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Atlantic Canada's housing market continues
to struggle, says RBC Economics
Higher prices and rising mortgage rates affect affordability
TORONTO, May 18, 2006 — Atlantic
Canada continues to experience a slow and steady deterioration
in housing affordability for a third consecutive quarter,
according to latest figures issued today by RBC Economics.
"With affordability deteriorating across all classes,
Atlantic Canada continues to face challenges in the housing
market," said Derek Holt, assistant chief economist,
RBC. "Moderate wage gains in the region were not able
to offset the higher monthly payments necessary to maintain
a house. The two-storey housing sector took the largest hit
with monthly payments up $34 this quarter."
RBC's Housing Affordability Index for the Atlantic provinces,
which measures the proportion of pre-tax household income
needed to service the costs of owning a home, continued on
a negative trend in the first quarter of 2006, increasing
to 23.2 per cent for a standard townhouse, 23.4 per cent for
a condo, 27.6 per cent for a detached bungalow and 34.3 per
cent for a two-storey home.
Elevated monthly payments, up by almost $18 this quarter,
stemmed mostly from rising house prices and higher mortgage
rates rather than from utility costs and property taxes. New
Brunswick and P.E.I. led the region with the strongest house
price surges for the first quarter of 2006 compared to last
year. New Brunswick and Nova Scotia also reported strong growth
in residential sales. In fact, Nova Scotia led the country
with the fastest residential sales growth, up 29 per cent
compared to a year ago.
RBC's Affordability Index for a detached bungalow for Canada's
largest cities is as follows: Vancouver 64.4 per cent, Toronto
41.7 per cent, Calgary 32.7 per cent, Montreal 34.9 per cent
and Ottawa 28.9 per cent.
Also included in the report are housing affordability conditions
for a broader sampling of smaller cities across the country.
For these smaller cities, RBC has used a narrower measure
of housing affordability that only takes mortgage payments
relative to income into account.
The Housing Affordability Index, which RBC has 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 condo. The higher
the index, the more costly it is to afford a home. For example,
an Affordability Index 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.
Highlights from across Canada:
- British Columbia: British Columbia's affordability
further deteriorated and remained the least affordable province
in which to own a home. Despite eroding affordability, B.C.'s
economy continues to exhibit strength.
- Alberta: The cost of owning a home in Alberta continued
to increase, as rapidly rising house prices and mortgage
rates outpaced strong income and employment growth for the
second consecutive quarter.
- Saskatchewan: Saskatchewan's affordability declined
across all housing classes for a second consecutive quarter.
Higher utility costs and rising mortgage rates led to the
deterioration, despite decent income growth.
- Manitoba: Solid housing price increases and higher
mortgage rates were to blame for the overall deterioration
in Manitoba's housing market with affordability declining
for a third consecutive quarter.
- Ontario: While Ontario's housing market continues
to see signs of a soft landing, housing affordability declined.
Income gains of about $50 per month this quarter were not
enough to offset higher mortgage rates and higher utility
costs.
- Quebec: Affordability continued to deteriorate
for a second consecutive quarter. The sales-to-listings
ratio has been on a gradual decline over the past year implying
that our widely anticipated cooling of Quebec's housing
market is now underway.
The full RBC Housing Affordability Index report is available
online, as of
8 a.m. E D.T. today at www.rbc.com/economics/market/pdf/house.pdf.
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For more information, please contact:
Derek Holt, RBC Economics, 416-974-6192
Jackie Braden, RBC Media Relations, 416-974-2124
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