Quebec homeowership more affordable, says RBC Economics9 March 2006
Quebec's housing affordability continued to improve in the third quarter of 2005, according to the Housing Affordability Index report released today by RBC Economics. "Quebec experienced the largest overall gains in housing affordability of any region across Canada," said Derek Holt, assistant chief economist, RBC. "This is the second quarter in a row in which the cost of owning a home in Quebec improved and affordability lies at its best level since the spring of 2004." RBC notes that housing market activity varied across Quebec throughout 2005 and is likely to do so again in 2006. Year-to-date, Sherbrooke's house price gains were the second strongest in the country behind only Victoria. Saguenay wasn't far behind, with Quebec, Montreal and Trois Rivieres residing in the middle of the pack among Canadian cities. Sherbrooke's gains may be due in part to tight supply conditions sparked by one of the steepest paces of decline in newly built homes coming onto market. RBC's benchmark Housing Affordability Index for Quebec - which measures the proportion of pre-tax household income needed to service the costs of owning a detached bungalow - stood at 33.7 per cent. Among housing classes, the largest improvement was in condominiums, coming in at 26.9 per cent of income, slightly ahead of a standard townhouse at 29.2 per cent and a standard two-storey home stood at 41.3 per cent. Housing affordability in Montreal improved for the second consecutive quarter, but remained slightly worse than 2004's annual average. Healthy income growth drove most of this improvement, as household incomes were estimated to have grown by about 1.5 per cent this quarter and 2.1 per cent in the previous quarter. Affordability for an average two-storey home required 42.4 per cent of pre-tax household income in Montreal. A standard townhouse stood at 29.9 per cent, with a detached bungalow at 33.5 per cent and an average Montreal condo at 27.4 per cent of income. RBC's Affordability Index for a detached bungalow for Canada's largest cities is as follows: Vancouver 53.6 per cent, Toronto 41.5 per cent, Montreal 33.5 per cent, Calgary 33 per cent and Ottawa 31.9 per cent. RBC notes that with interest rates on the way up in North America, there is concern about the impact on household finances and housing affordability. However, according to a new survey from the Organization for Economic Cooperation and Development, three quarters of all residential mortgages in Canada are at fixed rates. Only about one quarter are at a variable rate and exposed to rising short-term rate pressures. This compares very favourably to most other countries that have much higher shares of mortgage accounts that are of a variable rate nature. "Furthermore, Canadian households have high liquidity, a healthy debt-to-assets ratio, and enjoy strong labour markets, and strong wealth gains. These factors are driving improvements in household net worth and provide support for housing markets going forward," added Holt. The Housing Affordability Index, which RBC has 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 condo. The higher the index, the more costly it is to afford a home. For example, an Affordability Index 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. Across the country, affordability improved for British Columbia, Saskatchewan, Ontario and Quebec in the third quarter of 2005, whereas, it weakened slightly in Alberta, Manitoba, and the Atlantic provinces. Alberta, Saskatchewan, Manitoba, and parts of the Atlantic region were the only areas where house price pressures are not yet cooling off. Highlights from across Canada: - British Columbia: Housing affordability mildly improved due to strong
income growth in tight labour markets, but still remains at its worst
point in about a decade. - Alberta: Housing affordability further deteriorated as housing price
appreciation accelerated. Alberta is one of the few markets where the
annual pace of house price appreciation is actually increasing with
every major housing class experiencing house price gains of between
seven and nine per cent compared to a year ago. - Saskatchewan: All four housing classes saw continued improvement in
housing affordability. While this is the second consecutive quarter of
overall improvement in housing affordability, housing price pressures
remain. - Manitoba: Housing affordability deteriorated slightly as home carrying
costs jumped between two to four per cent, outpacing the gains made in
household incomes and the small dip in mortgage rates. - Ontario: Housing affordability continued to improve across all housing
classes in Ontario for a third straight quarter. Condos continue to
tower above the rest in terms of affordability and the recent surge in
condo construction will keep them the most affordable option for a
while. - Atlantic region: Atlantic Canada experienced one of the biggest
deteriorations in housing affordability in the country. The
deterioration occurred across all housing classes and is due to a
strong price surge in several markets especially New Brunswick and
Nova Scotia. The full RBC Housing Affordability Index report is available online, as of 8 a.m. E.S.T. today at www.rbc.com/economics/market/pdf/house.pdf. For a year-in-review look at provincial and city economic indicators, the December editions of RBC's Provincial Current Trends and Canadian City Trends reports are available online at www.rbc.com/economics/market/pdf/provtrend.pdf and www.rbc.com/economics/market/hi_city.html , respectively. About RBC Financial Group Royal Bank of Canada (TSX, NYSE: RY) uses the initials RBC as a prefix for its businesses and operating subsidiaries, which operate under the master brand name of RBC Financial Group. Royal Bank of Canada is Canada's largest bank as measured by market capitalization and assets, and is one of North America's leading diversified financial services companies. It provides personal and commercial banking, wealth management services, insurance, corporate and investment banking, and transaction processing services on a global basis. The company employs approximately 60,000 people who serve more than 14 million personal, business and public sector clients through offices in North America and some 30 countries around the world. For more information, please visit www.rbc.com.
For further information: please contact: Derek Holt, RBC Economics, (416) 974-6192; Claude Lussier, RBC Media Relations, (514) 874-5919; Archived images on this organization are searchable through CNW Photo Archive website at http://photos.newswire.ca. Images are free to accredited members of the media. To request a free copy of this organization's annual report, please go to http://www.newswire.ca and click on Tools for Investors.
Source: newswire
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