Home ownership in Canada became more affordable for the fifth straight quarter with modest improvement registered across the country, says the second quarter housing report by RBC Economics Research.
“Following the biggest quarterly improvements on record in the first quarter and continued improvement in the second quarter, the national home affordability level has been restored to pre-housing boom levels,” says Robert Hogue, senior economist, RBC. “However, the recuperative phase of the affordability cycle seems to be drawing to a close with housing prices firming up in many parts of the country and mortgage rates no longer trending downward.”
The RBC Housing Affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home.
“The leveling off of home affordability is not expected to stop the impressive resurgence in the housing market,” says Hogue. “Supply of properties for sale is dropping as demand bounces back, which is working to heat up prices again in many parts of the country.”
In the second quarter, housing affordability in British Columbia eased once again, further extending the downward trend since the start of 2008, although homeownership costs are still significantly above long-term levels. Sales of existing homes surged by more than 125 per cent from their cyclical trough early this year. Market conditions have tightened and there has been some firming of prices.
In Alberta, the biggest cumulative drop in the history of RBC affordability measures deepened further in the second quarter, falling to levels not seen since before the housing boom. Existing home sales soared by more than 60 per cent between April and July, fully reversing last year’s slide. Tightening market conditions should set the stage for some property value appreciation in the near future, says RBC.
Affordability has improved considerably in Saskatchewan since early last year, but homeownership costs remain above long-term averages. Regardless, sales of existing homes rebounded smartly, rising by more than 50 per cent since their lows in March. If this trend is sustained, property prices can be expected to eventually heat up as well, says RBC.
The notable easing of homeownership costs in the past year has fully repaired affordability in Manitoba, compared to historical averages, it says. Resale activity ramped up during spring and summer and property prices generally maintained their steady upward trend, supported by relatively tight market conditions.
Solid improvements in affordability in Ontario have supported a strong upturn in the market in recent months. All affordability measures are now below historic averages, says the report, indicating that homeownership costs are at attractive levels in the province. The tone of the market is generally positive, but local demand continues to be held back by the tough economic prospects many communities in Ontario continue to face.
Housing affordability improved once again in the second quarter in Quebec, says RBC, prolonging a trend that has been ongoing during the past year. Sales of existing homes surged by more than 40 per cent over the cyclical low reached mid-winter. With a more upbeat market sentiment and tightening demand-supply conditions pushing property values upward, the Quebec housing market appears to be back on track, it says.
Rebounding from a relatively restrained downturn, housing affordability in Atlantic Canada continues to improve, albeit at a more moderate pace than elsewhere in the country, says RBC. Affordability measures have declined noticeably since early last year and now stand below long-term averages. Sales of existing homes climbed by more than 18 per cent since January and property values increased modestly. Overall, Atlantic Canada is enjoying relatively attractive affordability levels, which should support housing activity in the period ahead.
