Housing affordability improves in Winnipeg, but poll notes regional divisions within Canada
Housing affordability in Canada is sharply divided regionally, with developments in the sizzling Vancouver and Toronto markets moving the needle on national figures, according to the latest Housing Trends and Affordability Report released by RBC Economics Research.
Other than in parts of British Columbia and Southern Ontario, housing affordability is not a major obstacle to homeownership in Canada.
According to the RBC report, Winnipeg, Regina, and Saskatoon bucked the trend and saw improvement in affordability for some or all housing categories in the first quarter.
Home resales in the Winnipeg area recently moved into record territory: almost 13,100 homes changed hands in the first quarter (on a seasonally adjusted and annualized basis), surpassing the previous high of 12,800 set in the second quarter of 2008.
“One of the factors driving demand higher in the Winnipeg area is affordability, which has been improving since 2012,” said Craig Wright, RBC’s chief economist.
“RBC’s aggregate measure fell by 0.4 percentage points to 29.7 per cent, which is the lowest level in more than six years.
“Demand-supply conditions have tightened since the first quarter, which suggests prices may firm in the period ahead,” he added.
WinnipegREALTORS® president Stewart Elston said local home buyers are taking advantage of “one of the most affordable housing markets in the country. They also have the adventage of choosing from a wide array and abundance of good listings.”
In the first quarter, RBC’s aggregate measure for housing affordability in Canada rose 0.8 percentage points to 47.1 per cent, the highest level since the second quarter of 2010.
Deterioration in the Canada-wide condo apartment affordability measure was more modest, as it rose 0.4 percentage points to 35.4 per cent.
Housing affordability is the cost of owning a home at market price as a share of household income, so a higher number means housing is less affordable.
Developments in Vancouver and Toronto continue to influence national readings, particularly in the single-detached category, because of the size of these two markets and magnitude of the increase in ownership costs that they experienced.
“There is no imminent end to this divided picture (in Canada) because home resale activity is very strong in Vancouver and Toronto and demand in both markets exceeds supply by a wide margin,” said Wright.
“First-quarter prices for single-detached homes in Vancouver surged nearly 25 per cent year-over-year, and such a parabolic rise in prices signals the presence of over-exuberance in this segment of Vancouver’s market that is not fully justified by the robust local fundamentals.
“In sharp contrast, we see balanced conditions in most other markets in Canada,” he added, “which is likely to keep affordability within reasonable levels.”
Vancouver is no longer the only housing hot spot on the West Coast. Home resales are booming in Victoria as well, and prices are rising rapidly, which has taken a toll on housing affordability in this area.
RBC’s aggregate affordability measure for the Victoria area market climbed by 1.0 percentage point to 47.4 per cent in the first quarter of 2016. This represented the third largest increase (after Vancouver and Toronto) among the Canadian markets that RBC tracks.
Buyers in Eastern Canada are benefiting from more affordable options. RBC’s affordability measures for the Saint John, New Brunswick area are the lowest among all cities that it tracks in Canada.
“It is more affordable for a Saint John buyer to own a single-detached home than it is for buyers in many large cities to own a condo apartment,” said Wright.
There was broad-based deterioration across the country in the first quarter of 2016, however, the extent of it was minimal for the most part, and the generally constructive picture remained little changed, according to the report.
In short, Canada’s housing market affordability remains a regional phenomena.
Because of their magnitude and size of the markets involved, developments in Vancouver will Toronto continue to dominate at the national level.