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British Columbia's housing affordability notably improved but still has far to go, says RBC & k: @, y& i- Z; [8 n6 k# K/ N
TORONTO, April 16 /CNW/ - British Columbia's housing markets are in the
, p6 k) J/ D1 L3 {middle of a significant correction that is partly reversing the extensive
! t7 [* ?, z$ { Ngains of recent years and which is helping restore affordability conditions,
: U( u( O9 ^. A0 F" Y; x" Zaccording to the latest housing report released today by RBC Economics.0 Z! s) c- k9 a" Q. N, E+ I
"The province's housing markets remain under heavy downward pressure,"
1 b) t4 G, {1 v+ R7 i0 X& Msaid Robert Hogue, senior economist, RBC. "While housing affordability is* ? I# O; A2 V) S k
improving as the correction process runs its course. RBC's affordability
& T* `' W, f; F' Zmeasures for the province are still at levels far off historical averages."
# Z' J, w% \/ C5 v) x5 u2 A! l( M$ x' n% n RBC notes that the sharp rise in unemployment since last summer is
7 | o* _9 D4 x. yworrying households in the province and weighing down demand for housing,
% \( I9 ~7 c- x# G* |, V* twhich runs well short of available supply. Such weak market conditions have- `9 Z& n9 F. \4 \
sustained the declining trend in prices for both existing and new homes.
1 K- w' I; a# n4 m The RBC Affordability measure for British Columbia, which captures the
$ Z$ o0 E# V# v$ H+ p+ c) R6 x F" Oproportion of pre-tax household income needed to service the costs of owning a( x& Y1 w# x+ o
home, improved across all housing segments in the last quarter of 2008.+ `8 |0 _$ `( h! n: j n/ U& M
Affordability of detached bungalows in the province moved to 66 per cent, the: P% q: v9 c. n/ N
standard townhouse to 52.5 per cent, the standard condo to 36.7 per cent, and
9 e% a, ^7 E3 O0 A: kthe standard two-story home to 73.7 per cent.$ m- v# m( d6 K7 m7 M" |+ |
According to the report, there are signs that the B.C. housing markets4 J' D4 u2 E* ~
may be stabilizing as sales of existing homes appear to have bottomed out in# r( d( h& W0 x8 {. n/ w/ h
the closing months of 2008 and the first two in 2009 - although at3 Y$ I9 K% H+ L( N/ J1 I9 J
historically depressed levels.
2 c( b* |* R1 o; |! X5 j Despite sharply declining house prices and lower mortgage rates, the cost
0 L% G7 f0 [2 o. cof homeownership in Vancouver is still the highest in the country. House7 O: k! k% E1 N6 u
prices continue to rapidly decline and pricing power remains firmly in the
" W& O7 k) J5 S. jhands of buyers with the sales-to-new listings ratio at historical lows. "This
5 {6 y2 _1 p' J4 Benormous imbalance suggests that prices will likely further correct in the
: }0 o3 x" \ B }: n) b) C4 |, Pmonths ahead," added Hogue.
7 ]7 h8 m! N7 L RBC's Affordability measure for a detached bungalow for Canada's largest
h5 C% D. b& r$ \- ] ]' Ycities is as follows: Vancouver 70.3 per cent, Toronto 51.3 per cent, Calgary1 G( G/ ]% R- S6 L
42.7 per cent, Ottawa 42.7 and Montreal 39.4 per cent.
