Calgary market transitioning into a more vigorous phase
TORONTO, May 20 /CNW/ - Unlike most other major centres across Canada,
housing affordability in Alberta remained stable in the first quarter
of 2011, according to the latest Housing Trends and Affordability
report issued by RBC Economics Research.
Until the fall of 2010, abundant availability of homes for sale in the
face of sluggish demand kept housing prices firmly under control.
Resulting stable or slightly declining property values contributed to a
substantial improvement in affordability in Alberta last year.
"The Alberta market continued to be stuck in low gear in the first
quarter of 2011. Sales of existing homes and construction of new
housing units showed very modest increases," said Robert Hogue, senior
economist, RBC. "While market conditions have become more balanced in
recent months, owning a home doesn't seem to be getting more expensive
in the provincial market at this stage. Affordability levels are still
looking quite attractive."
RBC's 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, remained relatively unchanged and below their
long-term averages in the first quarter of 2011. The measure for the
benchmark detached bungalow in the province moved up to 31.3 per cent
(an increase of 0.4 of a percentage point from the previous quarter),
the standard condominium stayed flat at 20.2 per cent and the standard
two-storey home fell to 34.2 per cent (down by 0.2 of a percentage
RBC's report notes that there are signs that the Calgary housing market
is finally overcoming its protracted slump. Home resales in the area
grew for the second consecutive period in the first quarter, the most
growth since the middle of 2009, helping to remove market slack and
setting a healthier balance between demand and supply.
"Calgary home prices have yet to break out of their listless trends, but
they rose at their fastest rate in more than a year in the first
quarter, with detached bungalows leading the way," said Hogue. "Firmer
market conditions and higher prices had only limited impact on
Calgary's affordability, which remains among the most attractive of
Canada's major cities."
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
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.
Ontario: In the first quarter of 2011, home resales in Ontario increased at a
sustained and yet subdued rate, while home prices rose modestly
overall. Affordability stood very close to long-term averages, leaving
homebuyer demand largely unchanged in the province. RBC measures went
up for bungalows and condominiums (by 0.5 and 0.1 of a percentage
point, respectively), but down for two-storey homes (by 0.6 of a
percentage point). Market activity in Ontario is likely to face some
headwinds in coming months, given the latest changes in mortgage
lending rules and the expected rise in interest rates.
Somewhat tense market conditions in Toronto further fuelled appreciation
in property values and led to an erosion in affordability, as RBC
measures for detached bungalows and condominium apartments rose by 0.8
and 0.1 of a percentage point respectively.
Ottawa measures increased modestly for detached bungalows and two-storey
homes, while they remained the same for condominium apartments. As most
measures have moved above long-run averages, any further deterioration
in affordability will likely act to restrain demand in the area.
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