TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
middle of a significant correction that is partly reversing the extensive
gains of recent years and which is helping restore affordability conditions,
according to the latest housing report released today by RBC Economics.
"The province's housing markets remain under heavy downward pressure,"
said Robert Hogue, senior economist, RBC. "While housing affordability is
improving as the correction process runs its course. RBC's affordability
measures for the province are still at levels far off historical averages."
RBC notes that the sharp rise in unemployment since last summer is
worrying households in the province and weighing down demand for housing,
which runs well short of available supply. Such weak market conditions have
sustained the declining trend in prices for both existing and new homes.
The RBC Affordability measure for British Columbia, which captures the
proportion of pre-tax household income needed to service the costs of owning a
home, improved across all housing segments in the last quarter of 2008.
Affordability of detached bungalows in the province moved to 66 per cent, the
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
the standard two-story home to 73.7 per cent.
According to the report, there are signs that the B.C. housing markets
may be stabilizing as sales of existing homes appear to have bottomed out in
the closing months of 2008 and the first two in 2009 - although at
historically depressed levels.
Despite sharply declining house prices and lower mortgage rates, the cost
of homeownership in Vancouver is still the highest in the country. House
prices continue to rapidly decline and pricing power remains firmly in the
hands of buyers with the sales-to-new listings ratio at historical lows. "This
enormous imbalance suggests that prices will likely further correct in the
months ahead," added Hogue.
RBC's Affordability measure for a detached bungalow for Canada's largest
cities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
The report also looked at mortgage carrying costs relative to incomes for
a broader sampling of cities across the country, including Victoria. For these
cities, RBC has used a narrower measure of housing affordability that only
takes mortgage payments relative to income into account.
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
condominium. 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.
Highlights from across Canada:
- Alberta: Since last fall, the declining Alberta economy has
intensified the downdraft on the province's housing markets, causing
home resales to drop to a 12-year low at the end of 2008 and rebound
only modestly since. Affordability has been on an improving track
since about the middle of 2007.
- Saskatchewan: Market activity has cooled considerably from the
frenzied pace from 2006 to early 2008 and prices have begun to
decline. Nonetheless, economic and demographic fundamentals are still
largely supportive of the housing market and overshadow extremely
poor affordability levels.
- Manitoba: Manitoba's housing markets have fared much better than the
vast majority in Canada: resale activity has slowed moderately and
prices have either held their own or edged down just slightly.
Affordability has been kept out of the danger zone, helping to
minimize any downside risks.
- Ontario: With the recession pounding many communities, housing market
conditions have deteriorated considerably. However, the impact is
unlikely to develop into an all-out rout similar to that of the early
1990s. Affordability, while still causing some stress, is quickly
being restored to levels closer to long-term averages.
- Quebec: The province's housing markets have been among the last in
Canada to yield to the weakening trend. The main sign of cooling thus
far has been a drop in resale activity, as prices have held up
reasonably well. Some of the persisting market strength can be
ascribed to sensible affordability levels, which had eroded only
modestly in recent years.
- Atlantic region: Markets have largely remained stable against the
general housing downturn, with St. John's becoming the housing hot
spot in Canada and Halifax and Saint John maintaining steady upward
price momentum. The region is benefiting from improving affordability
following two years of deterioration.
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: Robert Hogue, RBC Economics, (416) 974-6192;
Jackie Braden, RBC Media Relations, (416) 974-2124