Saskatchewan was the only province in Canada to show across-the-board improvement in housing affordability in the first quarter of 2012, according to the latest Housing Trends and Affordability Report, issued today by RBC Economics Research. Minimal home price increases and a decline in the case of two-storey homes in the first few months of this year helped to lower the costs of owning a home for all categories in the province.
“Particularly strong housing market activity in Saskatchewan since the fall of 2011 seems to corroborate the improvements in affordability we are seeing across the province, with affordability levels inching ever closer to their long-term averages,” said Robert Hogue, senior economist, RBC. “In the first quarter of 2012, home resales surged to record high levels and we expect that rapid economic growth will continue to support the provincial housing market for the balance of this year.”
RBC’s housing affordability measures for Saskatchewan, which capture the province’s proportion of pre-tax household income needed to service the costs of owning a home at going market value, fell between 0.2 and 2.0 percentage points (a decline in the measure represents increased affordability).
The measure for benchmark detached bungalows fell to 37.5 per cent (a decrease of 0.4 percentage points from the previous quarter) and standard condominiums dropped to 25.4 per cent (down 0.2 percentage points). Standard two-storey homes fell to 39.8 per cent (a decrease of 2.0 percentage points).
The latest easing in RBC’s measures brought affordability levels even closer to long-term averages in Saskatchewan, implying that any undue stress on provincial homebuyers is dissipating.
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.
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.