Housing Affordability Tough

British Columbia's housing affordabilty improved slightly in the second quarter of 2005 despite soaring house prices, according to the new Housing Affordability report released today by RBC Economics.

"While affordabilty improved, home ownership for most housing types remains firmly out of reach for the median Income earner," said Allan Seychuk, RBC economist. "Going forward, B.C.'s affordability is unlikely to get much better in the near-term, as housing prices continue to climb and mortgage rates drift higher."

The RBC Housing Affordabilty Index for B.C., which measures the proportion of pre-tax household income needed to service the costs of owning a home, improved to 52.8 per cent for a detached bungalow. A standard two-storey home still requires more than 60 per cent of pre-tax income to carry the costs of ownership and a standard townhouse is at 41.6 per cent. In comparison, a standard condo is still very attractive with affordability at 29 per cent, down 1.4 per cent from the previous quarter.

According to the RBC report, B.C. is expected to be one of the few provinces to see more housing starts in 2005 than In 2004, but starts will not be strong enough to keep up with demand.

"Steady migration to B.C. continues to put pressure on the province's housing markets and affordabilty is poised to worsen in the coming quarters," added Seychuk.

Vancouver's housing market remains hot as supply remained tight and prices accelerated in early summer. Nonetheless, Vancouver's affordability got better as lower mortgage rates helped ease the burden for buyers. Afoordability for a detached bungalow stood at 55.3 per cent, whereas a standard two-storey home was at 61.5 per cent and a standard townhouse was at 41.9 per cent. In comparison, a standard condo In Vancouver required 28.7 per cent of household income, not significantly more than Montreal at 28.1 per cent and Toronto at 27.3 per cent.

RBC's Affordabilty Index for a detached bungalow for Canada's other largest cities Is as follows: Toronto 42.1 per cent, Montreal 34.3 per cent, Calgary 32.8 per cent, Ottawa 32.1 per cent and Edmonton at 27.6 per cent.

The Housing Affordabilty 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 (excluding maintenance fees). 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.