Ontario home buyers benefit from a small improvement in affordability: RBC
Activity in the Toronto and Ottawa markets cooled in the fourth quarter of 2012
TORONTO, Feb. 25, 2013 /CNW/ - Ontario's previously hot housing market
conditions continued to cool in the fourth quarter of 2012, according to the
latest Housing Trends and Affordability Report issued today by RBC Economics
Research. This transition contributed to some improvement in housing
affordability in the province.
"The tightness that characterized Ontario's housing market earlier in the year
gave way to more balanced conditions at the tail end of 2012," said Craig
Wright, senior vice-president and chief economist, RBC. "This market
transition set the stage for more affordable housing prices across the
province during the second half of 2012."
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 inched lower by 0.3 percentage points to 29 per cent for
condominium apartments and by 0.1 percentage points to 42.9 for detached
bungalows. The measure for two-storey homes, however, edged higher by 0.1
percentage points to 48.9 per cent, following a substantial decline in the
Toronto-area housing market cooler and slightly more affordable
"Brisk demand in Toronto's housing market early last year put sellers firmly
in charge, driving prices upward, though this strength waned as the year
progressed. Demand cooled significantly during the spring, summer and early
fall," added Wright. "This quick turn of events re-balanced market conditions
and gave buyers more leverage to steer prices in their favour during the
latter half of 2012."
RBC notes that the prolonged boom that Toronto experienced in the 2000s
exerted some greater than usual stress on the market, which contributed to the
recent cooling in activity.
Still, pressure eased in the latter half of last year thanks to a slight
improvement in overall affordability. Fourth quarter affordability measures
fell by 0.4 percentage points for both detached homes and condominium
apartments to 52.8 per cent and 33.1 per cent, respectively. RBC's measure for
two-storey homes inched higher by 0.3 percentage points to 62.2 per cent.
Ottawa-area affordability holds steady; market conditions erode
Housing market conditions in the Ottawa-area gradually eroded over the course
of 2012. The combination of weaker demand and stronger supply of homes for
sale fully slackened the tight market conditions that previously existed.
"Affordability levels in Ottawa were in a holding pattern for the bulk of
2012. Buyers had more power as market conditions loosened in the late stages
of the year, which led to some reduction in ownership costs," added Wright.
RBC's measures for Ottawa fell in the fourth quarter for both detached
bungalows (by 0.5 percentage points) and two-storey homes (by 0.4 percentage
points); the measure for condominium apartments was unchanged. The report
notes that these affordability levels still stand above their historical
averages, suggesting that local homebuyers may be facing some greater than
usual affordability-related strain.
RBC's housing affordability measure for the benchmark detached bungalow in
Canada's largest cities is as follows: Vancouver 82.2 per cent (down 2.6
percentage points from the previous quarter); Toronto 52.8 per cent (down 0.4
percentage points); Montreal 39.3 per cent (down 0.9 percentage points);
Ottawa 38.8 per cent (down 0.5 percentage points); Calgary 38.1 per cent (up
0.2 percentage points) and Edmonton 30.7 per cent (down 0.1 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:
housing affordability improving, still has to go the distance
While housing affordability in British Columbia still has a
long way to go before reaching less stressful levels,
homebuyers in the province received a welcome reprieve in the
fourth quarter. RBC measures fell by 1.1 percentage points for
condominium apartments and 1.0 percentage point for detached
bungalows. The two-storey home category experienced a small
increase (0.4 percentage points), though this followed a
substantial decline in the third quarter.
vibrant market bolstered by attractive affordability
Brisk demand for the province's housing in 2012 was supported
by a strong provincial economy, accelerating population growth
and attractive affordability. Further improvement was
registered in the fourth quarter with measures falling between
0.1 and 0.2 percentage points.
affordability conditions buck the national trend Tight market
conditions at the beginning of 2012 had a lasting impact on
home prices in Saskatchewan, which climbed at some of the
faster paces in Canada in the fourth quarter. Rising property
values caused affordability to deteriorate in the fourth
quarter with measures increasing between 0.5 and 1.1 percentage
market vigour unhindered by slight affordability deterioration
Manitoba's housing market registered a banner year in 2012 with
a record 14,000 existing homes sold, indicating that housing
affordability levels had little dissuasive effect on homebuyers
in 2012. Although measures for detached bungalows and
condominiums deteriorated in the fourth quarter, measures for
two-storey homes remained unchanged. RBC's measures for
Manitoba continued to rank slightly above their long-term
average, suggesting that any affordability strain is likely
minimal at this point.
generally improving affordability tone is sustained
Quebec's housing affordability improved, for the most part, for
the third quarter in a row in the fourth quarter, yet this did
little to stimulate homebuyer demand as resale activity
continued to cool in the province. RBC measures fell for
two-storey homes (by 1.1 percentage points) and detached
bungalows (by 0.3 percentage points), but rose for condominium
apartments (by 0.4 percentage points).
-- Atlantic Canada:
housing continues to be affordable
Affordability in the Atlantic region received another boost in
the fourth quarter, with RBC measures falling for two-storey
homes (by 1.0 percentage points) and detached bungalows (by 0.5
percentage points), keeping levels well below their respective
national averages. The measure for condominium apartments rose
modestly by 0.3 percentage points, though this followed a more
sizable drop in the previous period.
The full RBC Housing Trends and Affordability report is available online, as
of 8 a.m. ET today, at rbc.com/economics/market/.
Robert Hogue, Senior Economist, RBC Economics Research, 416 974-6192 Elyse
Lalonde, Manager, Communications, RBC Capital Markets, 416 842-5635
To view this news release in HTML formatting, please use the following URL:
NI: FIN ECO
-0- Feb/25/2013 10:00 GMT
Press spacebar to pause and continue. Press esc to stop.