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Saskatchewan remains the most affordable province to own
bungalows and two-storey homes despite weaker affordability,
says RBC Economics
TORONTO, December 20, 2006 — Saskatchewan's
housing affordability continues to deteriorate across all
housing sectors, according to the latest RBC Economics' Housing
Affordability Index report.
"An increase in house prices, combined with a slight
decline in household income this past quarter, led to a marginal
deterioration in affordability," said Derek Holt, assistant
chief economist, RBC. "However, if rates continue to
remain stable and price growth levels off, we expect to see
affordability improve across all housing sectors in 2007."
The RBC Affordability Index for Saskatchewan, which measures
the proportion of pre-tax household income needed to service
the costs of owning a home, mildly eroded across all four
housing classes to 31 per cent for a detached bungalow, 33.8
per cent for a standard two-storey home, 24.8 per cent for
a standard townhouse and 19.9 per cent for a standard condo.
Saskatchewan is still the most affordable province for bungalows
and two-storey homes, the report noted. Solid employment growth,
healthy wage gains and low unemployment all helped drive the
province's economy this year, despite a dip in third quarter
income.
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.
The report also looked at mortgage carrying costs relative
to incomes for a broader sampling of select cities across
the country, including Regina and Saskatoon. For these select
cities, RBC has used a narrower measure of housing affordability
that only takes mortgage payments relative to income into
account.
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.
- 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.
- 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
Jackie Braden, RBC Media Relations, 416-974-2124
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