TORONTO, Sept. 12 /CNW/ - The Saskatchewan housing market suffered its
worst ever quarterly deterioration of affordability on record, according to
the latest housing report by RBC Economics.
"The province jumped into the spotlight at the start of the year when an
influx of people caught the housing supply off guard, forcing affordability to
deteriorate," said Derek Holt, assistant chief economist, RBC. "This momentum
continued into the second quarter as the pace of annual price gains soared
into the double digit range."
The RBC Affordability report for Saskatchewan, which measures the
proportion of pre-tax household income needed to service the costs of owning a
home, eroded significantly for all housing segments to 40 per cent for a
two-storey home, 38 per cent for a detached bungalow, 30 per cent for a
standard townhouse and 25 per cent for a condo.
The report noted that while there were no signs of price gains letting up
in the second quarter, there is some minor relief in sight as the shortage of
new listings appears to be easing. Current housing prices are starting to
weigh on demand, and as demand softens, Saskatchewan's housing market should
start to cool off. Holt noted that the arrival of extended amortization
mortgages has changed the dynamics of the housing market. The new found
ability to extend amortization up to forty year mortgages temporarily offsets
affordability pressures by rolling the clock backwards on affordability
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 cities across the country, including Regina and
Saskatoon. For these smaller cities, RBC has used a narrower measure of
housing affordability that only takes mortgage payments relative to income
into account. Over the past two years, Saskatoon, Edmonton and Calgary have
witnessed the worst deteriorations in affordability out of all Canadian
RBC's Affordability measure for a detached bungalow for Canada's largest
cities is as follows: Vancouver 71 per cent, Calgary 45 per cent, Toronto
45 per cent, Montreal 36 per cent and Ottawa 31 per cent.
Highlights from across Canada:
- British Columbia: Housing affordability eroded further across the
province as rising mortgage rates and house prices squeezed out
prospective home-buyers. The relief seen in the two-storey home
segment earlier this year was reversed this quarter with all
four home segments witnessing deteriorations in affordability.
- Alberta: Housing affordability deteriorated significantly in the
second quarter of 2007. Alberta's house prices have been growing at a
pace well above incomes and in a short time have created stressed
- Manitoba: With house price gains picking up pace and mortgage rates
continuing to rise, the province's housing affordability has
deteriorated for a second straight quarter. Manitoba saw the greatest
quarterly decline in affordability in more than a year.
- Ontario: After modest improvements earlier in the year, Ontario's
housing affordability deteriorated sharply in the second quarter. A
combination of higher house prices, rising mortgage rates and
increasing utility costs have forced a substantial deterioration in
affordability across all housing classes.
- Quebec: Despite only modest increases in house prices this past
quarter, climbing mortgage rates, utilities and taxes drove an
erosion in Quebec's housing affordability. However, the province's
decent economic fundamentals still support housing markets, with job
growth at a healthy two per cent rate this year and incomes keeping
pace with gains in house prices.
- Atlantic region: An environment of rising mortgage rates and strong
price gains created pricier second quarter housing conditions in
Atlantic Canada. While each of the housing segments witnessed a
significant affordability deterioration, it was the two-storey and
condo segments that saw the sharpest erosion.
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