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
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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