The first quarter of 2012 brought little change to Manitoba’s housing affordability, according to the latest Housing Trends and Affordability Report issued by RBC Economics.
“It was steady as she goes in the first few months of 2012, as homeownership costs in Manitoba generally stood in line with historical norms, representing a neutral financial burden for buyers,” said Robert Hogue, senior economist for RBC.
“The provincial housing market remains one of the more affordable areas in the country. In fact, Manitoba was one of the few provinces which bucked the broad national trend of deterioration in affordability for two-storey homes, as this market segment became slightly more wallet-friendly for buyers in the last quarter.”
RBC's housing affordability measures for Manitoba, which capture the province’s proportion of pre-tax household income needed to service the costs of owning a home at the going market value, rose slightly across two of three housing types in the first quarter of 2012 (an increase represents a loss in affordability).
The measure for the benchmark detached bungalow rose to 35.9 per cent (an increase of 0.1 percentage points from the previous quarter) and the standard condominium increased to 22.2 per cent (up 0.4 percentage points). Standard two-storey homes fell to 38.4 per cent (a decrease of 0.2 percentage points).
“Manitoba’s home resale activity has been quite volatile so far this year and registered a decline in the first quarter,” explained Hogue. “Still, the strong rebound in April resale data confirms that the rising trend over the past three years remains firmly in place and that the pullback is likely temporary. We expect further gains through the rest of 2012.”
RBC expects further challenges on the housing affordability front across Canada once the Bank of Canada begins raising interest rates in the fourth quarter of this year and assuming the European situation remains on the rails.
“Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years,” said Craig Wright, senior vice-president and chief economist for RBC. “Affordability headwinds are likely to increase next year, as interest rates make their way toward more normal levels, although the gradual pace at which we anticipate the central bank to proceed will lessen any negative impact on the housing market.”
RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities is as follows: Vancouver 88.9 per cent (up 3.1 percentage points from the previous quarter), Toronto 53.4 per cent (up 1.2 percentage points), Ottawa 41.8 per cent (up 0.9 percentage points), Montreal 41.4 per cent (up 1.2 percentage points), Calgary 36.7 per cent (unchanged) and Edmonton 32.4 per cent (down 0.4 percentage points).
The RBC housing affordability measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow (a reasonable property benchmark for the housing market in Canada) at market value. Alternative housing types are also presented, including a standard two-storey home and a standard condominium apartment.
The higher the reading, the more difficult it is to afford a home at market values. 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.