TORONTO, Aug. 28, 2014 /CNW/ - Ontario's housing affordability improved
slightly in the second quarter of 2014, but not enough to reverse mild
and ongoing deteriorating affordability trends, according to the latest
Housing Trends and Affordability Report issued today by RBC Economics Research.
Ownership costs have come under mounting pressure in recent years,
particularly in markets such as Toronto where property values are on
the incline. The latest readings of RBC's measures continue to suggest
that affordability may be moderately strained in the province,
particularly in Toronto.
"Ontario's homebuyers don't appear to be overly concerned by
affordability issues at present mainly because of lower mortgage rates
- home resales picked up in the second quarter by 13 per cent relative
to the first quarter," said Craig Wright, senior vice-president and
chief economist, RBC. "This corroborates the argument that the
deterioration in the first quarter was driven more by poor winter
weather than any underlying weakness."
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, edged lower for all housing types in
the second quarter (a decrease in the measure represents an improvement
RBC's affordability measures eased by 0.2 percentage points to 44.7 per
cent for bungalows, and by 0.1 percentage points for both two-storey
homes and condominiums to 50.9 per cent and 29.3 per cent,
Toronto: a seller's market despite rise in listings
A 10.2 per cent increase in homes newly listed for sale between Q1 and
Q2 was a welcome development in the Toronto market because demand had
previously been stronger than supply. RBC says the surge in new
listings helped resales reach their second-highest second quarter level
on record, although it didn't achieve much greater balance between
supply and demand in the market.
"Conditions in Toronto's housing market continue to favour sellers, and
accordingly, sustain a strong bid on property values," added Wright.
"Developments in the latest quarter did virtually nothing to stem the
steady erosion in housing affordability we've seen in the market since
RBC notes that Toronto was the only major market across Canada showing
some deterioration in the second quarter indicating that affordability
still appears to be strained, particularly for single-family home
RBC's measure for condominiums edged higher by 0.1 percentage points to
34.3 per cent. The other measures stayed unchanged at 65.3 per cent for
two-storey homes and eased by 0.2 percentage points to 55.9 per cent
Demand in Ottawa begins to pick up
Following two consecutive quarters of declining sales, the Ottawa-area
market showed signs that demand was finally picking up, though overall
market conditions remain quite weak in the area, says RBC.
"In the second quarter, the Ottawa area still saw plenty of properties
available for sale relative to demand," said Wright. "In fact, new
listings continued to outpace resales, causing the ratio of sales to
new listings to fall to its lowest level since 1997, handing over
increased pricing power to buyers. Accordingly, price advances have
been limited at best this year."
RBC's measures edged lower for all housing types, moving down 0.6
percentage points to 24.1 per cent for condominiums, down 0.5
percentage points to 37.6 per cent for two-storey homes and down 0.4
percentage points to 36.0 per cent for bungalows. With measures
standing close to their historical norms, affordability does not appear
to be an obstacle to Ottawa-area homebuyers at this stage.
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities in the second quarter of 2014 is as follows:
Vancouver 81.8 (down 0.3 percentage points from the previous quarter);
Toronto 55.9 (down 0.2 percentage points); Montreal 37.3 (down 1.6
percentage points); Ottawa 36.0 (down 0.4 percentage points); Calgary
33.6 (down 0.8 percentage points); Edmonton 31.7 (down 1.1 percentage
The RBC Housing Affordability Measure, which has been compiled since
1985, is based on the 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
homeownership 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: affordability broadly improves
Housing affordability in the province improved across the board in the
second quarter, with two-storey homes and condos reaching their most
attractive levels since late 2009. RBC's affordability measures for
B.C. fell between 0.9 and 2.0 percentage points. Still, owning a home
at market price in an area such as Vancouver continued to be very
difficult for an average household to afford.
Alberta: housing affordability remains attractive
Escalating prices in the province were largely taken in stride by
Alberta homebuyers in Q2 as lower mortgage rates and solid growth in
household incomes provided offset. Affordability in the province
improved modestly with RBC measures easing between 0.2 and 0.9
Saskatchewan: homebuyers face little undue affordability pressure
The provincial housing market rebounded strongly in the second quarter
with home resales jumping to a new record-high. At the same time, RBC's
affordability measures for Saskatchewan fell between 1.3 and 0.8
percentage points, and stood close to their historical averages.
Manitoba: new home listings surge; affordability plays largely neutral
The big housing market story in Manitoba was a surge of homes being
offered for sale with new listings growing to levels almost 14 per cent
above where they were a year ago. RBC's affordability measures fell
between 0.5 and 1.5 percentage points but remained close to long-run
averages, suggesting that affordability likely plays a neutral role in
home buying decisions in the province.
Quebec: improved affordability helps halt housing market slide
Quebec's housing market activity, which had been falling since early
2012, stabilized in Q2. Home resales rose modestly and the supply of
homes for sale grew. Second quarter affordability measures for the
province eased for all housing types - between 0.9 and 1.8 percentage
points. This improvement in affordability likely helped stabilize the
market at the margin in the latest quarter.
Atlantic Canada: attractive affordability conditions
The region's housing affordability conditions improved quite noticeably
in the second quarter thanks to lower mortgage rates and subdued price
pressures. RBC's measures for Atlantic Canada dropped between 0.9 and
1.8 percentage points.
The full RBC Housing Trends and Affordability report is available online, as of 8 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