Manitoba's housing affordability stays neutral; market sees surge of homes for sale in Q2 2014: RBC Economics

Manitoba's housing affordability stays neutral; market sees surge of homes for 
sale in Q2 2014: RBC Economics 
TORONTO, Aug. 28, 2014 /CNW/ - Housing affordability in Manitoba improved 
slightly in the second quarter of 2014 though it continued to play a 
predominantly neutral role on homebuyer demand in the province, according to 
the latest Housing Trends and Affordability Report issued today by RBC 
Economics Research. RBC says that in Q2 the larger narrative was the 
strengthening supply of homes for sale in the province. 
"Manitoba's housing activity bounced back as expected in the second quarter 
from the slowdown caused by frigid temperatures in the first quarter," said 
Craig Wright, senior vice-president and chief economist, RBC. "The bigger 
story though was a surge of homes for sale. New listings - which have been on 
a steady upward trend for some time - rose to levels almost 14 per cent above 
where they were a year ago." 
The increase in homes available for sale coincided with a wave of completions 
of new housing units in the Winnipeg area, which RBC says represents between 
85 per cent and 90 per cent of the Manitoba market, and far exceeded a 2.6 per 
cent increase in resales. 
"This is the latest such divergence that resulted in a notable loosening of 
demand-supply conditions since the end of 2012, and more recently, limited 
price advances," added Wright. 
Despite relatively affordable conditions, levels remain close to historical 
norms in the province. RBC 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, decreased for all three categories in the 
second quarter of 2014 (a decline in the measure represents improvement in 
RBC's affordability measures eased by 0.9 percentage points to 36.3 per cent 
for detached bungalows, by 0.5 percentage points to 23.7 per cent for condos 
and by 1.5 percentage points to 37.0 per cent for two-storey homes. 
RBC's housing affordability measure for the benchmark detached bungalow in 
Canada's largest cities in the second quarter of 2014 is as follows: Vancouver 
81.8 (down 0.3 percentage points from the previous quarter); Toronto 55.9 
(down 0.2 percentage points); Montreal 37.3 (down 1.6 percentage points); 
Ottawa 36.0 (down 0.4 percentage points); Calgary 33.6 (down 0.8 percentage 
points); Edmonton 31.7 (down 1.1 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. 
It is important to note that RBC's measure is designed to gauge ownership 
costs associated with buying a home at present market values. It is not a 
representation of the actual costs incurred by current owners, the vast 
majority of whom have bought in the past at significantly different values 
than those prevailing in the latest period. 
Highlights from across Canada: 
British Columbia: affordability broadly improves 

        --  Housing affordability in the province improved across the board
            in the second quarter, with two-storey homes and condos
            reaching their most attractive levels since late 2009. RBC's
            affordability measures for B.C. fell between 0.9 and 2.0
            percentage points. Still, owning a home at market price in an
            area such as Vancouver continued to be very difficult for an
            average household to afford.

Alberta: housing affordability remains attractive
        --  Escalating prices in the province were largely taken in stride
            by Alberta homebuyers in Q2 as lower mortgage rates and solid
            growth in household incomes provided offset. Affordability in
            the province improved modestly with RBC measures easing between
            0.2 and 0.9 percentage points.

Saskatchewan: homebuyers face little undue affordability pressure
        --  The provincial housing market rebounded strongly in the second
            quarter with home resales jumping to a new record-high. At the
            same time, RBC's affordability measures for Saskatchewan fell
            between 1.3 and 0.8 percentage points, and stood close to their
            historical averages.

Ontario: homebuyers undisturbed by affordability strains
        --  Housing affordability changed very little in Ontario in the
            second quarter and homebuyers did not appear to be overly
            concerned by the fact that affordability remained somewhat
            stretched for single-family homes. Lower rates were the main
            factor contributing to marginal declines in RBC's measures for
            Ontario, which edged lower between 0.1 and 0.2 percentage

Quebec: improved affordability helps halt housing market slide
        --  Quebec's housing market activity, which had been falling since
            early 2012, stabilized in Q2. Home resales rose modestly and
            the supply of homes for sale grew. Second quarter affordability
            measures for the province eased for all housing types - between
            0.9 and 1.8 percentage points. This improvement in
            affordability likely helped stabilize the market at the margin
            in the latest quarter.

Atlantic Canada: attractive affordability conditions
        --  The region's housing affordability conditions improved quite
            noticeably in the second quarter thanks to lower mortgage rates
            and subdued price pressures. RBC's measures for Atlantic Canada
            dropped between 0.9 and 1.8 percentage points.

The full RBC Housing Trends and Affordability report is available online, as 
of 8 a.m. ET today.

Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192 Elyse 
Lalonde, Communications, RBC Capital Markets, 416-842-5635 
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ST: Ontario
-0- Aug/28/2014 09:00 GMT
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