TORONTO, Sept. 12 /CNW/ - An environment of rising mortgage rates, strong
price gains, and higher utilities created pricier second quarter housing
conditions in Atlantic Canada, according to the latest Housing Affordability
report released today by RBC Economics.
"While all the housing segments witnessed a significant affordability
deterioration, it was the two-storey and condo segments that saw the sharpest
erosion," said Derek Holt, assistant chief economist, RBC.
The RBC Housing Affordability report for the Atlantic provinces, which
measures the proportion of pre-tax household income needed for maintaining the
costs of owning a home, saw a deterioration in all four housing segments with
the standard two-storey home standing at 37 per cent, the detached bungalow at
30 per cent, the standard townhouse at 26 per cent, and the standard condo at
26 per cent.
According to the report, there continues to be substantial variance in
housing market conditions across the region. Markets in Halifax and Saint John
remain tight and supportive of strong house price gains while there appears to
be some room in St. John's.
The hit to affordability conditions has created a challenging environment
for Atlantic Canada. The arrival of extended amortization mortgages, has
changed the near-term dynamics of the region's housing markets. For example, a
two-storey home with a 25-year mortgage currently accounts for roughly 37 per
cent of the median pre-tax household income in the region. By contrast, the
same home with a 40-year mortgage uses roughly 33 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 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.
Also included in the report are housing affordability conditions for a
broader sampling of select cities across the country, including St. John's,
Saint John, and Halifax. For these select 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 71 per cent, Calgary 45 per cent, Toronto
45 per cent, Montreal 36 per cent and Ottawa 31 per cent.
Highlights from across Canada:
- British Columbia: Housing affordability eroded further across the
province as rising mortgage rates and house prices squeezed out
prospective home-buyers. The relief seen in the two-storey home
segment earlier this year was reversed this quarter with all four
home segments witnessing deteriorations in affordability.
- Alberta: Housing affordability deteriorated significantly in the
second quarter of 2007. Alberta's house prices have been growing at a
pace well above incomes and in a short time have created stressed
- Saskatchewan: The Saskatchewan housing market suffered its worst ever
quarterly deterioration of affordability on record. At the start of
the year, the influx of people caught the housing supply off guard,
forcing affordability to deteriorate. This momentum continued into
the second quarter as the pace of annual price gains soared into the
double digit range.
- Manitoba: With house price gains picking up pace and mortgage rates
continuing to rise, the province's housing affordability has
deteriorated for a second straight quarter. Manitoba saw the greatest
quarterly decline in affordability in more than a year.
- Ontario: After modest improvements earlier in the year, Ontario's
housing affordability deteriorated sharply in the second quarter. A
combination of higher house prices, rising mortgage rates and
increasing utility costs have forced a substantial deterioration in
affordability across all housing classes.
- Quebec: Despite only modest increases in house prices this past
quarter, climbing mortgage rates, utilities and taxes drove an
erosion in Quebec's housing affordability. However, the province's
decent economic fundamentals still support housing markets, with job
growth at a healthy two per cent rate this year and incomes keeping
pace with gains in house prices.
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;
Jackie Braden, RBC Media Relations, (416) 974-2124