Quebec's housing affordability deteriorates,
says RBC Economics
MONTREAL, May 18, 2006 — Quebec's
housing affordability declined for a second consecutive quarter,
according to the Housing Affordability Index report released
today by RBC Economics.
"While affordability continued to decline, the ratio
of home sales-to-listings has been gradually shrinking over
the past year, suggesting our anticipated cooling of Quebec's
housing market is now underway," said Derek Holt, assistant
chief economist, RBC. "Other signs of a slowdown have
also emerged as April housing starts are down 23 per cent
compared with a year ago and the demand for residential permits
has weakened."
The RBC Affordability Index which measures the proportion
of pre-tax household income needed to service the costs of
owning a detached bungalow - stood at 34.8 per cent for Quebec.
The largest affordability erosion was the standard condo,
requiring 29.2 per cent of income. This decline was largely
driven by a 10 per cent year-over-year surge in condo prices
and an 8.5 per cent increase from the previous quarter.
After two quarters of almost flat prices, RBC notes that
the average condo price rose by about $13,000 in the most
recent quarter, bringing the average purchase price up to
$171,115. While condos still remain the most affordable housing
category in Quebec, townhomes are close behind with an average
price of $174,000, down for a second consecutive quarter.
Affordability of a standard townhouse stood at 30.3 per cent
of household income and a standard two-storey home at 43.2
per cent.
Affordability in Montreal also dropped across the board for
all housing types. Condo prices were up 10.5 per cent, reporting
the strongest deterioration followed by a two-storey home.
A sharp appreciation in condo prices led to the decline, bucking
the trend of cooling prices that started back in 2005.
"The combination of a small decline in household income,
modestly higher mortgage rates and higher house prices contributed
to Montreal's overall deterioration in affordability,"
added Holt.
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,
including Quebec City. 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.
- Atlantic region: Atlantic Canada continues to experience
a slow and steady deterioration in housing affordability.
Moderate wage gains in the region were not able to offset
the higher monthly payments necessary to maintain a house.
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
Raymond Chouinard, RBC Media Relations, 514-874-6556
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