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Homes Becoming More Affordable
RBC Economics releases second quarter report
Canada's housing affordability improved in the second quarter of 2005, according to the latest Housing Affordability Index released by RBC Economics. A dip in mortgage rates to multi-year lows offset higher house prices in most regions.
"For the most part, affordability improved in the second quarter across Canada with Alberta, and to a lesser extent Saskatchewan being the exceptions," said RBC economist Allan Seychuk. "Affordability probably looks as good as it will get in the near term as mortgage rates are on the rise."
The RBC Affordability Index, which measures the proportion of pre-tax household income needed to service the costs of owning a home, stands at 25% for a standard condo. The condo remains the most affordable housing type. A standard townhouse is the next most affordable at 28.7% and had the largest improvement in affordability in the second quarter of 2005.
A detached bungalow took up 36% of median pre-tax income, while a standard two-storey home remains the least affordable with an index reading of 41.8%. RBC's Affordability Index for a detached bungalow for Canada's largest cities is as follows: Vancouver 55.3%, Toronto 42.1%, Montreal 34.3%, Calgary 32.8%, Ottawa 32.1% and Edmonton at 27.6%.
RBC notes that Ontario posted some of the largest gains in affordability while Atlantic Canada's improvement was marginal. Even in British Columbia, where house prices are rising rapidly, ownership costs became easier to bear in the second quarter thanks to strong income growth and lower borrowing costs.
Affordability improved across most regions of Canada in the second quarter of 2005. Alberta was the notable exception as house prices accelerated sharply and offset the positive effects of lower interest rates, making it the only province to suffer an across-the-board deterioration in affordability. Saskatchewan experienced the same, but only for smaller homes. Atlantic Canada remains the country's most affordable region based on the benchmark detached bungalow.