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Atlantic Canada's housing market continues to cool, says
RBC Economics
TORONTO, December 20, 2006 — A gradual, controlled
cooling continues to take hold of Atlantic Canada's housing
market, according to the latest Housing Affordability Index
released today by RBC Economics.
"Affordability remained relatively unchanged thanks
to house price growth leveling off and household income gains
cooling," said Derek Holt, assistant chief economist
at RBC. "Following the trend taking place in other parts
of the country, the pressures on Atlantic Canada's housing
market showed signs of balancing for the second half of 2006."
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, was virtually
unchanged for all housing types in the third quarter of 2006,
and stood at 25.5 per cent for a standard townhouse in the
province, 25.7 per cent for a condo, 29.7 per cent for a detached
bungalow and 34.9 per cent for a two-storey home.
Affordability of two-storey homes improved very slightly
as prices dipped for the second quarter in a row. Across the
region, the number of homes available on the market has started
to exceed resale activity, relieving some of the demand. Nova
Scotia's hot housing market has also started to lose steam,
moving into more balanced territory.
Also included in the report are housing affordability conditions
for a broader sampling of select cities across the country,
including St. John's, Saint John, and Halifax. For these select
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.
RBC's Affordability Index for a detached bungalow in Canada's
other largest cities is as follows: Vancouver 70.1 per cent,
Toronto 43.8 per cent, Calgary 40.9 per cent, Edmonton 33.4
per cent, Montreal 36 per cent and Ottawa 30.8 per cent.
Highlights from across Canada:
- British Columbia: Housing affordability deteriorated
for a fourth consecutive quarter across all four types of
homes driven by a small decline in average monthly incomes,
higher utility bills, and climbing house prices.
- Alberta: The third quarter marked the sharpest
broad-based quarterly deterioration in Alberta's affordability
since 1990 with erosion of 12 to 15 per cent for all home
segments. Commodity-related spin-off effects have created
ample job opportunities, driven wages up and pushed unemployment
to record lows, helping to fuel the residential housing
market. However, the market is shifting away from excess
demand and towards cooling price pressures.
- Saskatchewan: An increase in house prices, combined
with a slight decline in household income this past quarter,
led to a marginal deterioration in affordability. However,
if rates continue to remain stable and price growth levels
off, affordability is expected to improve across all sectors
in 2007.
- Manitoba: For the third quarter of 2006, Manitoba
saw the strongest overall improvement in affordability for
three out of four housing classes. It remains the most affordable
province for townhouses and condos even though the townhouse
sector witnessed a marginal deterioration.
- Ontario: Dropping off from the growth peaks in
house prices and incomes seen several quarters ago, Ontario's
housing market has now cooled to more moderate levels. This
cooling has been slow and steady, and should allow for homeowners
to retain the bulk of their home equity gains going forward
into 2007 and 2008.
- Quebec: Housing affordability erosion was less
severe this quarter as income gains and utility relief managed
to outpace house price growth. The level of sales is expected
to continue to cool, while new home listings are expected
to increase and price growth to slow to a gradual pace across
the market.
The full RBC Housing Affordability Index report is available
online, as of 8 a.m. E.S.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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