Economic News/Trends and Analysis — March 15, 2010

Booming housing market undermines affordability in Quebec: RBC Economics

TORONTO, March 15 /CNW/ - The strong rally in Quebec's resale housing market has resulted in higher prices and homeownership costs during the fourth quarter of 2009, according to the latest housing report released today by RBC Economics.

"Quebec's housing market has rebounded impressively from the downturn, with prices recovering to pre-recession levels," noted Robert Hogue, senior economist at RBC. "This has caused affordability measures in Quebec to deteriorate to levels exceeding long-term averages."

The RBC Housing Affordability measure for Quebec rose across all four housing classes in the fourth quarter of 2009 (the higher the measure, the more expensive it is to afford a home). Affordability of the detached bungalow benchmark edged up to 34.5 per cent (up 0.8 percentage points), the standard townhouse rose to 29 per cent (up 0.2 percentage points), the standard condo increased to 28.4 per cent (up 0.4 percentage points) and the standard two-storey home elevated to 41.4 per cent (up 1.1 percentage points).

In the Montreal area, buyers are enthusiastically jumping into the market, as existing home sales have persistently set records since fall of last year. Housing prices have hit new highs with two-storey homes and bungalows showing particularly strong gains in the fourth quarter. RBC affordability measures for the area rose 1.0 and 0.9 percentage points for two-storey homes and bungalows, respectively, in the quarter. The measures for condominiums and townhouses dipped slightly by 0.2 and 0.1 per cent.

RBC's Housing Affordability measure for a detached bungalow for Canada's largest cities is as follows: Vancouver 69 per cent (up 1.4 percentage points), Toronto 49.1 per cent (up 0.1 percentage point), Ottawa 40.4 per cent (down 0.3 percentage points), Montreal 39.1 per cent (up 0.9 percentage points), Calgary 37.1 per cent (up 0.1 percentage point) and Edmonton 32.9 per cent (down 0.4 percentage points).

The report also looked at mortgage carrying costs relative to incomes for a broader sampling of cities across the country, including Montreal and Quebec City. For these cities, RBC used a narrower measure of housing affordability that only takes mortgage payments relative to income into account.

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. Alternative housing types are also presented including a standard two-storey home, a standard townhouse and a standard condominium. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household's monthly pre-tax income.

    Highlights from across Canada:

    -   British Columbia: Homeownership costs are rising in B.C. as very
        strong demand and a limited supply of homes for sale combine to
        propel prices substantially higher. All home affordability measures
        are above long-term averages in the province, a trend that is likely
        to continue in the near term.

    -   Alberta: The lagging economic recovery in Alberta, compared to other
        provinces, has stabilized housing affordability rates. Excessive
        supply left over from last year's downturn and housing slump has
        limited increases in housing prices. Attractive affordability levels
        and additional economic recovery should boost housing demand over the
        next year.

    -   Saskatchewan: Increased supply and lessened demand has put a damper
        on the housing market in the province, as the real estate market
        cooled from the heightened resale activity in the spring and summer.
        While home affordability improved in the province, the cost of owning
        a home still remains historically high.

    -   Manitoba: Manitoba's real estate market picked up considerably over
        the last quarter of 2009. Prices for condominiums and two-storey
        homes rose significantly, causing affordability levels to deteriorate
        in the province. Despite these increases, affordability levels are in
        line with long-term averages as Manitobans still see the costs
        associated with owning a home as manageable.

    -   Ontario: The housing market in Ontario has staged a remarkable
        recovery in the past year. Resale activity has recently reached
        record levels as prices have rebounded to new heights in most housing
        categories. Yet this has caused only limited damage to housing
        affordability in the province as lower mortgage rates and growth in
        household income kept affordability levels close to long-term
        averages.

    -   Atlantic Canada: Unlike many other parts of the country, housing
        affordability on the East Coast generally continued to improve in the
        fourth quarter. With most measures below long-term averages, activity
        in the housing resale market should remain elevated.

The full RBC Housing Affordability report is available online, as of 8 a.m. E.D.T. today at www.rbc.com/economics/market/pdf.house.pdf.

For further information: Robert Hogue, RBC Economics Research, (416) 974-6192; Matthew Gierasimczuk, RBC Media Relations, (416) 974-2124

Latest Industry Press Releases

Updated 15:57 CST, February 11, 2012  

• Construction/Building
• Government of Canada/Public Works
• Economic News/Trends and Analysis
• Environmental Services
• Real Estate
• Transportation/Trucking