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RBC says Atlantic Canada's housing affordability continues
to deteriorate
Several forces combine to create unfavourable conditions
TORONTO, September 19, 2006 — Atlantic Canada's housing
affordability continued to deteriorate for the fourth consecutive
quarter, according to the latest Housing Affordability Index
issued today by RBC Economics.
"Big jumps in house prices, higher mortgage rates and
a four per cent quarterly increase in utilities were among
the main forces behind the deterioration, with townhouses
showing the strongest deterioration of all," said Derek
Holt, assistant chief economist, RBC. "The hit to Atlantic
Canada's affordability would have been sharper if it wasn't
offset by healthy income growth."
Among major cities within the Atlantic provinces, mortgage
carrying costs increased faster than incomes in St. John's,
Saint John, Halifax, and Charlottetown, noted the report.
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
its downward trend for the second quarter of 2006, increasing
to 25.4 per cent for a standard townhouse, 25.5 per cent for
a condo, 29.7 per cent for a detached bungalow and 35.1 per
cent for a two-storey home.
The housing market in Nova Scotia showed evidence of a supply
imbalance in the second quarter of 2006, as the annual growth
of housing sales was up 17 per cent, outpacing new listings,
which were up by 6 per cent. This imbalance acted as a driver
for Nova Scotia's rapid price growth during the first half
of 2006. Meanwhile, Newfoundland and Labrador, Prince Edward
Island and New Brunswick have shifted into more balanced housing
market positions, noted Holt.
RBC's Affordability Index for a detached bungalow for Canada's
largest cities is as follows: Vancouver 68.2 per cent, Toronto
43.9 per cent, Montreal 36 per cent, Calgary 34.6 per cent
and Ottawa 30.3 per cent.
The Housing Affordability Index, the most comprehensive,
multiple housing class report, 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: Housing affordability continued
to erode in every housing segment. Bungalow and townhome
markets are setting new records while condos and standard
two storey homes lie close to 1990 records. Surging prices
and rising interest rates are to blame, despite healthy
income growth of 4.6 per cent compared to a year ago.
- Alberta: Alberta experienced one of the sharpest
deteriorations in housing affordability across the country
last quarter. While incomes are growing at a fairly rapid
five per cent annual pace, house price growth is multiples
faster.
- Saskatchewan: For a third consecutive quarter,
Saskatchewan's housing affordability deteriorated in every
housing class. Solid wage gains, coupled with fairly average
house price growth, have helped keep housing conditions
affordable. Saskatchewan remains one of the most affordable
provinces.
- Manitoba: Manitoba's two-storey houses saw the
sharpest deterioration in affordability, as prices were
up 21 per cent compared to last year. Detached bungalows
and condos remain the best options for prospective home
buyers as prices declined from the previous quarter.
- Ontario: Despite weakening price gains in Ontario's
housing market, affordability deteriorated for a third straight
quarter. The growth of household income failed to keep pace
with higher mortgage rates and rising utilities costs.
- Quebec: Most of Quebec's housing market is in the
midst of an orderly slowdown as prices grow much slower
than the double-digit pace of earlier years. Three out of
four housing segments deteriorated in affordability this
quarter, with Quebec's condo market the exception.
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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