Atlantic Canada's housing affordability looked even better in Q4 2014: RBC Economics

TORONTO, March 3, 2015 /CNW/ - Atlantic Canada's improving housing affordability trend continued in the fourth quarter of 2014, according to the latest Housing Trends and Affordability Report issued today by RBC Economics.

The report notes that housing has become more and more affordable since the end of 2013, coinciding with a period of soft market activity and historically elevated inventory levels that significantly contained price increases.

"Atlantic Canada has long had some of the best housing affordability levels in the country and the fourth quarter of 2014 was no exception," said Craig Wright, senior vice-president and chief economist, RBC. "We've seen weakening prices in the past year in Fredericton, Saint John, PEI, Newfoundland, and until not that long ago, Moncton, because market conditions were favourable to buyers. However, there were signs that activity picked up in Moncton and Saint John in the second half of 2014."

The RBC housing affordability measures, which capture the region's proportion of pre-tax household income that would be needed to service the costs of owning a home at current market values, fell for most housing types in the fourth quarter of 2014 (a decline in the measure represents an improvement in affordability).

RBC's measures for two-storey homes and bungalows eased by 0.5 and 0.1 percentage points, to 34.6 per cent and 30.1 per cent, respectively. The measure for condos edged up marginally by 0.1 percentage points to 25.1 per cent.

RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities in Q4 of 2014 is as follows: Vancouver 82.4 (down 1.2 percentage points from Q3); Toronto 56.8 (up 0.8 percentage points); Montreal 37.3 (unchanged); Ottawa 36.0 (up 0.2 percentage points); Calgary 33.7 (down 0.6 percentage points); Edmonton 33.5 (up 0.1 percentage points).

The RBC Housing Affordability measure, which has been compiled since 1985, is based on the calculated costs of owning a detached bungalow (a reasonable property benchmark for the housing market in Canada) at market value. Alternative housing types are also presented, including a standard two-storey home and a standard condominium apartment. The higher the reading, the more difficult it is to afford a home at market values. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, would take up 50 per cent of a typical household's monthly pre-tax income.

It is important to note that RBC's measure is designed to gauge ownership costs associated with buying a home at present market values. It is not a representation of the actual costs incurred by current owners, the vast majority of whom have bought in the past at significantly different values than those prevailing in the latest period.

Highlights from across Canada:

British Columbia: Small improvement in affordability conditions

• Housing affordability slightly improved across all categories of homes measured by RBC, primarily reflecting stronger household income arising from brighter economic prospects in the province. During Q4, RBC's measures eased between 0.1 and 0.7 percentage points.

Alberta: Housing remains relatively affordable despite buffeted economic confidence

• Housing affordability was mainly unchanged in Alberta during Q4, continuing to be fairly attractive relative to other provinces and compared to historical averages. RBC's measure for bungalows fell by 0.4 percentage points, and remained unchanged for both condos and two-storey homes.

Saskatchewan: Price declines translate to improved affordability

• Price declines in the province during the fourth quarter of 2014 contributed to the fifth consecutive quarter of affordability improvements. RBC's measures fell by 0.6 percentage points for both bungalows and two-storey homes. The measure for condos, however, rose by 0.6 percentage points.

Manitoba: Affordability improves across the provincial housing market

• It became more affordable to buy a home in Manitoba during the fourth quarter of 2014 with RBC's measures falling across all housing categories (between 0.1 and 0.4 percentage points over the third quarter).

Ontario: Robust housing market conditions impact affordability

• Ontario's housing market bucked the generally improving trend in affordability across Canada in Q4, 2014. RBC's measures rose in all categories between 0.2 percentage points and 1.0 percentage points.

Quebec: Broad-based improvements in affordability continue

• Steady improvements in Quebec's housing affordability continued in the fourth quarter of 2014 with RBC's measure declining across all categories tracked. Measures fell by 0.6 percentage points for two-storey homes and by 0.4 percentage points for both bungalows and condos.

The full RBC Housing Trends and Affordability report is available online as of 8 a.m. ET today.

SOURCE RBC

Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192
Elyse Lalonde, Communications, RBC Capital Markets, 416-842-5635