Manitoba's Housing Affordability Improves After Market Loses Some Steam: RBC Economics

TORONTO, Nov. 22, 2012 /CNW/ - Manitoba's housing market lost some of its steam in the third quarter, which helped to make home ownership more affordable in the province, according to the latest Housing Trends and Affordability Report released today by RBC Economics Research. Provincial home resale activity cooled through the spring and summer, contributing to an easing of earlier tight demand-supply conditions and the partial reversal of substantial price gains that were made in the second quarter.

"Property price declines between the second and third quarters across Manitoba resulted in a notable improvement in affordability - and the deterioration that occurred in the previous quarter was fully reversed in the process," said Craig Wright, senior vice-president and chief economist, RBC. "The province's affordability measures now stand slightly worse-off than they have been, on average, since the mid-80s, but they are still well below the national averages, suggesting minimal strain on Manitoban homebuyers' budgets at the moment."

RBC's housing affordability measures, which capture the province's proportion of pre-tax household income needed to service the costs of owning a home at market values, declined across all housing types (a decrease in the measure represents an improvement in affordability). The RBC measure for the benchmark detached bungalow fell by 1.6 percentage points to 36.5 per cent, the standard two-storey home eased by 1.0 percentage points to 38.9 per cent and the measure for condominium apartments declined by 0.6 percentage points to 22.2 per cent.

Where housing affordability stands in Canada

RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities is as follows: Vancouver 83.2 per cent (down 5.8 percentage points from the previous quarter); Toronto 52.4 per cent (down 0.7 percentage points); Montreal 40.2 per cent (up 0.1 percentage points); Ottawa 38.7 per cent (down 0.4 percentage points); Calgary 38.3 per cent (down 0.7 percentage points) and Edmonton 31.1 per cent (down 0.6 percentage points).

The RBC Housing Affordability Measure, which has been compiled since 1985, is based on the 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.

Highlights from across Canada:

• British Columbia: Affordability hurdles still tough to clear
  
  British Columbia's housing market experienced improvements in the third quarter of 2012, and yet, affordability conditions remained the poorest across Canada. RBC measures fell between 2.0 percentage points and 3.7 percentage points, the largest drops across Canada. The situation remains less severe elsewhere in the province; the share of income needed to carry ownership costs in Victoria, for instance, is almost half the share in Vancouver for some housing types.

• Alberta: Attractive affordability contributes to market renaissance
  
  Alberta's housing market enjoyed firm and steady resale activity, balanced demand-supply conditions, moderate home price increases, and improved housing affordability. Third quarter affordability measures for the province edged lower - between 0.2 percentage points and 0.4 percentage points -remaining below their long-term and the national averages.

• Saskatchewan: Little evidence of affordability strain
  
  Significant deteriorations in housing affordability in the second quarter in Saskatchewan were largely reversed in the third with RBC measures in the province falling between 0.9 percentage points and 1.3 percentage points. The measures stood just slightly above their long term averages for all housing categories, indicating little in the way of undue affordability induced strain on the market.

• Ontario: More balanced conditions help to ease affordability stress
  
  Ontario's housing affordability eased somewhat in the third quarter, but remains under mild pressure, most notably in the two-storey home segment. RBC measures declined between 0.5 percentage points and 1.1 percentage points in the province, which, in effect, rolled back the two consecutive quarterly increases that took place in the first half of this year.

• Quebec: Second straight affordability improvement
  
  Housing affordability improved for the second straight quarter in Quebec, with RBC's measures edging lower across all housing types in the province, between 0.6 percentage points and 0.8 percentage points, in the third quarter. For the most part, levels are only slightly worse than the average historical level, indicating that prospective homebuyers in Quebec may feel minimally stretched budget-wise, if they bought a home at current market prices.

• Atlantic: Affordability position remaining quite stable
  
  Housing affordability in Atlantic Canada improved slightly across the board, with RBC measures in the region inching lower by 0.2 percentage points to 0.7 percentage points relative to the previous quarter. Affordability measures have been reasonably stable over the past three years in the region, showing no discernable trends on either the up or down sides.

The full RBC Housing Trends and Affordability report is available online, as of 7 a.m. ET today, at rbc.com/economics/market/.

SOURCE: RBC

Please contact: 
Robert Hogue, Senior Economist, RBC Economics Research, 416-974-6192
Elyse Lalonde, Manager, Corporate Communications, RBC Capital Markets,
416-842-5635