PROVINCIAL 2ND QUARTER AFFORDABILITY

Alberta's housing market continues as one of Canada's most affordable: RBC Economics

RBC Economics

 Aug. 27, 2013, 2013 (Menafn - Canada NewsWire via COMTEX)

Alberta homebuyers continued to enjoy a relatively affordable housing market in the second quarter, despite some increases in ownership costs in late 2012 and early 2013, according to the latest Housing Trends and Affordability Report issued today by RBC Economics Research.

"Despite the fact that the market has kicked into higher gear since spring - thereby boosting prices and increasing ownership costs - Alberta continues to be a relatively affordable market," said Craig Wright, senior vice-president and chief economist, RBC. "We will likely see some disruptions in market activity trickle through in summer data from the floods in southern Alberta; however, we anticipate the strong provincial economy will endure, supporting further housing growth in 2014."

In the second quarter of 2013, 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, edged higher for all three categories tracked (an increase in the measure represents deterioration in affordability).

RBC's affordability measure rose by 0.7 percentage points to 32.4 per cent for bungalows and 0.4 percentage points to 34.5 per cent for two-storey homes. The measure for condominiums rose slightly by 0.1 percentage points to 19.6 per cent. All measures stood at a level below their long-term average, indicating that homeownership in the province remained historically attractive.

Calgary's housing market moving forward despite flood adversity.

The flooding that hit Calgary at the end of June did not appear to have slowed Calgary's housing market progression in the second quarter of 2013, says RBC. On a quarterly basis, home resales in the area posted a 12 per cent gain - their second-strongest improvement in four years.

"Though prices are now on a steeper upward trajectory, the effects have yet to undermine affordability in a material way. In fact, affordability levels in Calgary continue to be among the best in Canada," said Wright. "Demand for Calgary housing will continue to benefit from a strong provincial economy, solid labour market, fast-rising population and attractive affordability."

RBC measures for Calgary showed little movement across all housing categories in the second quarter of 2013. RBC's measure for two-storey homes rose by 0.5 percentage points to 33.6 per cent and for condominium apartments edged lower by 0.2 percentage points to 19.4 per cent; the measure for bungalows remained unchanged at 33.0 per cent.

RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities is as follows: Vancouver 82.1 per cent (up 2.2 percentage points from the previous quarter); Toronto 54.5 per cent (up 0.5 percentage points); Montreal 38.1 (down 0.7 percentage points); Ottawa 37.1 (up 0.5 percentage points); Edmonton 34.0 (up 1.8 percentage points); Calgary 33.0 (unchanged).

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 takes one step back

Homeownership of single-family homes in the province became less affordable in the second quarter of 2013 amid a surge in resale activity since early spring following a near two-year long cooling stretch. RBC measures rose by 1.1 percentage points for bungalows, by 0.8 percentage points for two-storey homes, and by only 0.1 percentage points for condominiums.

--Saskatchewan:
seesaw affordability pattern endures

Affordability in the province continued to experience a seesaw-like pattern which has characterized this market in recent years. RBC measures rose modestly by 0.9 percentage points for bungalow and 0.5 percentage points for two-storey homes in the latest period, while the measure for condominiums inched lower by 0.3 percentage points.

--Manitoba:
housing affordability a mixed bag

The province's second quarter housing affordability developments proved to be a mixed bag with RBC's measure for the two-storey home category rising by 1.8 percentage points, the measure for bungalows down slightly by 0.2 percentage points, and the measure for condominiums edging up by 0.2 percentage points.

--Ontario:
steady as she goes

There was little change in housing affordability in Ontario in the second quarter. RBC's measures for both bungalows and two-storey homes rose by 0.2 percentage points relative to the first quarter, while the measure for condominiums remained flat.

--Quebec:
bucking the deteriorating affordability trend

The Quebec housing market bucked the national trend by enjoying a broad-based improvement in affordability in the second quarter. RBC affordability measure for the province fell by 0.5 percentage points for bungalows and 0.4 percentage points for condominiums; the measure for two-storey homes remained unchanged.

--Atlantic Canada:
affordability stuck in neutral

Atlantic Canada's housing affordability levels remained relatively static at neutral levels in the second quarter of 2013. Affordability measures moved marginally in all categories tracked by RBC: bungalows and condominiums edged lower by 0.1 percentage points and 0.2 percentage points, respectively; two-storey homes edged up by 0.1 percentage points.

