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
"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:
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
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.
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
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
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