TORONTO, March 15 /CNW/ - British Columbia's housing affordability
improved in some housing segments, in the fourth quarter of 2006, as a rising
supply of homes on the market overpowered a cooling pace of resale activity,
according to the new report released today by RBC Economics.
According to the RBC report, 2006 marked the worst deterioration in
B.C.'s housing affordability since the bursting of the housing bubble in the
early 90s. The erosion of affordability throughout 2006 occurred at such
breakneck speed that it broke prior records in three out of four home
segments, with townhomes the lone exception.
"At long last, the fourth quarter of 2006 provided some relief for B.C.
homeowners with housing affordability improvements for the two-storey and
detached bungalow segments," said Derek Holt, assistant chief economist, RBC.
"However, condos and townhomes continued a fifth straight quarter of
"A more balanced housing market should support more affordability relief
in the year ahead," added Holt.
The RBC Affordability measure captures the proportion of pre-tax
household income needed to service the costs of owning a home. In the fourth
quarter of 2006, it improved to 62.5 per cent for a detached bungalow. Condos
slightly deteriorated with a reading of 33.3 per cent. The measure for a
standard townhouse eroded to 47.7 per cent and the standard two-storey home
improved to a reading of 67.8 per cent.
After more than a year of consistently deteriorating affordability
conditions in Vancouver, prospective buyers of two-storey homes and detached
bungalows finally saw some relief. The pace of quarterly price gains in these
two segments continued to decelerate during the fourth quarter leading to a
moderate slowdown in the annual pace of appreciation. The affordability of
townhome and condo segments continued to deteriorate but at a much slower pace
compared to the prior quarter.
RBC's Affordability measure for detached bungalows in Canada's largest
cities is as follows: Toronto 42.6 per cent, Calgary 40.9 per cent, Montreal
35.3 per cent and Ottawa 30 per cent.
Also included in the report are housing affordability conditions for a
broader sampling of select cities across the country, including Victoria where
an overall mild fourth quarter deterioration was reported. For these select
cities, RBC has used a narrower measure of housing affordability that only
takes mortgage payments relative to income into account.
The Housing Affordability report, 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 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:
- Alberta: Since the start of 2005, housing affordability across
Alberta has been eroding at an aggressive pace. While the most recent
quarter reported another across-the-board deterioration, the pace of
erosion appears to have topped out and has slowed significantly.
- Saskatchewan: For a fifth consecutive quarter, affordability eroded
in three out of four home classes - detached bungalow, townhouse and
condo. Saskatchewan's annual house price gains, which are in the 10
per cent range, outweighed any mortgage rate relief or household
income growth that would have helped offset costs.
- Manitoba: After declining affordability in the first half of 2006,
Manitoba saw a marked improvement for the second half of the year.
The strongest improvement came from the condo sector, reversing much
of the deterioration that occurred in the early part of 2006.
- Ontario: As Ontario's housing market continued to cool, affordability
improved across all classes. Softer price growth, a decline in
mortgage rates and lower utility bills combined to bring monthly
payments down by one to two per cent for all four housing segments.
- Quebec: Led by improvement in two-storey homes, housing affordability
recovered significantly for the first time in over a year as the
long-anticipated soft landing continues to unfold. Supply and demand
fundamentals in Quebec's housing market are cooling off in tandem and
the effects are overflowing to improve affordability conditions for
- Atlantic region: Strong household income growth, lower monthly
utility bills and a modest drop in mortgage rates contributed to
improve conditions across Atlantic Canada.
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