Balanced Housing Market Conditions Ease Ontario's Mild Affordability Stress:
-- Cooling intensifies in Toronto market; housing slightly more
affordable in the third quarter of 2012
-- Ottawa affordability improves amid largest quarterly decline in
housing activity since mid-2010
TORONTO, Nov. 22, 2012 /CNW/ - Ontario's housing market continues to be under
some mild affordability-related stress, which slightly eased off in the third
quarter, according to the latest Housing Trends and Affordability Report
released today by RBC Economics Research.
"Ontario's hot housing market cooled off in the spring and summer, as the
number of home resales fell while homes for sale grew - causing a notable
moderation in the rate of price appreciation in the third quarter," said Craig
Wright, senior vice-president and chief economist, RBC. "We're currently
seeing more balanced market conditions and this provides scope for further
easing in affordability-related stress in the province near-term."
RBC's 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, declined across all housing types (a decrease in the measure
represents an improvement in affordability). The RBC measure for the benchmark
detached bungalow fell by 0.6 percentage points to 42.6 per cent, the standard
two-storey home eased by 1.1 percentage points to 48.5 percent and the measure
for condominium apartments declined by 0.5 percentage points to 29.2 per cent.
"The declines we saw across measures essentially rolled back the two
consecutive quarterly increases that took place in the first half of this
year," added Wright.
Toronto market cools further; affordability strain eases slightly
Home resales in the Toronto-area tumbled nearly 12 per cent
quarter-over-quarter, signalling a further cooling in the market. RBC notes
that an increased supply of homes available for sale relative to demand
significantly weakened the strong hand sellers had earlier this year, leading
to modest quarterly price declines in some housing categories.
"The slowing pace of price increases made things a bit easier for prospective
homebuyers in Toronto - the share of household budget needed to cover the
costs of owning a home at market prices fell for the first time this year,"
Affordability exerted some greater than usual stress on the Toronto market,
despite RBC's measures declining between 0.7 percentage points and 1.3
percentage points in the third quarter, as the measures still stood modestly
above their long-term averages.
Ottawa housing market slows
After holding steady in the second quarter, housing affordability slightly
improved in the third quarter in the Ottawa-area market, with RBC measures
edging lower across all housing categories between 0.1 and 0.5 percentage
"The cost of owning a home at market prices is taking a bigger bite out of
household budgets in Ottawa than has been the case, on average, since the
mid-1980s, indicating that local homebuyers experienced greater affordability
strain in the third quarter. This may have been among factors weighing on
housing activity in recent months," explained Wright. "Home resales fell 5.4
per cent in the third quarter, constituting the largest quarterly decline in
the area since mid-2010."
Where housing affordability stands in Canada
RBC's housing affordability measure for the benchmark detached bungalow in
Canada's largest cities is as follows: Vancouver 83.2 per cent (down 5.8
percentage points from the previous quarter); Toronto 52.4 per cent (down 0.7
percentage points); Montreal 40.2 per cent (up 0.1 percentage points); Ottawa
38.7 per cent (down 0.4 percentage points); Calgary 38.3 per cent (down 0.7
percentage points) and Edmonton 31.1 per cent (down 0.6 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:
Affordability hurdles still tough to clear
British Columbia's housing market experienced improvements in
the third quarter of 2012, and yet, affordability conditions
remained the poorest across Canada. RBC measures fell between
2.0 percentage points and 3.7 percentage points, the largest
drops across Canada. The situation remains less severe
elsewhere in the province; the share of income needed to carry
ownership costs in Victoria, for instance, is almost half the
share in Vancouver for some housing types.
Attractive affordability contributes to market renaissance
Alberta's housing market enjoyed firm and steady resale
activity, balanced demand-supply conditions, moderate home
price increases, and improved housing affordability. Third
quarter affordability measures for the province edged lower -
between 0.2 percentage points and 0.4 percentage points
-remaining below their long-term and the national averages.
Little evidence of affordability strain
Significant deteriorations in housing affordability in the
second quarter in Saskatchewan were largely reversed in the
third with RBC measures in the province falling between 0.9
percentage points and 1.3 percentage points. The measures stood
just slightly above their long term averages for all housing
categories, indicating little in the way of undue affordability
induced strain on the market.
- Market losing some of its steam; minimal pressure on
Declining housing prices spurred a notable improvement in
housing affordability in Manitoba over the third quarter. RBC
measures fell between 0.6 percentage points and 1.6 percentage
points, which fully unwound the deterioration that occurred in
the prior quarter. Provincial affordability levels sit slightly
higher than their averages since the mid 1980s, but remain well
below the corresponding national averages.
Second straight affordability improvement
Housing affordability improved for the second straight quarter
in Quebec, with RBC's measures edging lower across all housing
types in the province, between 0.6 percentage points and 0.8
percentage points, in the third quarter. For the most part,
levels are only slightly worse than the average historical
level, indicating that prospective homebuyers in Quebec may
feel minimally stretched budget-wise, if they bought a home at
current market prices.
Affordability position remaining quite stable
Housing affordability in Atlantic Canada improved slightly
across the board, with RBC measures in the region inching lower
by 0.2 percentage points to 0.7 percentage points relative to
the previous quarter. Affordability measures have been
reasonably stable over the past three years in the region,
showing no discernable trends on either the up or down sides.
The full RBC Housing Trends and Affordability report is available online, as
of 7 a.m. ET today, at rbc.com/economics/market/.
Please contact: Robert Hogue, Senior Economist, RBC Economics Research,
416-974-6192 Elyse Lalonde, Manager, Corporate Communications, RBC Capital
To view this news release in HTML formatting, please use the following URL:
NI: FIN ECOSURV
-0- Nov/22/2012 12:00 GMT
Press spacebar to pause and continue. Press esc to stop.