TORONTO, March 14 /CNW/ - Although housing affordability continued to
deteriorate in the last quarter of 2007 and currently sits at its worst point
in over a decade, Atlantic Canada should see some modest improvements across
all home segments in 2008, according to the latest housing report by RBC
"Housing markets across the region are cruising along at a healthy speed
and are generally well balanced," said Derek Holt, assistant chief economist
at RBC. "The improvements to affordability in 2008 should stem from the
combination of decent income growth, moderate house price gains and
anticipated mortgage rate relief."
The RBC Housing Affordability measure for Atlantic Canada, which captures
the proportion of pre-tax household income needed to service the costs of
owning a home, mildly deteriorated across all four classes last quarter as the
benchmark detached bungalow moved to 32 per cent, the standard townhouse to
27 per cent, the standard condo to 27 per cent and the standard two-storey
home to 38 per cent.
According to the report, house price growth should stabilize around
five per cent while new home construction is expected to taper off. Softer
markets are likely to tilt in favour of buyers over sellers. At the end of
2007, Newfoundland's and Labrador's housing market heated up as a result of
tight supply and rising prices in St. John's, resulting in affordability
erosion across the region. However, the province is expected to join the rest
of the Atlantic region in an overall cooling trend in 2008.
The report also presents a comparison of Canadian and U.S. household
finances, and shows that Americans are still modestly richer, but much more
heavily leveraged and further in debt with less liquidity. That, in turn,
makes them more vulnerable to ongoing credit market turmoil and risks towards
house prices than Canadians. In fact, the sharp depreciation in the U.S.
dollar over the past six years has made Canadians relatively richer over time,
by raising the value of what their wealth will buy in world markets compared
to that of their American counterparts.
Also included in the report are housing affordability conditions for a
broader sampling of cities, including St. John's, Saint John, and Halifax. For
smaller 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 74 per cent, Toronto 47 per cent, Calgary
42 per cent, Montreal 37 per cent and Ottawa 32 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 measure, the more costly it is to afford a home. For
example, an Affordability measure 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: Although affordability conditions deteriorated to
their worst level on record at the end of 2007, the province is
poised for some affordability relief in 2008 as a result of cooler
price gains and lower interest rates.
- Alberta: At the end of 2007, the province witnessed broad-based
affordability improvements across all housing segments for the first
time in over three years. Rapidly cooling prices put the province on
watch, but should result in improved affordability for 2008.
- Saskatchewan: Saskatchewan has become the new Alberta. Constraints in
the existing home market have pushed into overflowing demand in the
new home market. As the national leader for growth in housing starts,
house prices, residential building permits, and resale activity, the
province saw substantial erosion in affordability in 2007. In 2008,
affordability conditions should gradually stabilize.
- Manitoba: Housing markets across the province continue to heat up.
Resale markets continue to drive strong price gains, but as household
income continues to grow at the third-fastest rate in the country,
affordability conditions remain steady.
- Ontario: Even though housing affordability deteriorated across all
housing segments, the pace has slowed. The province should see
improvements in 2008 from a cooling economy, lower mortgage rates,
and softer price gains.
- Quebec: A generally balanced market has helped keep housing
affordability in check. In 2008, a slower pace of house price gains
and softer income growth should contribute to improved affordability
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; Amy
Goldbloom, RBC Economics, (416) 974-0579; Jackie Braden, RBC Media Relations,