Canadians in the market for a resale home had reason to celebrate in the third quarter of 2012. The summer’s new mortgage rules look to have made an impact in the housing market, to the benefit of buyers. According to the latest Housing Trends and Affordability Report published by RBC Economics Research, softening home prices coupled with a modest improvement in household incomes, has led to more affordable housing nationwide.
Improvement Remains Moderate
It’s important to note this is only one data set. The long-term trend isn’t as rosy – although there have been gains in some quarters and a loss in others, housing affordability has remained relatively flat over the last two years. Not great news, but at least housing prices aren’t appreciating faster than household income. Low interest rates have definitely helped housing affordability, but with rate hikes looming in 2013, household affordability could begin to erode.
How Affordable is My House?
The RBC Housing Affordability Measure determines housing affordability within a region. It looks at the percentage of a household’s pre-tax income needed to cover fixed housing costs, including mortgage payments, utilities and property taxes. The lower the affordability measure, the more affordable housing is in the area and vice-versa. In the third quarter, the benchmark detached bungalow, decreased by 1.0 per cent to 42.0 per cent, making it slightly easier for Canadians to afford a house.
So how did each province fare in terms of housing affordability? Here’s the lowdown of housing affordability nationwide.
Housing affordability has remained steady in the Maritimes and Newfoundland over the last three years. It remains one of the most affordable places to live in Canada. The benchmark detached bungalow only required 32.3 per cent of pre-tax income, a slight improvement of 0.2 per cent over the second quarter.
For the second straight quarter housing affordability improved in La Belle Province. A detached bungalow only required 33 per cent of pre-tax income, a modest improvement of 0.8 per cent. New mortgages rules look to have softened the market, leading to more balanced conditions. Affordability didn’t improve everywhere – in Montreal, the province’s biggest city, 40.2 per cent of pre-tax income was required for a detached bungalow, slightly up by 0.1 per cent.
Ontario has been hit the hardest by the new mortgage rules in the second half of 2012. Ontario’s once red-hot housing market looks to be balancing itself out. After two straight quarters of affordability erosion, the benchmark bungalow fell by 0.6 per cent to 42.6 per cent of pre-tax income. In Toronto, Canada’s biggest city, bungalow affordability improved marginally – down 0.7 per cent to 52.4, as the number of active listings fell significantly in recent months.
Housing prices look to have hit a brick wall in the Keystone Province. After an active first half of the year, the resale market has cooled considerably, leading to an improvement in housing affordability. 36.5 per cent of pre-tax income, a decrease of 1.6 per cent, was required for the average bungalow.
Saskatchewan, the least populous Prairie Province, saw a similar trend to neighbouring province Manitoba. Declines in housing affordability experienced in the first two quarters were mainly reversed in the third quarter. Price appreciation in the province’s two major cities, Regina and Saskatoon, were mostly offset by an increase in household income. A detached bungalow required 38.2 per cent of pre-tax income, a modest improvement of 0.9 per cent.
Canada’s economic powerhouse doesn’t appear to suffering the slump felt by provinces like Ontario and British Columbia. A balanced market coupled with Alberta’s ever-growing economy has led to a stable housing market. With the allure of well-paying jobs in the oil sands, Alberta’s affordability remains one of the best in the country – a bungalow only required 32.7 per cent of pre-tax income, an improvement of 0.3 per cent.
Despite seeing the largest improvements in affordability in the third quarter, British Columbia still remained Canada’s most expensive province. Detached bungalows required a whopping 66.5 per cent of pre-tax income, a robust improvement of 3.7 per cent. Hit by a slumping housing market, Vancouver, Canada’s least affordable city saw the largest affordability improvement in Canada – 83.2 per cent of pre-tax income is required for a detached bungalow, a drop of 5.8 per cent.