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Saskatchewan's Housing Affordability Improves Thanks to Steady Household Income Gains: RBC Economics


Saskatchewan's Housing Affordability Improves Thanks to Steady Household Income Gains: RBC Economics

TORONTO, Nov. 22, 2012 /CNW/ - The significant deterioration in housing affordability in the second quarter in Saskatchewan was largely reversed in the third quarter, according to the latest Housing Trends and Affordability Report, issued today by RBC Economics Research. The report indicates that a moderation in home price increases and increased household incomes contributed to an improvement in affordability in the province.

"Homeowners' budgets in Saskatchewan were somewhat stretched in the second quarter as home prices spiked, particularly in markets like Saskatoon and Regina," said Craig Wright, senior vice-president and chief economist, RBC. "While property appreciation continued in the third quarter, gains were comparatively modest and any impact on affordability was offset by rising household incomes."

RBC notes that Saskatchewan's housing affordability levels were far from excessive, with measures standing just above their long-term averages for all housing categories, indicating little in the way of undue affordability-induced strain on the market.

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 0.9 percentage points to 38.2 per cent, the standard two-storey home eased by 1.3 percentage points to 41.7 percent and the measure for condominium apartments declined by 1.0 percentage points to 26.2 per cent.

"Housing market activity in the province has moderated since the spring, providing some slack to the tighter conditions that Saskatchewan experienced earlier in the year," added Wright. "Nonetheless, given the strong start to the year, home resales remain on pace to set a new record high in the province in 2012."

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.
    --  Alberta:
        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.
    --  Manitoba
        - Market losing some of its steam; minimal pressure on
        affordability
        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.
    --  Ontario:
        More balanced conditions help to ease affordability stress
        Ontario's housing affordability eased somewhat in the third
        quarter, but remains under mild pressure, most notably in the
        two-storey home segment. RBC measures declined between 0.5
        percentage points and 1.1 percentage points in the province,
        which, in effect, rolled back the two consecutive quarterly
        increases that took place in the first half of this year.
    --  Quebec:
        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.
    --  Atlantic:
        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 
Markets, 416-842-5635

SOURCE: RBC

To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/November2012/22/c2536.html

CO: RBC
ST: Ontario
NI: FIN ECOSURV 

-0- Nov/22/2012 12:00 GMT

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