Toronto home resales back on track in the third quarter
TORONTO, Nov. 27, 2013 /CNW/ - Housing affordability in Ontario saw
further modest erosion in the third quarter of 2013, primarily
concentrated in the single-family homes segments, according to the
latest Housing Trends and Affordability Report issued today by RBC Economics Research. Still, RBC notes that this
deterioration has had no visible restraining effect on housing market
"Ontario homebuyers paid little attention to the less affordable
conditions in the third quarter as the resale market continued on an
upswing, rising 5.3 per cent from the second quarter," said Craig
Wright, senior vice-president and chief economist, RBC. "Over the last
four years, affordability levels have drifted higher, particularly for
single-family homes, suggesting prospective Ontario homebuyers are
experiencing some affordability-induced stress. Still, tension levels
remain far from dangerous at this point."
While single-family homes have become increasingly more expensive, RBC
notes that the trend in affordability for condominiums in Ontario has
been much flatter, indicating that ownership within this category
remains relatively within reach for the majority of condo buyers in the
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 up slightly in the third quarter
of 2013 (an increase in the measure represents a deterioration in
RBC's measures for Ontario rose by 0.9 percentage points to 44.9 per
cent for bungalows and 0.7 percentage points to 50.6 per cent for two-
storey homes, while the increase for condo apartments was more subdued
at 0.2 percentage points to 29.6 per cent.
Toronto-area activity reverses cooling from 2012; affordability remains
Homebuyer activity in Toronto has not let up despite the fact that
housing affordability continued to appear somewhat stretched,
particularly for single-family homes, RBC says; home resales posted a
third straight quarterly gain for a cumulative increase of 18 per cent
since the end of 2012.
"Third-quarter housing market activity advanced by a notable 9.3 per
cent from the previous quarter in Toronto, effectively marking a full
reversal of the significant cooling activity that took place in the
latter half of 2012," said Wright. "Going forward, however,
affordability-related stress in the Toronto area will likely be a
restraining force preventing housing activity from reaching heated
The RBC report indicates that third-quarter housing affordability
measures continue to stand above average levels - quite noticeably for
bungalows and two-storey homes, but much less so for condominiums. RBC
measures increased by 1.3 percentage points to 55.6 per cent for
bungalows, by 0.8 percentage points to 63.7 per cent for two-storey
homes and diminished marginally by 0.1 percentage points to 33.8 per
cent for condominiums.
Ottawa-area affordability remains near long-run averages
Third-quarter home resales in the Ottawa area continued to grow;
however, at 1.8 per cent, the quarterly growth rate was slower than the
2.9 per cent registered in the second quarter and lagged the 6.0 per
cent pace of growth nationally.
"With Ottawa-area demand-supply conditions loosening slightly over the
past year, home price increases have been quite subdued," said Wright.
"This has helped to keep affordability levels at, or close to, long-run
averages in the area, suggesting little undue affordability-related
stress on local homebuyers at this stage."
RBC measures for Ottawa edged higher by 0.4 percentage points for both
bungalows and two-storey homes to a corresponding 37.3 and 39.0 per
cent. The measure for condominiums rose 0.1 percentage points to 25.2
RBC's housing affordability measure for the benchmark detached bungalow
in Canada's largest cities is as follows: Vancouver 84.2 (up 2.0
percentage points from the previous quarter); Toronto 55.6 (up 1.3
percentage points); Montreal 38.3 (up 0.3 percentage points); Ottawa
37.3 (up 0.4 percentage points); Calgary 33.7 (up 0.7 percentage
points); Edmonton 32.9 (up 0.5 percentage points).
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.
Highlights from across Canada:
British Columbia's housing affordability ebbs
Firmer market conditions in the third quarter propped up home prices in
the province, contributing to erosion in housing affordability levels.
RBC measures rose by 1.5 percentage points for bungalows, 1.2
percentage points for two-storey homes, and 0.8 percentage points for
Alberta's affordability remains attractive despite deterioration
Alberta's housing affordability deteriorated for the third consecutive
quarter in the third quarter, albeit modestly. This kept the province
in an attractive position relative to other provinces with respect to
affordable housing. RBC's measures rose 0.6 percentage points for
bungalows, 0.2 percentage points for two-storey homes and 0.1
percentage points for condominiums.
Saskatchewan's homeownership remains reasonably affordable
RBC measures for Saskatchewan edged slightly higher in the third
quarter, up 0.6 percentage points for two-storey homes, 0.2 percentage
points for condominiums, and 0.1 percentage points for bungalows.
Affordability in the province has mostly trended sideways since 2009,
suggesting that it likely has a neutral effect on home buying decisions
in the province, RBC says.
Manitoba's housing affordability mirroring the national picture
RBC's measures for Manitoba increased by almost the same magnitude as
Canadian measures for single family homes in the third quarter (0.6
percentage points for bungalows and two-storey homes), while the
measure for condos remained unchanged compared to a marginal rise of
0.1 percentage points in Canada overall.
Quebec's affordability reverses earlier improvements
Small improvements in Quebec's affordability levels that took place in
the second quarter were for the most part reversed in the third
quarter. RBC measures rose for two of three housing types tracked; up
0.6 percentage points for two-storey homes and 0.5 percentage points
for bungalows. The measure for condominiums remained unchanged.
Atlantic Canada's affordability levels remain within manageable range
Affordability in the region compares well against the rest of the
country, showing little movement in the third quarter, and keeping
within a very manageable range for homebuyers. RBC's measures edged
higher by 0.5 percentage points for two-storey homes and by 0.2
percentage points for bungalows. The measure remained unchanged for
condominiums in the region.
The full RBC Housing Trends and Affordability report is available
online, as of 8 a.m. ET today, at www.rbc.com/economics/economic-reports/canadian-housing-forecast.html.
For further information:
Craig Wright, Senior Vice-President and Chief Economist, RBC, 416 974-7457
Robert Hogue, Senior Economist, RBC, 416 974-6192
Elyse Lalonde, Manager, Communications, RBC Capital Markets, 416 842-5635