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Manitoba tops housing affordability index: biggest improvement detached bungalows
Jun 17, 2005

While higher prices are eroding affordability in other provinces, Manitoba leads the country in affordability in most housing categories, according to the latest Housing Affordability Index by RBC Economics.

“Despite rising prices, housing affordability was more or less flat in Manitoba in the first quarter due to lower mortgage rates and relatively healthy income growth,” the index reported.

“The biggest improvement in affordability came in detached bungalows with a drop in the index to 31 per cent from 31.2 per cent.”

But, the index also shows that Manitoba is the only province in which bungalows are more expensive ($171,000) than detached standard two-storey homes ($162,000).

“An aging housing stock in parts of Winnipeg is responsible both for this phenomenon and for the province’s strong demand for new housing,” according to the report.

The index couldn’t conclude that Manitoba’s housing market is cooling since year-over-year price comparisons were still strong for the first quarter. But,  it added that larger homes are trending steadily down from the 14 to 15 per cent growth rates of last spring.

“In contrast, prices for smaller homes are still playing catch-up.”

The Winnipeg Real Estate Board reported that MLS® sales were highest in the categories above $100,000 during May. For the first time, MLS® sales under $100,000 accounted for just over one-quarter of all sales in May.

The greater volume in sales in the higher price ranges contributed to a dollar volume that was the highest ever for one month.

“Most staggering, and even somewhat surreal to me, is the fact that the dollar volume which is based primarily on residential-detached sales activity reached the $200-million level,” said WREB president Ruthe Penner.

“Only five years ago, we would not have been too disappointed if we had a May dollar volume around the $100-million mark,” she added.

The index said higher house prices, slower income growth and increased utilities costs slightly eroded housing affordability in the rest of Canada, despite lower borrowing costs in the first quarter of 2005.

“The combination of revised income levels by Statistics Canada and our expanded report, which now includes additional housing types, has revealed further deterioration of housing affordability across Canada,” said Allan Seychuk, an RBC economist. 

“However, by historical standards, affordability is still good overall and extremely good in some parts of the country.”

The RBC affordability index for the four popular housing types in Canada — detached bungalow, two-storey home, townhouse and condo — showed considerable divergence in the first quarter of 2005. 

The standard condo is on average the most affordable housing type, taking up 25.5 per cent (exclusive of condo fees) of median pre-tax household income, followed by the standard townhouse at 29.6 per cent and the detached bungalow at 36.6 per cent. The standard two-storey home is the least affordable with an index reading of 42.6 per cent.

RBC noted that some regions of the country are showing varying degrees of a slowing housing market, but notable pockets exist where the boom continued unabated in the first quarter of 2005. 

In most areas of Canada, housing markets remain healthy. Central and Eastern Canada show ongoing annual house price gains between two to 10 per cent while Western Canadian house price increases hovered in a generally higher range between six and 12 per cent. 

Across most regions of Canada, affordability mildly eroded in the first quarter of 2005. Manitoba leads the country in affordability for condos, townhouses and two-storey homes while British Columbia has the least affordable housing, although its affordability gap with the rest of Canada is considerably narrower for condos than for its other housing types.

The Housing Affordability 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. 

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.

RBC’s affordability index for a detached bungalow for Canada’s largest cities for the first quarter of 2005 are: Vancouver 56.2 per cent, Toronto 42.8 per cent, Montreal 34.8 per cent, Calgary 32.5 per cent, and Ottawa 32.1 per cent.