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Quebec's housing affordability erodes further, says RBC
Economics
Prices dip in condo market
MONTREAL, September 19 — The affordability of
Quebec's housing market deteriorated further for the third
straight quarter, but the market is showing signs of cooling,
according to the Housing Affordability Index report released
today by RBC Economics.
"Most of Quebec's housing markets are in the midst of
an orderly slowdown as prices grow much slower than the double
digit pace of earlier years," said Derek Holt, assistant
chief economist, RBC. "While three out of the four housing
segments deteriorated in affordability this quarter, Quebec's
condo market was the exception."
Detached bungalows, townhomes and two-storey homes were less
affordable in the second quarter due to mild house price gains
in the four to six per cent range, slow income growth, higher
mortgage rates, property taxes, and rising utilities costs.
The RBC Affordability Index which measures the proportion
of pre-tax household income needed to service the costs of
owning a detached bungalow - deteriorated to 36.2 per cent
of income. The amount of median pre-tax income required to
purchase a condo declined marginally to 28.7 per cent from
29.1 per cent as average condo prices slipped by $7,700 from
the previous quarter. A standard townhouse had an index reading
of 31.1 per cent and a standard two-storey home remained the
least affordable, requiring 44 per cent of income for the
second quarter of 2006.
Montreal's condo market was the only housing segment to have
some relief with affordability mildly improving. Unfortunately
for condo owners, it was because of a 6.4 per cent drop in
prices compared to the previous quarter. This price drop offset
pressures from higher interest rates, rising utilities costs,
and higher property taxes. Affordability of Montreal's other
home segments was weaker.
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, Calgary 34.6 per cent and Ottawa 30.3 per cent.
Also included in the report is a look at mortgage carrying
costs relative to incomes 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, 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.
- Atlantic region: Atlantic Canada's housing affordability
continued its downward descent for the fourth consecutive
quarter. Big jumps in house prices, higher mortgage rates
and a four per cent increase in utilities were among the
main forces behind the decline, with townhouses showing
the strongest deterioration of all.
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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