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Toronto Star
April 17, 2009
Thanks largely to record low interest rates, Canadian housing has become more affordable, although slowing income growth and a weak jobs market will act as a restraint for buyers, says a report by the Royal Bank.
"With the recession pounding many communities, housing market conditions have deteriorated rapidly across Ontario since mid- year last year," said RBC senior economist Robert Hogue in a report. "The recession will continue to be the dominant factor weighing on the province's housing markets in the coming months."
But a drop in prices and low interest rates have meant that houses have become increasingly affordable over the last year, reversing a four year trend from 2004 to late 2007 that saw houses priced out of the reach of many first time buyers, says RBC.
In Toronto, where a standard bungalow costs $428,100, affordability is still an issue. But lower mortgage rates means that the RBC index fell to 51.3 in the fourth quarter of 2008 from 53.1 in the third quarter of last year.
(RBC's index shows the proportion of median pre-tax household income required to service the cost of mortgage payments, taxes and utilities on a standard home. The higher the measure, the more difficult it is to afford a house. A rating of 51.3 means it takes 51.3 per cent of pre-tax income to afford a home.)
"Poor affordability remains an issue, but some improvement has taken place in the past year," said Hogue. "As Toronto's economy continues to struggle with the recession in the coming months, housing market conditions will likely deteriorate further extending the downward drift in prices."
Affordability will likely have improved in the first quarter of 2009, since interest rates and prices have dropped even further. But a tough jobs market and slowing income growth are strong mitigating factors.
There were more than 60,000 jobs lost in March, bumping the unemployment rate to 8 per cent from 7.7 per cent the month before.
A report by HIS Global Insight forecasts that the unemployment rate will hit 9.8 per cent by next year.
Still, it is unlikely the market will return to the depths of the last housing bubble in 1989 where the index was at an all time high at 67.12, requiring two thirds of income to support a bungalow, says RBC.
The difference is that some lenders today are offering one-year rates at 3 per cent, compared to the double digit mortgage rates of 14 per cent and more that buyers had to pay in the 80s.
The affordability issue is even more dramatic for two-storey detached homes which cost an average of $512,500 in Toronto.
The index fell to 61.4 in the fourth quarter of last year from 63.6 in the third quarter.
Condos remain the most affordable in the Toronto market at an average price of $287,300, taking 34.8 per cent of pre-tax income, compared to 36.5 in the earlier quarter.
Affordability has been a big plus for the spring resale market. The Canadian Real Estate Board reported yesterday that existing home sales in March were down by 13.7 per cent compared to a year earlier, the degree of the decline has slowed significantly.
Average home prices fell by 7.7 per cent to $288,641, the smallest year over year decline in six months.Source: RBC
Home ownership more affordable: RBC
My mission to Maximise my client's profits in Real Estate. www.sukhpal.ca SUKHPAL SINGH,Realtor. Homelife Superstars Real Estate Ltd
Toronto Star
April 17, 2009
Thanks largely to record low interest rates, Canadian housing has become more affordable, although slowing income growth and a weak jobs market will act as a restraint for buyers, says a report by the Royal Bank.
"With the recession pounding many communities, housing market conditions have deteriorated rapidly across Ontario since mid- year last year," said RBC senior economist Robert Hogue in a report. "The recession will continue to be the dominant factor weighing on the province's housing markets in the coming months."
But a drop in prices and low interest rates have meant that houses have become increasingly affordable over the last year, reversing a four year trend from 2004 to late 2007 that saw houses priced out of the reach of many first time buyers, says RBC.
In Toronto, where a standard bungalow costs $428,100, affordability is still an issue. But lower mortgage rates means that the RBC index fell to 51.3 in the fourth quarter of 2008 from 53.1 in the third quarter of last year.
(RBC's index shows the proportion of median pre-tax household income required to service the cost of mortgage payments, taxes and utilities on a standard home. The higher the measure, the more difficult it is to afford a house. A rating of 51.3 means it takes 51.3 per cent of pre-tax income to afford a home.)
"Poor affordability remains an issue, but some improvement has taken place in the past year," said Hogue. "As Toronto's economy continues to struggle with the recession in the coming months, housing market conditions will likely deteriorate further extending the downward drift in prices."
Affordability will likely have improved in the first quarter of 2009, since interest rates and prices have dropped even further. But a tough jobs market and slowing income growth are strong mitigating factors.
There were more than 60,000 jobs lost in March, bumping the unemployment rate to 8 per cent from 7.7 per cent the month before.
A report by HIS Global Insight forecasts that the unemployment rate will hit 9.8 per cent by next year.
Still, it is unlikely the market will return to the depths of the last housing bubble in 1989 where the index was at an all time high at 67.12, requiring two thirds of income to support a bungalow, says RBC.
The difference is that some lenders today are offering one-year rates at 3 per cent, compared to the double digit mortgage rates of 14 per cent and more that buyers had to pay in the 80s.
The affordability issue is even more dramatic for two-storey detached homes which cost an average of $512,500 in Toronto.
The index fell to 61.4 in the fourth quarter of last year from 63.6 in the third quarter.
Condos remain the most affordable in the Toronto market at an average price of $287,300, taking 34.8 per cent of pre-tax income, compared to 36.5 in the earlier quarter.
Affordability has been a big plus for the spring resale market. The Canadian Real Estate Board reported yesterday that existing home sales in March were down by 13.7 per cent compared to a year earlier, the degree of the decline has slowed significantly.
Average home prices fell by 7.7 per cent to $288,641, the smallest year over year decline in six months.Source: RBC
About Me
SUKHPAL SINGH, Sales Person( Realtor)
HomeLife Superstars Real estate Ltd, Brokerage
Direct: 416-878-3212
Office: 905-792-7800
http://www.sukhpal.ca/
HomeLife Superstars Real estate Ltd, Brokerage
Direct: 416-878-3212
Office: 905-792-7800
http://www.sukhpal.ca/