Sunday, April 09, 2006

Quebec's Housing Market Moderately Cools

Quebec's housing affordability eroded in the fourth quarter of 2005 in the wake of rising mortgage rates, weaker income growth, and higher utility costs, according to the Housing Affordability Index report released today by RBC Economics.

"Quebec's housing market had already begun to cool last quarter," said Derek Holt, assistant chief economist, RBC. "The good news is that supply and demand have slowed simultaneously without impacting prices. House price growth now appears to be moderating into the single digits."

The RBC Affordability Index for Quebec -- which measures the proportion of pre-tax household income needed to service the costs of owning a detached bungalow - stood at 34.8 per cent. Among housing classes, a standard two- storey remained the least affordable at 42.6 per cent. Affordability of a standard townhouse stood at 30.5 per cent and a standard condominium remained the most affordable, requiring 27.7 per cent of income.

In 2005, Quebec's housing starts dropped by almost 8,000 units, down 13 per cent from 2004, showing the strongest decline in Canada this past February. Another sign of Quebec's cooling housing market is that residential permits peaked in 2004 and have since declined significantly. Furthermore, unlike many other parts of the country, the relatively weak investment trend on the non-residential side is expected to continue and will challenge employment growth providing yet another challenge to Quebec's housing market. Montreal's housing market is experiencing a marked slowdown initiated by a significant decline in housing starts and residential permits. Nevertheless, housing affordability in Montreal deteriorated despite the deflation in prices across almost all housing types compared to the prior quarter, with the exception of condos. House prices are growing modestly in the five per cent range compared to year ago.


Post a Comment

<< Home