Michael Kane
Sun
Strong income growth means more people can afford to buy a home in British Columbia despite soaring prices, according to a report released Thursday.
But it is still as tough to put your own roof over your head as it has been in about a decade, said Derek Holt, assistant chief economist at RBC Economics.
The RBC findings support the view that the B.C. real estate market will remain robust for the next couple of years, said Cameron Muir, senior market analyst with Canada Mortgage and Housing Corp. in Vancouver.
“We have been saying for a while that an improving economy in B.C. and Greater Vancouver has led to some rising wages, and that is helping to offset some affordability concerns around rising prices.”
However, Muir expects the pace of growth in prices to slow down. “Rather than double-digit increases, we expect increases in the single digits.”
Holt said Vancouver and Victoria are holding the number one and number three spots, respectively, on housing price gains. Both cities have seen lower year-to-date construction numbers during the past year, but growth in re-sales remains among the strongest in the country.
The RBC Housing Affordability Index, which measures the proportion of pre-tax household income needed to service the costs of owning a home, improved to 51.4 per cent for a detached bungalow in B.C. That means that home ownership costs, including mortgage payments, utilities and property taxes, take up 51.4 per cent of a typical household’s monthly pre-tax income.
By contrast, a standard two-storey home still requires more than 60 per cent of pre-tax income to carry the costs of ownership. A standard townhouse went up the most, to 41.5 per cent, while a standard condo declined one-tenth of a percentage point to 28.8 per cent.
Across the country, affordability improved for B.C., Saskatchewan, Ontario and Quebec in the third quarter of 2005, and worsened modestly in Alberta, Manitoba and the Atlantic provinces.
Housing affordability across the country is threatened by rising interest rates, but a survey from the Organization for Economic Cooperation and Development notes that three-quarters of all residential mortgages in Canada are locked in at fixed rates. Only about one quarter are at variable rates and exposed to rising short-term rate pressures, a much lower proportion than in most other OECD countries.
“Furthermore, Canadian households have a healthy debts-to-assets ratio, and enjoy strong labour markets and strong wealth gains,” Holt said in a release. “These factors are driving improvements in household net worth and provide support for housing markets going forward.”
© The Vancouver Sun 2005