Alberta's overall home affordability stays in the saddle: RBC Economics
TORONTO, Sept. 27 /CNW/ - Alberta's persistently lackluster housing market conditions, which only perked up modestly during last year's modest upturn in resale activity, have translated in considerable improvement in affordability since early 2008, according to the latest housing report released today by RBC Economics Research.
"Alberta's housing market painted a mixed picture in the second quarter, with modest price increases in most categories and a marginal easing for condominium affordability," said Robert Hogue, senior economist, RBC. "Overall, homeownership remains affordable with measures remaining at or below their long term average, implying little downside risk to the market and boding well for strengthening housing demand once the provincial job market shows more substantial gains."
The RBC Housing Affordability Measures for Alberta capture the province's proportion of pre-tax household income needed to service the costs of owning a home (a rise in the measure means homes are less affordable). The measure for the benchmark detached bungalow moved up to 34.3 per cent (an increase of 1.4 percentage points from the previous quarter), the standard townhouse slightly rose to 25.5 per cent (up 0.1 percentage point), the standard two-storey home increased to 37.5 per cent (up 0.7 percentage point). However, the standard condominium edged downward to 21.5 per cent (a 0.3 percentage point drop).
The report found that home resales in Calgary fell significantly through the spring and summer, reaching levels only moderately higher than the lows seen at the end of 2008 the worst period in the housing downturn. Renewed weakness in demand exerted downward pressure on home prices which fell for most housing types in the second quarter. The RBC measures for Calgary edged lower, down between 0.1 and 0.5 percentage points across most housing categories with the exception of a 0.9 percentage increase for bungalows.
"Buyers appear to be circling the wagons as favorable housing affordability has failed to spur sales following the fairly subdued rebound in activity which ran its course at the start of the year," added Hogue. "However, it might just be a question of time before they spring into action. Sustained economic recovery will eventually dissipate any lingering doubts about the attractiveness of homeownership in the city."
The report also looked at mortgage carrying costs relative to incomes for a broader sampling of cities across the country, including Calgary and Edmonton. For these cities, RBC has used a narrower measure of housing affordability that only takes mortgage payments relative to income into account.
Ontario and British Columbia saw the most significant deterioration in affordability in the second quarter; however, some improvements in specific housing types occurred in Alberta (condominiums) and Saskatchewan (townhouses). All other provinces showed modest erosion, with the exception of two-storey homes in Manitoba where the rise in the RBC measure was quite substantial.
RBC's Housing Affordability Measure for a detached bungalow in Canada's largest cities is as follows: Vancouver 74.0 per cent (up 1.7 percentage points from the last quarter), Toronto 50.2 per cent (up 2.4 percentage points), Montreal 43.2 per cent (up 1.8 percentage points), Ottawa 41.2 per cent (up 3.6 percentage points), Calgary 39.2 per cent (up 0.9 percentage point) and Edmonton 34.7 (up 2.5 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. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household's monthly pre-tax income.
The full RBC Housing Affordability report is available online, as of 8 a.m. E.D.T. today at www.rbc.com/economics/market/pdf/house.pdf