Regional housing market remains soft
Improved housing affordability across Atlantic Canada was not enough to pull the regional housing market out of its slump in the first quarter of 2014, according to the latest Housing Trends and Affordability report issued by RBC economics research.
RBC notes that home resales in the region hit a nine-year low, standing nearly 14 per cent below the 10-year average. Housing activity in Halifax was particularly depressed with resales at their weakest level in 19 years. Saint John also posted the softest numbers in 10 years.
Craig Wright, senior vice-president and chief economist, RBC, says despite an improvement in Atlantic Canada’s housing affordability conditions, activity was soft.
“While tough weather conditions no doubt contributed to the slump, demand for housing was likely hampered by poor labour market conditions and weak demographics.”
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, decreased for two of the three categories in the first quarter of 2014 (a decline in the measure represents improvement in affordability).
RBC’s affordability measures eased by 0.4 percentage points to 31.2 per cent for detached bungalows and to 25.9 per cent for condominiums in the first quarter. The measure for two-storey homes rose slightly by 0.2 percentage points to 36.2 per cent. Atlantic Canada’s affordability measures continue to compare relatively favourably to the region’s historic averages.
RBC’s housing affordability measure for the benchmark detached bungalow in Canada’s largest cities in the first quarter of 2014 is as follows: Vancouver 82.4 (up 0.9 percentage points from the previous quarter); Toronto 56.1 (up 0.2 percentage points); Montreal 38.9 (up 0.1 percentage points); Ottawa 36.4 (down 0.5 percentage points); Calgary 34.5 (up 0.9 percentage points); Edmonton 32.9 (down 0.2 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.