CALGARY - Alberta officially became the most affordable province in the country for home ownership in the fourth quarter of 2010 and affordability in Calgary is now the best it's been in almost six years, says a new report released Thursday by RBC.
The Housing Trends and Affordability report said a gradual but steady recovery in housing demand in the past half-year has just begun to bolster market conditions in the Calgary area by drawing the prolonged slump since 2007 closer to an end.
In Calgary on a seasonally-adjusted basis, home resales increased appreciably since the June 2010 lows, and this "helped to reduce the market slack significantly by the end of last year that kept buyers in the driver's seat.
"Nonetheless, the return to more balanced market conditions in Calgary did not succeed in reversing the tide in the fourth quarter of 2010, because home prices continued to weaken for the most part," said the report by senior economist Robert Hogue.
"This, however, contributed to further material improvement in affordability-the RBC Measures for Calgary, again, fell the most among Canada's largest urban markets, by declining by 0.9 to 3.1 percentage points (on a quarterly basis).
"Affordability in the area is now the best in almost six years. We believe that attractive affordability will support further increases in demand as the local economy picks up steam in the year ahead."
The report said the Alberta market is the only provincial market showing year-over-year home price declines, reflecting soft market conditions.
In the fourth quarter of 2010, the RBC measures in Alberta fell once again by 1.0 to 2.4 percentage points in the province, extending their long strings of declines since late 2007, said the report.
"In addition to the lower mortgage rates, the further depreciation of home prices contributed to lowering the cost of home ownership in the fourth quarter. Property values were negatively affected by a substantial downswing in demand in the spring and early summer, which put buyers in the driver's seat," said RBC.
"The significant improvement in affordability is near the end of its line, however. Demand has shown more vigour in recent months-alongside a provincial economy that is gaining more traction-and the Albert market has become better balanced."
The RBC Housing Affordability Measure has been compiled since 1985. The higher the reading, the more costly it is to afford a home. For example, an affordability reading of 50 per cent means that home ownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household's monthly pre-tax income.
In Calgary, the affordability measure for a detached bungalow was 34.9 per cent in the fourth quarter of 2010, down 4.8 per cent from the previous year. For a standard two-storey home, it was 37.0 per cent, down 5.0 per cent from last year and for a standard condominium the measure was 22.4 per cent which represented a 2.7 per cent decline from a year ago.
For Alberta, the affordability measures and their year-over-year declines were: detached bungalow, 30.9 per cent (- 3.3 per cent); standard two-storey, 34.4 per cent (- 4.1 per cent); and standard condominium, 20.3 per cent (- 2.6 per cent).
© Copyright (c) The Calgary Herald
Thursday Feb 24th, 2011