Affordability set to neutral
TORONTO, May 27, 2014 /CNW/ - Alberta's home prices were tame in Q1 of
2014, keeping housing affordability levels relatively flat, according
to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
"Alberta's housing market continued to benefit from a booming economy,
rapid rising population and attractive affordability," said Craig
Wright, senior vice-president and chief economist, RBC. "First quarter
home resales were 9.0 per cent above the 10-year average, which kept
demand-supply conditions fairly tight in the province's largest
RBC notes, however, that activity stabilized in the past two quarters,
suggesting that trends remain under control and that the housing market
is showing few signs of overheating. While generally up solidly from a
year ago, home prices were tame in the first quarter of the year.
The RBC housing affordability measures, which capture the proportion of
pre-tax household income that would be needed to service the costs of
owning a home at current market values, rose slightly for two of three
categories tracked in first quarter of 2014 (an increase in the measure
represents deterioration in affordability).
RBC's affordability measures rose by 0.1 percentage points to 32.6 per
cent for bungalows and by 0.4 percentage points to 20.2 per cent for
condominiums. The measure for two-storey homes was unchanged at 34.4
Calgary-area housing market gives a strong performance
Calgary's housing market continues to benefit from a strong economy,
solid demographic demand and attractive affordability levels.
"Home prices in Calgary are rising at the fastest rate in the country,
but they seem to be easily absorbed by Calgary's high - and growing -
household incomes," added Wright. "Calgary's housing market pretty much
has everything going for it at the moment."
Despite slight erosion in housing affordability over the past year,
including Q1 2014, all of RBC's measures for the area continue to be
well below their long-term average. This trend indicates that
developments in the Calgary-area market to date have been quite
RBC's measures increased in all three categories in the first quarter:
by 0.9 percentage points for bungalows to 34.5 per cent, 1.0 per cent
for two-storey homes to 35.0 per cent and 0.5 percentage points for
condo apartments to 20.4 per cent.
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in the first quarter of 2014 is as follows:
Vancouver 82.4 (up 0.9 percentage points from the previous quarter);
Toronto 56.1 (up 0.2 percentage points); Montreal 38.9 (up 0.1
percentage points); Ottawa 36.4 (down 0.5 percentage points); Calgary
34.5 (up 0.9 percentage points); Edmonton 32.9 (down 0.2 percentage
The RBC Housing Affordability Measure, which has been compiled since
1985, is based on the calculated 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:
British Columbia: single-family homes less affordable
Housing affordability continues to be poor in British Columbia. RBC
measures rose 1.2 percentage points for two-storey homes and 0.9
percentage points for bungalows to 74.2 per cent and 68.4 per cent,
respectively. The measure for condos remained unchanged at 33.6 per
Saskatchewan: affordability plays a neutral role
Owning a home in Saskatchewan became slightly more affordable for the
most part in Q1 2014. RBC's measures fell in two of the three
categories - bungalows by 0.6 percentage points to 36.4 per cent and
condominiums by 0.1 percentage points to 25.4 per cent. The rise in the
measure for two-storey homes - 0.5 percentage points to 40.7 per cent -
reversed a decline that took place in the previous quarter.
Manitoba: housing becomes more affordable
Manitoba homebuyers benefited from some improvement in affordability in
the first quarter of 2014. RBC measures for both bungalows and
condominiums fell in the first quarter to their lowest levels in nearly
a year - by 0.4 percentage points and 0.6 percentage points,
respectively. Although the measure for two-storey homes rose by 0.3
percentage points, it stands at a lower level than last spring.
Ontario: affordability deteriorates in single-family homes
First quarter affordability measures point to a consistently eroding
affordability picture in the province, particularly for single-family
homes. RBC's measures stood at 24-year highs for bungalows at 44.9 per
cent and two-storey homes at 51.0 per cent. The measure for
condominiums was 29.4 per cent - not much below its multi-decade peak.
Quebec: housing affordability levels sit close to historical averages
Housing affordability in the province did not erode much or at all in
the first quarter and largely remain close to historical norms. RBC's
measures edged higher by 0.2 percentage points for bungalows to 34.5
per cent and 0.1 percentage points for two-storey homes to 43.7 per
cent. The measure for condominiums fell 0.1 percentage points to 26.6
Atlantic: favourable affordability conditions do little to energize
The region's housing affordability conditions largely improved in the
first quarter, but did little to pull the market out of its slump. RBC
measures declined 0.4 percentage points to 31.2 per cent for bungalows
and 0.4 percentage points to 25.9 per cent for condominiums. The
measure for two-storey homes rose by 0.2 percentage points to 36.2, but
remained below its long-term average.
The full RBC Housing Trends and Affordability report is available online as of 8 a.m. ET today.
For further information:
Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635