Housing affordability improves as prices easeBy Mario Toneguzzi
Calgary Herald
December 9, 2008
The housing markets in both Calgary and Edmonton are expected to retreat even further in 2009 as concerns mount about the economy, "spurred by the sharp drop in energy prices that sent shivers down homeowners' spines," says a report released Monday by RBC Economics.
The affordability measure report said Alberta's housing conditions have softened since prices peaked in 2007 with declining prices restoring some of the affordability lost during the boom. However, affordability measures are still high, suggesting the province's housing markets remain overvalued, at least relative to household income.
In Alberta, "as stiff headwinds blow on the provincial economy and erode consumer confidence, homebuyers will be reluctant to step into play until affordability improves more significantly," said Robert Hogue, senior economist at RBC. "The province's housing affordability conditions still have a fair way to go before returning to long-term averages."
On a national level, the report said that as a sluggish economy threatens income growth and makes households "much more skittish" about major financial commitments, issues of affordability are coming to the fore.
"While the Canadian housing sector is undoubtedly entering a cyclical downturn, the risk of experiencing a U. S.-style meltdown is remote," said the report.
The RBC affordability measure for Alberta, which captures the proportion of pre-tax household income needed to service the costs of owning a home, improved across all home segments with the benchmark detached bungalow dropping to 43 per cent, the standard townhouse to 32.1 per cent, the standard condo to 28.2 per cent, and the standard two-storey home to 46.4 per cent.
RBC's affordability measure for a detached bungalow for Canada's largest cities is as follows: Vancouver 74.8 per cent, Toronto 53.3 per cent, Calgary 47.3 per cent, Ottawa 43.3 per cent and Montreal 40.4 per cent.
