British Columbia's housing affordability improves for second consecutive quarter: RBC Economics

British Columbia's housing affordability improves for second consecutive 
quarter: RBC Economics 
--  Remains the priciest province in which to own a home 

    --  Vancouver remains the least affordable market in Canada

TORONTO, Feb. 25, 2013 /CNW/ - While it remains the country's priciest 
province in which to own a home, British Columbia's housing affordability saw 
noticeable improvements for the second consecutive quarter, in the fourth 
quarter of 2012, according to the latest Housing Trends and Affordability 
Report released today by RBC Economics Research.

"Affordability improvements across most housing types in the fourth quarter 
were welcome news to prospective buyers in British Columbia," said Craig 
Wright, senior vice-president and chief economist, RBC. "Still, the market has 
a long way to go before affordability reaches less stressful levels."

The RBC report notes that poor affordability levels were a key factor playing 
into the sharp 11.9 per cent drop in provincial home resales last year. B.C. 
was one of only two markets in Canada to experience a decline in activity. The 
province's home prices were also down between 0.8 per cent and 4.0 per cent 
from 2011.

"Much of the cooling that took place in B.C. is owed to the Vancouver-area, 
where affordability tensions are by far the greatest," added Wright.

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 two out of three housing types tracked in the 
fourth quarter (a decrease in the measure represents an improvement in 

The RBC measure fell for the benchmark detached bungalow by 1.0 percentage 
points to 66.4 per cent and for condominium apartments by 1.1 percentage 
points to 33.4 per cent. The two-storey home category experienced a small 
increase of 0.4 percentage points to 72.7 per cent but this followed a 
substantial decline of 3.2 percentage points in the third quarter.

Market correction makes Vancouver slightly less unaffordable

The Vancouver-area market was in correction mode in 2012, with home resales 
falling 23 per cent to the lowest level in 12 years (excluding the recession 
in 2008), tipping the home price scale in favour of prospective buyers.

"Following a run-up over the previous nine years, Vancouver home prices fell 
across the board in 2012 and, by the fourth quarter, the area was the only 
major market showing year-over-year price declines," Wright explained. "While 
Vancouver still holds the title as least affordable market in Canada, the 
softening in activity helped to significantly ease homeownership costs in the 
latter half of 2012 and made the market slightly less unaffordable."

Fourth quarter RBC affordability measures for Vancouver fell by 2.6 percentage 
points for detached bungalows, by 1.2 percentage points for condominium 
apartments and by 0.8 percentage points for two-storey homes.

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:
    --  Alberta:
        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.
    --  Saskatchewan:
        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 points.
    --  Manitoba:
        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.
    --  Ontario:
        affordability largely improves, tempering overall market
        The tightness that characterized Ontario's housing market in
        the early part of 2012 gave way and a more balanced market was
        observed in the second half of 2012, improving overall
        affordability conditions in the province. RBC's measures inched
        lower by 0.1 and 0.3 percentage points for the detached
        bungalow and condominium apartment, respectively, while the
        measure for two-storey homes rose marginally by 0.1 percentage
    --  Quebec:
        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

 Robert Hogue, Senior Economist, RBC Economics Research, 416 974-6192 Elyse 
Lalonde, Manager, Communications, RBC Capital Markets, 416 842-5635


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