/ X/ B: y0 C! n9 Q, F* J The report also looked at mortgage carrying costs relative to incomes for1 |( ^; B$ \" F. F7 G8 S
a broader sampling of cities across the country, including Victoria. For these
; S1 i7 ]- ~+ i. b; e4 ucities, RBC has used a narrower measure of housing affordability that only
" r$ X+ J, h; {7 P- Qtakes mortgage payments relative to income into account.1 |) Q" ^5 C9 Q" {+ E
The Housing Affordability measure, which RBC has compiled since 1985, is
( c* \* P8 x! C d, y& vbased on the costs of owning a detached bungalow, a reasonable property- j" |& r9 O" N4 W3 K+ j
benchmark for the housing market. Alternative housing types are also presented
) Y, E5 l) Y" T3 vincluding a standard two-storey home, a standard townhouse and a standard
5 R( E i7 @6 v* {9 X2 A" J& dcondominium. The higher the reading, the more costly it is to afford a home.+ l! c* l7 t9 O
For example, an Affordability reading of 50 per cent means that homeownership
7 r, H0 q3 M8 \2 M9 c) z) J4 V4 a, xcosts, including mortgage payments, utilities and property taxes, take up 50
1 J9 U# D4 s1 v' ~3 c u* Lper cent of a typical household's monthly pre-tax income.
8 P4 K6 _/ y+ k; D; V, e! j
/ w! z! i5 o7 T/ n* h( t; v6 v( G <<5 H$ ~" |$ O: v9 R' V1 q
Highlights from across Canada:
& F! u. X. U2 n& `2 N& R7 x2 D) k# t8 ?
4 [ J! K8 `" q; L0 n8 x - Alberta: Since last fall, the declining Alberta economy has. d$ o0 Q4 |* q8 m
intensified the downdraft on the province's housing markets, causing- C7 | Q. \) d( E" ^
home resales to drop to a 12-year low at the end of 2008 and rebound ~2 n& g5 B. C+ ^* x. r" {
only modestly since. Affordability has been on an improving track2 n1 `+ H0 Y) {1 z0 i: O3 S
since about the middle of 2007.* e, s# q, r6 h- |
- Saskatchewan: Market activity has cooled considerably from the
/ x i9 \. q" j4 {/ i frenzied pace from 2006 to early 2008 and prices have begun to6 ^+ m: ] M2 C) ^
decline. Nonetheless, economic and demographic fundamentals are still
/ ^% Z+ B, s t' v largely supportive of the housing market and overshadow extremely
' w" I& G G) Z poor affordability levels.
4 D: [- h7 w( W - Manitoba: Manitoba's housing markets have fared much better than the' ^6 k. f* b. o! p: X' M
vast majority in Canada: resale activity has slowed moderately and# x% ^" ^5 o' I7 }( t% V/ X% {- E
prices have either held their own or edged down just slightly.1 u. T( z; k$ A( Y
Affordability has been kept out of the danger zone, helping to
+ E5 |: A; m8 w/ m% T. K minimize any downside risks.
3 C8 y, ^, L; n3 | - Ontario: With the recession pounding many communities, housing market) z9 B2 R: v% t# h
conditions have deteriorated considerably. However, the impact is! g8 Y. b5 ^( H4 s6 @& i% [4 b! r) h
unlikely to develop into an all-out rout similar to that of the early A# R$ c0 W p8 H# L" P X
1990s. Affordability, while still causing some stress, is quickly1 S) V' _; |, \
being restored to levels closer to long-term averages.
3 w% w7 g6 ^) R: i; Q" O8 {2 J. A - Quebec: The province's housing markets have been among the last in
% h' `" Q. N* o: I& A Canada to yield to the weakening trend. The main sign of cooling thus* f7 x9 X: H) n# [ {9 I
far has been a drop in resale activity, as prices have held up+ N" d& G I, L( V& G4 f
reasonably well. Some of the persisting market strength can be
2 c$ v; O M( {& I2 w1 n9 `8 X ascribed to sensible affordability levels, which had eroded only
6 M" E1 u* Z3 Z2 {9 y modestly in recent years.. D, h/ b: c& F: @, u7 R8 ~
- Atlantic region: Markets have largely remained stable against the% d* {+ E+ `/ z7 G& P, n9 F6 V7 f
general housing downturn, with St. John's becoming the housing hot
0 ~ U" ~, |+ { a( K) l spot in Canada and Halifax and Saint John maintaining steady upward9 B- w4 E* B& T1 ?" T. D
price momentum. The region is benefiting from improving affordability& e" ~2 D1 ]& y6 t, _
following two years of deterioration.4 {# I! L1 S) {! G( k
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