Housing affordability declines
RBC Economics releases first quarter report
Canada's housing affordability further deteriorated in the first quarter of 2006 according to the latest Housing Affordability Index released by RBC Economics.
“The cost of homeownership in Canada, including financing, utilities and property taxes, rose at a faster pace than incomes for the second consecutive quarter,” said Derek Holt, assistant chief economist, RBC. “While property taxes and utilities increased this past quarter, most of the deterioration in affordability was driven by a surge in home prices and rising mortgage rates.”
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. 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 most affordable housing class remains the standard condo, with an index of 27.4 per cent. A standard townhouse is next at 31 per cent followed by a detached bungalow at 38.8 per cent. A standard two-storey home is still the least affordable housing type with an index reading of 44.5 per cent.
"The continued upward pace of resale prices and mortgage rates into the second quarter of 2006 does not bode well for near-term affordability," added Holt. RBC's Affordability Index for a detached bungalow for Canada's largest cities is as follows: Vancouver 64.4 per cent, Toronto 41.7 per cent, Calgary 32.7 per cent, Montreal 34.9 per cent and Ottawa 28.9 per cent.
Across the country, housing affordability declined with British Columbia's market deteriorating the most. Being at or near its highest point on record in every house class except standard condominiums, B.C.'s housing market continues to be driven by resale activity.
The cost of owning a home in Alberta continued to increase, as rapidly rising house prices and mortgage rates outpaced strong income and employment growth for the second consecutive quarter.
Saskatchewan's affordability declined across all housing classes for a second consecutive quarter. Higher utility costs and rising mortgage rates led to the deterioration, despite decent income growth.
Solid housing price increases and higher mortgage rates were to blame for the overall deterioration in Manitoba's housing market with affordability declining for a third consecutive quarter.
While Ontario's housing market continues to see signs of a soft landing, housing affordability declined. Income gains of about $50 per month this quarter were not enough to offset higher mortgage rates and higher utility costs.
Affordability continued to deteriorate for a second consecutive quarter in Quebec. The sales-to-listings ratio has been on a gradual decline over the past year implying that our widely anticipated cooling of Quebec's housing market is now underway.
Atlantic Canada continues to experience a slow and steady deterioration in housing affordability. Moderate wage gains in the region were not able to offset the higher monthly payments necessary to maintain a house.
The Schacter Team - Your Langely Real Estate Experts.