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Quebec's housing market continues to gradually cool, says
RBC Economics
MONTREAL, December 20 — Quebec's housing affordability
mildly deteriorated in the third quarter of 2006 for two-storey
homes and townhouses while detached bungalows and condos witnessed
slight improvements as housing markets continue to demonstrate
signs of cooling, according to the Housing Affordability Index
report released today by RBC Economics.
The RBC Affordability Index, which measures the proportion
of pre-tax household income needed to service the costs of
owning a detached bungalow, modestly improved to 36.2 per
cent of income. The amount of median pre-tax income required
to purchase a condo in Quebec remained unchanged at 28.7 per
cent. However, affordability deteriorated for a fourth consecutive
quarter for a standard townhouse and a standard two-storey
home with index readings of 31.4 per cent and 44.2 per cent,
respectively.
"Quebec's housing affordability erosion was less severe
this quarter thanks to income gains and lower utility costs,"
said Derek Holt, assistant chief economist, RBC. "We
expect the rate of sales to continue to cool, new home listings
to increase, and price growth to moderate at a gradual pace
across the market."
According to the report, Montreal's housing market continues
to cool gradually with annual growth of house prices between
two and five per cent compared to double digit growth rates
experienced over the past couple of years. Overall, there
was little change to the city's housing affordability conditions
as modest income gains, flat interest rates and lower utility
costs offset minimal house price gains and higher property
taxes.
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 and Ottawa 30.8 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: 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.
- Atlantic region: Affordability remained relatively
unchanged thanks to house price growth leveling off and
cooling household income gains. 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.
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
Raymond Chouinard, RBC Media Relations, 514-874-6556
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