RBC Housing Affordability Index

While the rest of the country slowly climbs up the housing pay scale, it is now Saskatchewan that remains the most affordable provinces for housing, despite housing affordability deteriorating  slightly in every class for a third straight quarter, according to the latest RBC Economics’ Housing Affordability Index.

The RBC Affordability Index for Saskatchewan, which measures the proportion of pre-tax household income needed to service the costs of owning a home, eroded slightly across all four housing classes to 30.5 per cent for a detached bungalow, 32.8 per cent for a standard two-storey home, 24.2 per cent for a standard townhouse and 19.4 per cent for a standard condo.  The report noted that house prices in Saskatchewan have pulled back to a more sustainable pace in 2006. Lower utility bills helped offset the slight deterioration of affordability that was driven by interest rate hikes.

The Housing Affordability Index, the most comprehensive, multiple housing class report, 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  omeownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

RBC’s Affordability Index for a detached bungalow for Canada’s largest cities is as follows: Vancouver 68.2 per cent, Toronto 43.9 per cent, Montreal 36 per cent, Calgary 34.6 per cent and Ottawa 30.3 per cent.

Highlights from across Canada:

–   British Columbia: Housing affordability continued to erode in every
housing segment. Bungalow and townhome markets are setting new
records while condos and standard two-storey homes lie close to 1990
records. Surging prices and rising interest rates are to blame,
despite healthy income growth of 4.6 per cent compared to a year ago.
–   Alberta: Alberta experienced one of the sharpest deteriorations in
housing affordability across the country last quarter. While incomes
are growing at a fairly rapid five per cent annual pace, house price
growth is multiples faster.
–   Manitoba: Manitoba’s two-storey houses saw the sharpest deterioration
in affordability, as prices were up 21 per cent compared to last
year. Detached bungalows and condos remain the best options for
prospective home buyers as prices declined from the previous quarter.
–   Ontario: Despite weakening price gains in Ontario’s housing market,
affordability deteriorated for a third straight quarter. The growth
of household income failed to keep pace with higher mortgage rates
and rising utilities costs.
–   Quebec: Most of Quebec’s housing market is in the midst of an orderly
slowdown as prices grow much slower than the double-digit pace of
earlier years. Three out of four housing segments deteriorated in
affordability this quarter, with Quebec’s condo market the exception.
–   Atlantic region: Atlantic Canada’s housing affordability continued
its downward descent for the fourth consecutive quarter. Big jumps in
house prices, higher mortgage rates and a four per cent increase in
utilities were among the main forces behind the decline, with
townhouses showing the strongest deterioration of all.

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