and by improved job prospects - Manitoba boasts the
lowest unemployment rate in Canada (as of the fourth quarter of 2010)
and RBC expects this to continue in 2011.
Ontario: Concerns last year that the housing market would falter have now
largely dissipated as home resale activity picked up smartly in the
fall and property values resumed their appreciation trend in the
closing months of 2010. The slowdown in market activity in the spring
and summer last year largely reflected various transitory factors -
including the introduction of the HST and changes in mortgage lending
rules - that brought demand forward to the start of the year. The
silver lining of this slowdown, however, has been an improvement in
affordability. The RBC Measures edged lower for the second consecutive
time for most housing categories in the fourth quarter, down by 0.2 to
0.3 percentage points. The only exception was two-storey homes, which
became marginally less affordable amid notable price gains. RBC expects
affordability will play a neutral role for demand in Ontario with RBC
Measures close to their long-run average.
Quebec: Higher home prices in the fourth quarter of 2010 caused some
deterioration in affordability following meaningful improvement in the
previous period. Home resales strengthened in the latter part of 2010,
contributing to tightened market conditions that gave sellers a
stronger hand in negotiating prices, particularly for two-storey homes.
Price gains and rising household income dominated the positive effects
of lower mortgage rates on affordability in the fourth quarter for all
housing types except detached bungalows (where a small improvement was
registered). RBC Measures rose marginally by 0.1 to 0.2 percentage
points for two-storey homes and condominium apartments, and fell by 0.6
percentage points for detached bungalows; however, the levels of all
Measures still modestly exceeded long-term averages in the province.
RBC expects that modestly strained affordability in Quebec will further
deteriorate in the period ahead when interest rates rise.
Atlantic Canada: Home resale activity sputtered late in 2010 and reversed some of the
gains achieved at the end of the summer and early fall. This has not
disrupted property values in the fourth quarter as home prices
generally appreciated; yet, housing affordability improved for most
housing categories because declines in interest rates provided a
dominant offset. Only condominium apartments saw a slim deterioration
in affordability as the RBC Measures rose by 0.1 percentage point
compared with declines of 0.5 percentage points for detached bungalows
and two-storey homes. Affordability levels continue to be mostly
attractive in Atlantic Canada from both historical and cross-country
perspectives. RBC projects that is likely to remain so in the near-term
despite our expectation of higher interest rates. Market conditions
have recently swung in favour of buyers which will exert downward
pressure on prices in coming months.
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