Saskatchewan's housing affordability trends sideways: RBC Economics

TORONTO, Feb. 25, 2014 /CNW/ - Saskatchewan's affordability levels remained near historical averages and played a predominantly neutral role in home-buying decisions in Q4 2013 , according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.

"Home resales in Saskatchewan stayed at elevated levels for the second consecutive quarter, at just under 13,700 units on a seasonally-adjusted and annualized basis, fuelled by a healthy job market - with the jobless rate at a 24-year low in the fourth quarter - and positive demographic trends," said Craig Wright, senior vice-president and chief economist, RBC. "Affordability in the province continued to trend sideways, as it has done since 2009, and is clearly not putting much undue stress on prospective homebuyers."

The RBC 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, decreased for two of the three categories in the fourth quarter of 2013 (a decline in the measure represents improvement in affordability).

RBC measures decreased by 1.1 percentage points to 40.1 per cent for two-storey homes and 0.2 percentage points to 37.0 per cent for bungalows. The measure for condominiums partially reversed the substantial drop registered in early 2013 by gaining 0.4 percentage points to 25.5 per cent.

RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities in the fourth quarter of 2013 is as follows: Vancouver 81.6 (down 2.3 percentage points from the previous quarter); Toronto 55.6 (up 0.1 percentage points); Montreal 38.8 (unchanged); Ottawa 36.7 (down 0.4 percentage points); Calgary 33.8 (down 0.2 percentage points); Edmonton 33.3 (up 0.1 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.

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's housing affordability remains relatively poor despite some improvements
  Affordability conditions improved across all housing categories in the province, with RBC measures falling between 1.0 and 1.4 percentage points in the fourth quarter. With levels at 73.2 per cent for two-storey homes, 67.7 per cent for bungalows and 33.7 per cent for condominium apartments, affordability remains poor, particularly in Vancouver.

• Alberta's homes become even more affordable
  Owning a home at market value in Alberta became slightly more affordable for most housing categories in the final quarter of 2013 and continued to compare favourably against historical and national averages. RBC's measures fell by 0.5 percentage points for two-storey homes and by 0.2 percentage points for bungalows. The measure for condominiums edged higher by 0.1 percentage points.

• Manitoba's surge in listings lends a hand to affordability
  A surge in newly listed homes for sale weakened demand-supply conditions in Manitoba during the second half of 2013, which ultimately helped to improve affordability with RBC measures for two-storey homes and bungalows slipping by 1.1 percentage points and 0.6 percentage points, respectively. The measure for condominiums rose by 0.8 percentage points.

• Ontario's affordability picture remains largely unchanged
  RBC's affordability measures for Ontario eased by 0.1 percentage points for both bungalows and two-storey homes and stayed flat for condominiums in the fourth quarter of 2013. Owning a single-detached home at market value in the province continues to take a larger share of household income compared to the historical average despite marginal improvements for the first time in a year.

• Quebec's affordability conditions little changed from the third quarter
  The only observable variation in affordability conditions in Quebec during the fourth quarter was in the two-story homes category, with RBC's measure inching higher by 0.2 percentage points. The measures for bungalows and condominium apartments remained unchanged. All measures continued to stand near their long-run averages.

• Atlantic Canada retains decent affordability conditions
  Housing affordability in the region remained at generally neutral levels in the fourth quarter, and still compared favourably against the majority of markets across Canada. RBC's measures fell by 0.6 percentage points for two-storey homes and by 0.1 percentage points for bungalows. The measure for condominiums rose by 0.2 percentage points.

The full RBC Housing Trends and Affordability report is available online, as of 8 a.m. ET today, at rbc.com/economics/economic-reports/canadian-housing-forecast.html.

SOURCE: RBC

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