TORONTO, June 22, 2015 /CNW/ - The silver lining for Alberta home buyers
in the face of plummeting oil prices at the start of this year was that
housing affordability improved significantly across the board in the
first quarter of 2015, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.
"Alberta's housing market experienced a particularly violent bout of
anxiety in response to plunging oil prices earlier this year - sellers
rushed to list homes and buyers hit pause," said Craig Wright, senior
vice-president and chief economist, RBC. "This combination dramatically
loosened demand-supply conditions, driving down property values and
turning the table squarely in favour of buyers in Q1."
The RBC Housing Affordability measures, which capture the province's
proportion of pre-tax household income needed to service the costs of
owning a home at market values, declined across all segments in the
first quarter (a decrease in the measure represents an improvement in
affordability). RBC's measures for Alberta fell 1.0 percentage points
to 33.0 per cent for two-storey homes, 0.6 percentage points to 19.9
per cent for condos, and 0.7 percentage points to 31.8 per cent for
Wright comments: "Alberta's housing affordability measures stood at
fairly attractive levels compared to historical averages and compared
to current values in other provinces, which will likely help limit the
extent of the correction in the province. In fact, resale activity has
stabilized more recently, suggesting that the worst may be over for
Alberta's housing market."
Buyers in Calgary remain hesitant despite improved affordability
Like the rest of Alberta, Calgary's housing market came under pressure
when the plunge in oil prices shook the confidence of both buyers and
sellers. RBC says that Calgary's housing market swung sharply -
shifting from favouring sellers to favouring buyers, thereby causing
the earlier rapid pace of price increases to start running in reverse.
The positive effect of this was a broad improvement in affordability.
"Calgary's improving housing affordability may not be enough motivation
for home buyers at this point in time as there is still uncertainty
about global oil markets and Alberta's economy in general. Still,
recent developments suggest that housing activity stabilized in spring,
and the market will be shaped by news on the economy and the job market
in particular over the coming months."
RBC's measures for Calgary fell in the first quarter of 2015 across all
categories tracked: declining 0.6 percentage points to 19.4 per cent
for condos, 1.5 percentage points to 32.6 per cent for two-storey
homes, and 1.0 percentage points to 32.8 per cent for bungalows.
During Q1 2015, affordability measures at the national level edged lower
by 0.3 percentage points to 27.1 per cent for condominiums and 0.2
percentage points to 47.9 per cent for two-storey homes. The measure
for detached bungalows was unchanged at 42.7 per cent.
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in Q1 2015 is as follows: Vancouver 85.6 (up
2.8 percentage points from Q4 2014); Toronto 57.3 (up 0.6 percentage
points); Montreal 37.2 (down 0.2 percentage points); Ottawa 35.4 (down
0.6 percentage points); Calgary 32.8 (down 1.0 percentage points);
Edmonton 32.8 (down 0.8 percentage points).
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
home ownership 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: Vancouver skews provincial affordability
Q1 developments varied by housing categories, but still signaled
greater-than-average pressure on affordability. RBC's measures eased
0.4 percentage points for condos and 0.1 percentage points for
two-storey homes, and rose 1.0 percentage points for bungalows.
Saskatchewan: slower resale activity combined with moderating household income mutes
impact on affordability
Home resales plummeted more than 16 per cent in the province during Q1,
contributing to price declines across housing segments. The impact on
affordability was partly muted by a moderation in household income.
RBC's measures fell 0.1 percentage points for condos, rose 0.3
percentage points for bungalows and remained unchanged for two-storey
Manitoba: affordability stands close to long-run averages
Affordability of single-detached homes and condos evolved in opposite
directions in Q1. RBC's measures rose by 0.3 percentage points for both
bungalows and two-storey homes, while the measure for condos fell
noticeably by 1.1 percentage points.
Ontario: affordability theme continues to be split
For the past four years, owning a single-detached home at market prices
in the province has become less and less affordable, whereas the weight
of owning a condo has remained fairly constant. RBC's measures for
bungalows and two-storey homes rose by 0.3 percentage points, while the
measure for condos edged lower by 0.2 percentage points.
Quebec: affordability at multi-year best levels
After remaining steady for years, housing affordability improved in the
province over the course of 2014 and the trend continued in Q1 2015.
RBC's measures fell across all three categories tracked (between 0.3
and 0.1 percentage points).
Atlantic Canada: affordability still attractive and improving
The lingering effect of earlier softness in home resale markets led to
further improvement in housing affordability in the Atlantic region in
Q1. RBC's affordability measures fell 0.7 percentage points for
bungalows and 0.5 percentage points for two-storey homes. The measure
for condos was unchanged.
The full RBC Housing Trends and Affordability report is available online as of 8:00 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