TORONTO, June 15 /CNW/ - According to a new housing report issued today
by RBC Economics, Ontario's housing market appears to have stabilized.
"Healthy income gains were offset by modest house price growth, creating
very little movement in affordability across all housing classes," said Derek
Holt, assistant chief economist, RBC. "Annual house price gains continue to
bounce around the three-to-five per cent range, as Ontario's housing market
RBC's Housing Affordability report for Ontario, which measures the
proportion of pre-tax household income needed to service the costs of owning a
home, stood at 35.5 percent for the benchmark detached bungalow, 41 per cent
for the standard two-storey home, 29 percent for the standard townhouse and
27 percent for the standard condo.
The condo market is the most active home segment with prices still
growing in the six to ten per cent range, spurred on by the hot Toronto
market. Still seen as the most viable option for first-time homebuyers,
especially in Toronto, the demand for condos will likely remain elevated for
the rest of the year. New construction activity has started to slow as the
market adjusts to softer demand conditions and a weaker economy.
Toronto's housing market remains one of the softest among big Canadian
cities. Affordability conditions remain relatively stable at 43 per cent as
the sales-to-listings ratio is balanced and annual price growth is in low
single-digits. Reacting to softer conditions, the residential construction
market is weakening as housing starts cooled 42 per cent in the first quarter
and permits dropped ten per cent. Condos continue to lead the Toronto market
as price growth was up seven per cent compared to a year ago.
"Rising mortgage rates are expected to take a bite out of Toronto's
affordability later this year, but modest price growth should help offset some
of that impact," said Holt.
According to the report, Ottawa's housing market has regained some
momentum after softening through much of 2006. Like Toronto, condos also
remain the most affordable option for homebuyers, requiring approximately
22 per cent of household income. Affordability levelled off as healthy income
gains kept pace with rising house prices. Resale activity picked up in the
first quarter, exerting pressure on prices across all four housing classes.
However, new home construction has tapered off and is expected to continue to
decline over the rest of the year.
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.
The report also looked at mortgage carrying costs relative to incomes for
a broader sampling of smaller cities across the province, including London,
Kitchener, Windsor, St. Catharines, Brantford and North Bay. Many of Ontario's
smaller cities witnessed a broadly-based fourth quarter affordability
improvement. For these smaller cities, RBC has used a narrower measure of
housing affordability that only takes mortgage payments relative to income
RBC's Affordability measure for a detached bungalow for 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.
Highlights from across Canada:
- British Columbia: Solid income gains outstripped softer house price
growth to make way for another 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 of the remaining three home
segments deteriorated as prices continued to move higher.
- 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
- 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