Sunday, April 09, 2006

British Columbia's Housing Market Remains Strong Despite Affordability Deterioration

British Columbia remained the least affordable province in which to own a home in the fourth quarter of 2005, according to the new report released today by RBC Economics.

"Although B.C.'s housing affordability remains the least favourable across the country, its housing market continues to power ahead," said Derek Holt, assistant chief economist, RBC. "Affordability eroded in the last quarter of 2005 as demand remains high and house prices continue to climb."

RBC notes that soaring house prices pushed British Columbia's detached bungalow affordability index up the most in the fourth quarter relative to the third, but the other three indices (two-storey, townhouse, and condo) also deteriorated. A standard two-storey home took up 62.8 per cent of average household pre-tax income in the final quarter of 2005 costing $435,000.

For other housing types, the RBC Affordability Index, which measures the proportion of pre-tax household income needed to service the costs of owning a home, stood at 29.9 per cent for a standard condo, which remains the most affordable housing type. A standard townhouse is next at 43.2 per cent followed by a detached bungalow at 54.9 per cent.

RBC forecasts that affordability is expected to continue to erode as the economy continues to boom and strong migration to the province persists. Land shortages coupled with labour and capacity constraints will intensify demand for homes and are expected to continue to drive price appreciation across the province.

Vancouver's housing affordability deteriorated substantially, bringing the annual average for the standard detached bungalow and two-storey homes to a 10-year high. Rapid price gains, slower household income growth, higher mortgage rates and increased utility costs all contributed to eroding affordability across all housing types. The condo remained the most affordable at 29.4 per cent, followed by a standard townhouse at 43.6 per cent. A detached bungalow stood at 57.5 per cent and a two-storey home was the least affordable at 64 per cent.


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