OIL RICHES

Alberta’s oil riches driving Canada’s economy: BMO
By: Lauren Krugel
Canadian Press Oct 9, 2012

CALGARY — Canada’s economic growth is being driven by resource-rich Western provinces, according to a Bank of Montreal report released Tuesday.

Alberta leads the pack, with the bank predicting 3.5% real GDP growth this year, falling back a bit to 2.9% in 2013.

“The energy sector remains the key driver of economic activity in the province, with crude bitumen production up 16% year-over-year through the first half of the year, and the Energy Resources Conservation Board expecting oil sands output to more than double by 2021,” said economist Robert Kavcic.

The energy sector’s strength has attracted workers from elsewhere in Canada to Alberta, which has the country’s lowest unemployment rate at 4.4%.

But BMO Kavcic says the industry faces some risk.

“Cost pressures could again pick up, though oil sands operations are generally viewed as economical at prices above US$80 (per barrel),” he said.

“Also, wrangling over new pipeline capacity continues.”

Production from the Bakken, a massive oil deposit that stretches through parts of Montana, North Dakota and Saskatchewan, is filling up existing pipelines and causing Canadian producers to get a lower price for the heavy crude they produce.


“Estimates suggest that production in Western Canada could be negatively impacted by 2015/16 if there is not enough new pipeline capacity put in place.”

BMO says Canada’s overall real GDP growth is expected to be 2.2% in 2012, with the Western provinces all topping that rate.

Saskatchewan, where oil and gas extraction and potash and uranium mining are big economic drivers, is expected to see growth of 3.1% this year.

For British Columbia, it sees real GDP growth of 2.5% and for Manitoba, growth of 2.6%.

Further east it’s a different story. BMO sees Ontario posting growth of two per cent and the economies of Quebec and the Atlantic provinces growing at less than two per cent in 2012.

The report says fiscal restraint, the high loonie and sluggish U.S. demand are putting a damper on growth in Central Canada.

Kavcic noted some cause for optimism in Ontario’s auto sector.

“Auto producers continue to invest in North America and, despite a strong currency and higher labour costs compared to the southern U.S. and Mexico, Ontario is no exception,” he said.

“Toyota, for example, is expanding production at its Woodstock assembly plant — a project worth about $100-million and 400 jobs. Plus, the CAW and Big Three automakers recently reached new four-year contract agreements. Output in the auto sector was up a solid 20 per cent year-over-year through August.”

Also Tuesday, the International Monetary Fund trimmed its global growth forecasts in its quarterly economic outlook.

The IMF predicts the global economy will expand 3.3% this year, down from the estimate of 3.5% growth it issued in July. Its forecast for growth in 2013 is 3.6%, down from 3.9% three months ago and 4.1% in April.

Photo By: inertiachick

2 MONTHS OF A CHILL

Home resales cool for second straight month
Reuters
Published: Monday, March 15, 2010

TORONTO -- Sales of existing homes in Canada dipped for a second straight month in February, but remained high on a year-over-year basis, as the market may be moving into more balanced conditions, data showed on Monday.

The Canadian Real Estate Association (CREA) said a total of 42,799 homes changed hands last month, down 1.5% from January, as a large gain in sales in Toronto were offset by declines in Vancouver and other British Columbia housing markets.

The real estate group said the Winter Olympics, which were held in the host city of Vancouver and nearby areas, may have played a factor in lower sales in the province last month.

Unit sales in British Columbia were down 13.3% in February from January, compared with a 3.3% advance in Ontario.

Across Canada, sales rose 44% from the same month last year, a smaller gain in national activity from the previous three months. This was in line with economists' views that year-over-year comparisons are likely to shrink in coming months because the recovery of the housing market started in February 2009.

"Housing markets are becoming more balanced," said Gregory Klump," CREA's chief economist.

After a relatively short spell of low consumer confidence during the global financial crisis, Canadian homebuyers were quickly back in the market and have made the housing sector one of the cornerstones of the domestic economic recovery. The pace of the rebound has encouraged debate about a housing bubble.

But with rising supply -- new listings rose for a fifth straight month, up 2.4% -- it could take the steam out of the housing markets as the year goes on, said Mr. Klump.

Ultralow interest rates could further prompt home resales this spring before the arrival of new mortgage rules in April and changes to provincial sales tax regimes in British Columbia and Ontario, before cooling in the second half of the year.

"We should see the Canadian housing market move slowly back into a balanced-market position as higher mortgage rates and prices begin to temper demand," said Millan Mulraine, economics strategist at TD Securities.

CREA said the national average home price in February rose 18.2% from a year earlier to $335,655 (US$329,074)

Photo By: cjhart10