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Report indicates resale market has picked up despite slight decrease in affordability
Aug 29, 2013
Affordability in Manitoba's housing market was a mixed picture in the second quarter of 2013, according to the latest Housing Trends and Affordability Report issued by RBC Economics Research. 
The report found that second-quarter housing affordability in the province was only slightly off the average existing since the mid-1980s.
“Manitoba’s home buyers shrugged off the slightly less affordable conditions in the second quarter resulting in a strong pick-up in resale activity,” said Craig Wright, senior vice-president and chief economist, RBC. “In fact, home resales rebounded by 5.6 per cent from the first quarter, and following a particularly weak winter, the spring season was quite brisk in markets such as Winnipeg where resales returned to above the 10-year average by June.”
RBC’s measure for two-storey homes in Manitoba increased by 1.8 percentage points to 39.9 per cent and the measure for condominiums rose slightly by 0.2 percentage points to 24.2 per cent. The measure for bungalows was down slightly by 0.2 percentage points to 38.1 per cent.
RBC’s housing affordability measure for the benchmark detached bungalow in Canada's largest cities is as follows: Vancouver 82.1 per cent (up 2.2 percentage points from the previous quarter); Toronto 54.5 per cent (up 0.5 percentage points); Montreal 38.1 (down 0.7 percentage points); Ottawa 37.1 (up 0.5 percentage points); Edmonton 34 (up 1.8 percentage points); Calgary 33 (unchanged).
Owning a home in Canada became slightly less affordable in the second quarter of 2013, according to the report. However, erosion in affordability didn’t hinder activity, as home resales and housing starts have shown renewed vigour since the spring across the country, reversing part of the cooling that took place in the second half of 2012 and early 2013.
“Home buyers seemed unfazed by the slight deterioration in affordability — we saw the market regain some momentum in the second quarter with home resales increasing 6.4 per cent,” said Wright. “Resales should stabilize close to the recent not-too-hot, not-too-cold levels in the near-term, barring any further changes in housing policy by the federal government.”
The RBC housing affordability measures, which capture the province’s proportion of pre-tax household income needed to service the costs of owning a home at market values, varied in the second quarter of 2013. An increase in the measure represents deterioration in affordability. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, would take up 50 per cent of a typical household’s monthly pre-tax income.
The RBC report noted that, in past years, demand-supply conditions were relatively tighter for single-family homes compared to condos. These conditions have consistently applied relatively greater upward pressure on single-family homes’ homeownership costs. The cumulative effect of these varying pressures has been driving affordability levels below their historical averages for bungalows, and especially, two-storey homes, while staying roughly on par for condominium apartments.
What the report also noted was that not all markets across Canada are created equal. 
“The two-tiered affordability picture we are seeing nationally primarily reflects the conditions in Canada’s three largest markets: Toronto, Montreal and Vancouver. 
“It has become a bit of a stretch for a typical household to own a bungalow or two-storey dwelling in these cities,” said Wright. 
The most noticeable deterioration in affordability was in Vancouver where, after four quarters of mostly continuous improvement, the bungalow and two-storey home segments recorded a significant slide. 
“It’s important to note that we are not seeing many signs indicating that owning a home — of any type — is out of reach for households in other local markets,” he added.
What is keeping affordability levels generally manageable for Canada's home buyers? According to RBC, it’s the current exceptionally low interest rates. RBC anticipates that the Bank of Canada will keep its overnight rate unchanged at one per cent throughout the remainder of 2013, and will gradually begin raising it starting in mid-2014, which should largely mitigate risks of serious deterioration in affordability levels.