Housing affordability rolls on but improvement could be
running out of steam, says RBC Economics
TORONTO, September 9, 2009 — Home ownership
in Canada became more affordable for the fifth straight quarter
with modest improvement registered across the country, according
to the second quarter housing report released today by RBC
"Following the biggest quarterly improvements on record
in the first quarter and continued improvement in the second
quarter, the national home affordability level has been restored
to pre-housing boom levels," said Robert Hogue, senior
economist, RBC. "However, the recuperative phase of the
affordability cycle seems to be drawing to a close with housing
prices firming up in many parts of the country and mortgage
rates no longer trending downward."
The RBC Housing Affordability measure captures the proportion
of pre-tax household income needed to service the costs of
owning a home. During the second quarter of 2009, the RBC
Affordability measure at the national level improved modestly
across all housing segments, as the benchmark detached bungalow
moved to 39.1 per cent, the standard townhouse to 31.5 per
cent, the standard condo to 26.9 per cent and the standard
two-storey home to 44.4 per cent respectively.
The report found that measures fell at the national level
by 0.4 percentage points for standard condominiums and 0.6
percentage points for two-storey homes, detached bungalows
and standard townhouses - marking the fifth consecutive quarterly
decline in home ownership costs (the lower the measure, the
more inexpensive it is to afford a home).
"The leveling off of home affordability is not expected
to stop the impressive resurgence in the housing market,"
added Hogue. "Supply of properties for sale is dropping
as demand bounces back, which is working to heat up prices
again in many parts of the country."
RBC's Affordability measure for a detached bungalow for Canada's
largest cities is as follows: Vancouver 63.4 per cent, Toronto
46.5 per cent, Ottawa 38.6 per cent, Montreal 37.3 per cent
and Calgary 35.7 per cent.
The Housing Affordability measure, 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 condominium. The
higher the reading, the more costly it is to afford a home.
For example, an Affordability reading 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: In the second quarter, housing
affordability in B.C. eased once again, further extending
the downward trend since the start of 2008, although homeownership
costs are still significantly above long-term levels. Sales
of existing homes surged by more than 125 per cent from
their cyclical trough early this year. Market conditions
have tightened and there has been some firming of prices.
- Alberta: The biggest cumulative drop in the history
of RBC Affordability measures in Alberta deepened further
in the second quarter, falling to levels not seen since
before the housing boom. Existing home sales soared by more
than 60 per cent between April and July, fully reversing
last year's slide. Tightening market conditions should set
the stage for some property value appreciation in the near
- Saskatchewan: Affordability has improved considerably
in Saskatchewan since early last year, but homeownership
costs remain above long-term averages. Regardless, sales
of existing homes rebounded smartly, rising by more than
50 per cent since their lows in March. If this trend is
sustained, property prices can be expected to eventually
heat up as well.
- Manitoba: The notable easing of homeownership costs
in the past year has fully repaired affordability in Manitoba,
compared to historical averages. Resale activity ramped
up during spring and summer and property prices generally
maintained their steady upward trend, supported by relatively
tight market conditions.
- Ontario: Solid improvements in affordability in
Ontario have supported a strong upturn in the market in
recent months. All Affordability measures are now below
historic averages, indicating that homeownership costs are
at attractive levels in the province. The general tone of
the market is generally positive, but local demand continues
to be held back by the tough economic prospects many communities
in Ontario continue to face.
- Quebec: Housing affordability improved once again
in the second quarter in Quebec, prolonging a trend that
has been ongoing during the past year. Sales of existing
homes surged by more than 40 per cent over the cyclical
low reached mid-winter. With a more upbeat market sentiment
and tightening demand-supply conditions pushing property
values upward, the Quebec housing market appears to be back
- Atlantic Canada: Rebounding from a relatively restrained
downturn, housing affordability in Atlantic Canada continues
to improve, albeit at a more moderate pace than elsewhere
in the country. Affordability measures have declined noticeably
since early last year and now stand below long-term averages.
Sales of existing homes climbed by more than 18 per cent
since January and property values increased modestly. Overall,
Atlantic Canada is enjoying relatively attractive affordability
levels, which should support housing activity in the period
The full RBC Housing Affordability 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:
Robert Hogue, RBC Economics Research, 416-974-6192
Matt Gierasimczuk, Media Relations, RBC, 416-974-2124