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.

BEST IN SHOW

Calgary year-over-year housing sales growth best in Canada
Near 15% hike in MLS transactions
By Mario Toneguzzi
Calgary Herald October 15, 2012

CALGARY — While most of Canada’s major centres recorded year-over-year MLS sales declines in September, Calgary went against the tide with the highest annual growth rate in the country.

According to the Canadian Real Estate Association, MLS sales in Calgary rose by 14.8 per cent from September 2011 to 2,054 transactions.

In contrast, sales across the country fell by 15.1 per cent to 32,192.

But the average MLS sale price in Calgary dipped by 0.9 per cent in September to $402,756.

Nationally, the average price rose by 1.1 per cent to $355,777.

CREA said Monday that more than half of all local markets in the country posted sales declines of at least 10 per cent on an annual basis.

“New mortgage rules continue to keep a lid on national sales activity,” said Wayne Moen, CREA’s president.

The organization’s chief economist, Gregory Klump, said national activity is likely to remain down from year-ago levels over the fourth quarter of this year.

“In the shadow of the latest mortgage rule changes, activity has ratcheted down from higher levels seen during the fourth quarter last year,” he said. “While some first-time homebuyers may no longer qualify for mortgage financing under the new rules, it is likely that many others are stepping back and reassessing how much house they can realistically afford, which is one of the things new mortgage rules were designed to do.”

In Alberta, MLS sales rose by 7.7 per cent from last year to 4,714 while the average price increased slightly by 0.2 per cent to $355,127.

“While the 15 per cent year-over-year drop in sales suggests Canadian housing is making like Felix Baumgartner, falling past the speed of sound, the details are not nearly as weak, and still suggest that the housing market is simply gliding to a lower altitude,” said Douglas Porter, deputy chief economist with BMO Capital Markets.

On Monday, CREA also released its MLS Home Price Index. The national index rose 3.9 per cent year-over-year in September. This was the fifth time in as many months that the annual gain shrank and marks the slowest rate of increase since May 2011.

Regina led the country with a 14.2 per cent hike followed by Calgary at 6.5 per cent.

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

SAY NO TO WAR

Most Canadians would balk at bidding war
Sheila Dabu Nonato
Postmedia News Apr 19, 2012

About a quarter of Canadians say they are willing to enter into a “bidding war” in Canada’s housing market and pay up to 120% of the asking price, according to a BMO report released Thursday.

The BMO Buying Report said Canadian respondents in the Prairies, Ontario and Alberta are more willing to enter into a bidding war than those in Quebec and Atlantic Canada.

In the survey, 22% of Canadians said they were willing to enter into a bidding war when making an offer on a home.

“Of those prepared to fight, half would pay up to 110% of the asking price, while a quarter would be willing to bid up to 120%,” the report said.

Those surveyed in Manitoba/Saskatchewan ranked first in eagerness to enter into a mortgage bidding war (32%). They were followed by respondents in: Ontario (28%), Alberta (25%), B.C. (23%), Atlantic Canada (13%) and Quebec (10%).

The study also noted that 52% of Canadians surveyed said they’re willing to pay between 100 and 110% of the asking price, with Quebec ranking first at 62%. It was followed by: Alberta and B.C. (53%), Ontario (51%), Manitoba/Saskatchewan (48%) and Atlantic Canada (44%).

Meanwhile, 27% of Canadians said they would pay between 100 to 120%, with the highest in Atlantic Canada (33%), then Ontario and B.C. (30%), Quebec (25%), Manitoba/Saskatchewan (22%) and Alberta (17%).

John Pasalis, broker owner of Realosophy Realty Inc., a Toronto-area real estate brokerage, cautioned that the bidding wars may not be as lucrative as they seem.

“One thing to keep in mind is the houses that are getting pretty crazy bidding wars are underpriced anywhere from five to 10%,” he said. “The list prices aren’t always an indication of what they’re actually worth.”

Pasalis said his company has seen “multiple offers almost non-stop for years now,”including as much as 10 or more buyers bidding on a house.

“You just get these spikes and valleys in the market where things get a little bit more heated and demand starts outstripping supply as things get faster,” he explained.

However, the mortgage wars may backfire on owners if the bank’s appraisal of the home is lower than what a buyer pays for the home, he said.

To avoid this, Pasalis cautioned that homeowners need to know the actual market value of the property they want to buy as opposed to its listing price.

Nationally, the average home sale price is $369,677, the report said. The average home prices across Canada are “rising modestly,” it said, except in Toronto ($504,117) and Vancouver ($761,742).

“Toronto prices have risen 11% over the past year, while Vancouver’s have fallen 3%,” said Doug Porter, deputy chief economist for BMO Capital Markets.

The survey was completed online by Leger Marketing from March 19-22 with a sample of 1,000 Canadian home or condo owners. The margin of error is plus or minus 3.1%, 19 times out of 20.

Photo By: Kamilerner

RISING DEMAND IN ALBERTA

House prices expected to ease
Financial Post Staff
Mar 5, 2012

OTTAWA — Home resales are expected to rise by 0.3% this year in Canada, with low interest rates continuing to support the market, the Canadian Real Estate Association said Monday.

National sales are forecast to reach 458,800 units in 2012, up from 457,305 in the previous year. “Rising demand in Alberta, Saskatchewan, and Nova Scotia, is expected to offset softer activity in British Columbia, Ontario, and New Brunswick,” CREA said.

In 2013, CREA said, sales are expected ease back to 457,200 units, with modest gains in all provinces except Ontario “as economic and job growth picks up later this year and builds into 2013,” it said.

Meanwhile, the national average price is likely to decline by 1.1% this year to $359,100, followed by a slight increase of 0.9% to $362,300 in 2013.

“Risks to the Canadian economic outlook remain elevated owing to the European sovereign debt quagmire, but the continuation of low interest rates is the silver lining,” said Gregory Klump, CREA’s chief economist.

“So long as the European debt crisis is contained and a global economic recession avoided, low interest rates will support Canadian home sales and prices. Recent trends are reassuring, but interest rates remaining low for longer will doubtless keep the Canadian housing market under scrutiny for signs of overheating.”