Two-storey affordability improving trend slightly
TORONTO, June 15 /CNW/ - British Columbia's housing affordability
witnessed a deterioration in three out of four housing types, in the first
quarter of 2007, according to the new report released today by RBC Economics.
However, solid income gains outstripped softer house price growth to make
way for a slight improvement in housing affordability for two-storey homes.
The improvement is welcome relief for many prospective homeowners attempting
to tap into the already elevated property market. Affordability in the
remaining three home segments - bungalows, condos, and townhouses -
deteriorated as prices continued to move higher.
"British Columbia's housing market is unique compared to the rest of the
West as it appears to have already reached a saturation point," said Derek
Holt, assistant chief economist, RBC. "The expensive housing market,
particularly for stand-alone homes, has already priced many prospective
homeowners out of the market. Looking ahead, we expect the increased supply of
homes on the market will help further restrain price growth."
RBC notes that in reaction to soaring house prices, the focus of
prospective homebuyers has shifted towards the condo market, which has become
the only affordable option for many.
The RBC Affordability measure captures the proportion of pre-tax
household income needed to service the costs of owning a home. A detached
bungalow stood at 62 per cent and condos at 33 per cent. The index for a
standard townhouse was 46.5 per cent and the standard two-storey home at
65 per cent.
The market was deep into sellers' territory through the early part of
2006 but midway through the year, the pace of resale activity off and new
listings began to spring up. Increased market supply will translate into
softer price gains.
"Even moderating affordability conditions still leave the Vancouver
housing market as the extreme outlier in the country with almost 70 per cent
of income still required to service basic homeownership costs for a standard
two-storey home," added Holt.
RBC's Affordability measure for a detached bungalow in Canada's largest
cities is as follows: Vancouver 68 per cent, Calgary 40 per cent, Toronto
43 per cent, Montreal 35.4 per cent and Ottawa 30.5 per cent.
Also included in the report are housing affordability conditions for a
broader sampling of select cities across the country, including Victoria where
a first quarter mild 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 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.
Highlights from across Canada:
- Alberta: Economic fundamentals - including strong wages, low
unemployment and net provincial migration - are still favouring
Alberta's housing market. However, the frenzied pace of activity
exhibited through much of 2006 is starting to moderate.
- Saskatchewan: After several years of stability, Saskatchewan's
housing affordability eroded sharply in the first quarter of 2007.
Two-storey homes were hit the hardest, as the province's housing
market jumped into a severe state of excess demand. An influx of
migrants, which is at a 25 year high, complemented a pick-up in wage
growth and caught the housing supply off guard, resulting in soaring
prices and a rapid decline in affordability. Caution is warranted
because the staying power of this shift in migration is uncertain at
this early stage.
- Manitoba: Manitoba still remains the most affordable province to own
a home in the country, despite the fact that all four housing types
saw a decline in affordability. The risk of a market slowdown for
Manitoba is much less pronounced, compared to other western
- Ontario: Healthy income gains were offset by modest house price
growth, creating very little movement in affordability across all
housing classes. Annual house price gains continue to bounce between
three-to-five per cent, as Ontario's housing market continues to
- Quebec: Housing affordability modestly deteriorated across all
housing segments. However, Quebec's housing market has had a soft
landing as house price gains have leveled off while remaining
positive. Despite softer housing markets that are expected to persist
through most of 2007, homeowners can still look to retain the equity
they have accumulated in their homes.
- Atlantic region: Atlantic Canada's two-storey home segment continued
to post improvements in affordability for the first quarter of 2007
while condos, detached bungalows and townhouses witnessed a slight
deterioration in 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;
Jackie Braden, RBC Media Relations, (416) 974-2124