Alberta's lower homeownership costs help boost resales, says RBC Economics

• Press Release
• Source: RBC
• On 5:00 am EDT, Wednesday September 9, 2009

TORONTO, Sept. 9 /CNW/ - Homeownership costs in Alberta have dropped to levels that were last seen three years ago, further boosting the resale market according to the latest second quarter housing affordability report released today by RBC Economics.

"The biggest cumulative drop in the history of RBC Affordability measures in Alberta further deepened in the second quarter, reaching levels that last prevailed in late 2005 and early 2006," said Robert Hogue, senior economist, RBC. "In response, buyers have jumped back into the housing market in a big way since the spring, sending existing home sales soaring over 60 per cent between April and July."

RBC's Housing Affordability measure for Alberta, which captures the proportion of pre-tax household income needed to service the costs of owning a home, shrank by 0.2 to 0.5 percentage points, depending on the housing type (the lower the measure, the more inexpensive it is to afford a home). Affordability for the benchmark detached bungalow moved down to 33.5 per cent, the standard townhouse down to 25.0 per cent, the standard condo down to 21.9 per cent and the standard two-storey home down to 36.6 per cent respectively.

In Calgary, sales of existing homes picked up considerably through spring and summer. Consequently, for the first time in two years, the balance of supply and demand is slightly favouring sellers. RBC's Affordability measures for Calgary in the second quarter eased again by between 0.1 and 0.3 percentage points, reaching levels below long-term averages.

"The latest figures show property values are still generally languishing in Calgary, but we believe that, as confidence gradually returns in the city, the stage will be set for a turnaround," added Hogue.

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 report also looked at mortgage carrying costs relative to incomes for a broader sampling of cities across the country, including Calgary and Edmonton. For these cities, RBC has used a narrower measure of housing affordability that only takes mortgage payments relative to income into account.

The property benchmark for the Housing Affordability measure, which RBC has compiled since 1985, is based on the costs of owning a detached bungalow. 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.

	    -   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
	        on track.

	    -   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 ahead.
	    

The full RBC Housing Affordability report is available online, as of 8 a.m. EDT today at www.rbc.com/economics/market/pdf/house.pdf.

For further information

Robert Hogue, RBC Economics, (416) 974-6192
Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124

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