Migration hits 25 year high
TORONTO, June 15 /CNW/ - After several years of stability, Saskatchewan's
housing affordability eroded sharply in the first quarter of 2007, according
to the latest housing report by RBC Economics.
"Two-storey homes were hit the hardest, as the province's housing market
jumped into a severe state of excess demand," said Derek Holt, assistant chief
economist, RBC. "An influx of migrants, the sharpest quarterly gain in
twenty-five years, complemented a pick-up in wage growth and caught home
builders 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 and comes after ten consecutive
years of net migration outflows."
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 to 36 per cent for a two-storey home, 33 per cent
for a detached bungalow, 26 per cent for a standard townhouse and 21 per cent
for a condo.
The sudden drop in affordability reflected a peak in the sales-to-listing
ratio at 0.92 per cent in April - the highest in the country and the highest
on record for Saskatchewan. Resale prices also saw first quarter annual gains
at close to 30 per cent. Labour, land and material shortages helped drive
construction costs up and as a result saw new home prices in Saskatoon
skyrocket 25 per cent compared to a year ago. This drove a record pace of
affordability deterioration in Saskatoon. The report noted that while
conditions are expected to remain elevated, rising costs will help stabilize
demand, creating a more sustainable housing market toward the end of 2007.
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 country, including Regina and
Saskatoon. Saskatoon witnessed a record quarterly deterioration in
affordability conditions while Regina reported slight deteriorations in
affordability in three out of four home segments. For these smaller cities,
RBC has used a narrower measure of housing affordability that only takes
mortgage payments relative to income into account.
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.
- 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