Homeownership Becoming A More Affordable Reality For Canadians, RBC

MONDAY, 29 NOVEMBER 2010 14:46

WRITTEN BY NEWSROOM

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In a report released on Monday by the Economics Research team at RBC, the ratio of pre-tax household income it takes to own a home declined in the third quarter of 2010 after an entire year in which the affordability of owning a home had gone downhill.  The report cited lower home prices and mortgage rates as reasons for the upswing.According to the Royal Bank of Canada, home ownership was in reach for more Canadians in the past few months.

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“The improvement in affordability during the third quarter has relieved some of the stress that had been mounting in Canada’s housing market over the past year,” said Robert Hogue, senior economist for RBC. “After appreciating rapidly during the strong rebound in resale activity last year and early this year, national home prices recently came off the burner and retreated modestly as market conditions cooled considerably through the spring and summer.”

RBC quoted recent stats which states that, on average nationally, it took 40.4% of household income, to own a bungalow between July and September.  That figure came in at 2.4 % lower than it had been in Q2.

There is thought as well that this  affordability could get even better and more accessible for more Canadians, with the anticipation of  additional cuts in the posted five-year fixed rate already in place in the early part of the fourth quarter, coupled with  previous home price increases rolling back  in certain markets.   This hope though, is tempered with the expectation that the Bank of Canada will increase rates again in Q2, with the intention of creating a more upwardly stable mortgage rate environment.

"Higher mortgage rates will be the dominant factor raising homeownership costs beyond the short term, although increasing household income - as the job situation continues to strengthen in Canada - will provide some positive offset," added Hogue. "We expect housing demand and supply to remain mostly in balance overall, setting the course for very modest home price increases."

There was improvement nationally in terms of home ownership affordability in the Q3, in particular in British Columbia, where elevated property values enhanced the overall effect of falling interest rates, in calculating monthly mortgage charges. Ontario saw a similar drop in homeownership costs, responsible for creating downward pressure on the RBC Measures below their long-term average in the province for bungalows and condominiums. Alberta and Manitoba are the only two provinces where the RBC Measures stand below their long-term average in all housing categories.

RBC's Housing Affordability Measure for a detached bungalow in Canada's largest cities is as follows: Vancouver 68.8 per cent (down 5.4 percentage points from the last quarter), Toronto 47.2 per cent (down 3.0 percentage points), Montreal 41.7 per cent (down 1.3 percentage points), Ottawa 38.2 per cent (down 2.9 percentage points), Calgary 37.1 per cent (down 2.0 percentage points) and Edmonton 32.7 per cent (down 2.0 percentage points).