The RBC Housing Affordability Measures
show the proportion of median pre-tax
household income that would be
required to service all the ownership costs.
According to RBC’s latest report, Housing Trends and Affordability, Alberta is the most affordable province in Canada when it comes to real estate. Although Alberta’s average house prices are the third highest in the country (following British Columbia and Quebec), the income of average Albertans is high enough to pay for all the ownership costs smoothly. National affordability measures are much higher for all the measured categories (from 12.9 to 8.3 percentage points).
Canada: Eroding Affordability
Rising prices and a slight increase in mortgage rates affected housing affordability in Canada in the second quarter. The affordability of all housing categories — for a detached bungalow, a two-storey house, and a condominium — rose at the national level by 1.7, 1.1, and 0.8 per cent, respectively, from the previous quarter, resulting in the second consecutive deterioration. “However, extremely poor and rapidly eroding affordability in the Vancouver-area market is somewhat skewing the national picture,” said Craig Wright, RBC’s senior vice-president and chief economist. The affordability index shows that owning a home in Vancouver is a "dream that only the area’s highest-earning households can contemplate.“ The extreme lack of affordability in the Vancouver area is a driver of national measures and raises concerns about the area‘s downturn. RBC found that most local markets continue to be affordable, or only slightly unaffordable, despite the increasing costs and economic turmoil in the world.
Alberta: The Best With Great Prospects
Alberta’s affordability for two-storey
house is still higher than affordability for
a condominium in British Columbia.
While Canada faces a drop in housing affordability, Alberta’s housing remains attractive. The RBC measures show that Alberta is the most affordable province in the country despite having risen between 0.5 to 1.3 percentage points. The average Alberta family spent 32.8 per cent of their pre-tax income to pay the cost of mortgage payments, property taxes, and utilities on a detached bungalow, 36.4 per cent if they decide to buy a standard two-storey house, and only 21.3 per cent to afford a standard condominium. To compare, in Vancouver, a family needs to allocate 92.5 per cent of their income to service the payments. “We expect that robust economic growth and rising employment will shore up confidence in Alberta’s housing market, thereby leading to stronger resale activity in the period ahead,” said Wright in the report. The forecast by Canadian Real Estate Association (CREA) also predicts high resale activity in Alberta. Sales are expected to grow by 7.3 per cent to 53,350 units this year and in 2012 to 57,000 units (6.8 per cent).
Calgary: About to Improve?
The RBC figures for Calgary grew between 0.4 and 1.1 percentage points, although earlier this year, Calgary’s statistics were more optimistic, indicating a slow rebound. In the second quarter, home resales decreased and provided only a little price pressure that reflected in deteriorated measures. However, owning a home in the Calgary area continues to be close to the most affordable that it has been in almost six years. Wright believes that the strong economic fundamentals of Alberta and Calgary will find their way into the housing market and will support housing demand. Sano Stante, president of the Calgary Real Estate Board (CREB), predicts in CREB’s latest report: “With Calgary’s energy sector slated to grow, it is expected to lift the city’s employment, income and in-migration, and in turn help contribute to growth in the resale market.”
If you want to calculate your own housing affordability, use the Housing Affordability Calculator