British Columbia's affordability improves in Q2, but remains strained in Vancouver: RBC Economics

 British Columbia's affordability improves in Q2, but remains strained in  Vancouver: RBC Economics  TORONTO, Aug. 28, 2014 /CNW/ - Housing affordability in British Columbia  improved broadly during the second quarter of 2014 - condos and two-storey  homes reaching their most attractive levels since 2009 - yet it remained a  stretch for the average household to own a home in a market like Vancouver,  according to the latest Housing Trends and Affordability Report issued today  by RBC Economics Research.  "British Columbia's housing market experienced brisk activity in the second  quarter," said Craig Wright, senior vice-president and chief economist, RBC.  "Home resales rose to a five-year high. Thankfully, the pace of new listings  picked up sufficiently to keep the demand-supply equation in balance."  The report notes that price pressures remained in check overall, though there  was a slight divergence; the single-family home segments experienced modestly  stronger price gains relative to the condo segment.  The 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, fell for all housing types in the second quarter of  2014 (an fall in the measure represents an improvement in affordability).  RBC's affordability measures dropped fairly significantly for two-storey  homes, down 2.0 percentage points to 72.0 per cent. The measure for detached  bungalows declined by 1.3 percentage points to 67.0 per cent while the measure  for condos fell by 0.9 percentage points to 32.6 per cent.  Vancouver homebuyers welcome lower rates  "Affordability in higher-priced housing markets benefits disproportionately  from a fall in mortgage rates relative to lower-priced markets if all else  remains constant," said Wright. "This was the case in the Vancouver-area  market in the second quarter, when a decline in fixed mortgage rates helped  affordability across the board, despite prices recording some of the faster  increases among Canada's major markets."  RBC's measures for Vancouver decreased by 0.3 percentage points to 81.8 per  cent for bungalows and by 1.3 percentage points to 85 per cent for two-storey  homes. Condos declined for the third straight quarter by 0.8 percentage points  to 39 per cent.  This modest improvement in affordability may have been among the factors  contributing to a quarterly rise of 8.7 per cent in home resales in the second  quarter, RBC says; however, the extent likely was limited as affordability  levels remain poor in the area.  "Owning a home in Vancouver continues to be very difficult for an average  household to afford," added Wright. "Measures stand well above historical  norms. This likely explains in large part why home resales were still more  than 6.0 per cent below the 10-year average."  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:  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.  Manitoba: new home listings surge; affordability plays largely neutral role         --  The big housing market story in Manitoba was a surge of homes             being offered for sale with new listings growing to levels             almost 14 per cent above where they were a year ago. RBC's             affordability measures fell between 0.5 and 1.5 percentage             points but remained close to long-run averages, suggesting that             affordability likely plays a neutral role in home buying             decisions in the province.  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             points.  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.    SOURCE  RBC  Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192 Elyse  Lalonde, Communications, RBC Capital Markets, 416-842-5635  To view this news release in HTML formatting, please use the following URL:  http://www.newswire.ca/en/releases/archive/August2014/28/c8091.html  CO: RBC ST: Ontario NI: FIN ECO ECOSURV  
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