The Star Phoenix, -
Saskatchewan's housing affordability improved slightly in the first quarter, compared with the same period last year, due to plummeting oil prices and a drop in home sales, according to the latest report by RBC Economics Research.
But a recent rebound in housing demand and lower incomes caused affordability to erode somewhat in the first quarter, compared with the fourth quarter of 2014, RBC stated.
"In the first quarter, Saskatchewan's home resales dropped by more than 16 per cent, contributing to price declines across most housing segments," said Craig Wright, senior vice-president and chief economist for RBC.
"The effect on affordability was partly muted by a moderation in household income - a 0.2 per cent drop in incomes entirely offset the effect of the 0.4 per cent price decline in two-storey homes and mostly offset the 0.9 per cent drop in condo prices."
Compared with the previous quarter, RBC's affordability measure for two-storey homes was unchanged at 37.9 per cent, and the measure for condos inched only 0.1 percentage points lower to 24.7 per cent. The measure for bungalows rose by 0.3 percentage points to 33.9 per cent (bungalow prices rose slightly).
Nationally, housing affordability continued to decline in Toronto and Vancouver, while conditions for homebuyers improved in Alberta during the first quarter of the year as lower oil prices caused the real estate market to soften.
RBC says mortgage rate cuts improved the affordability of homes in many Canadian housing markets where prices didn't accelerate too rapidly.
That offset rapid price growth in Toronto and Vancouver, leaving national affordability levels relatively flat.
RBC says demand in softer markets such as Montreal and Ottawa began to pick up.
On a national level, RBC says affordability edged 0.3 percentage points lower for condos to 27.1 per cent, while for detached homes it declined 0.2 percentage points to 47.9 per cent.
The bank predicts that rate hikes from the central bank, which is expected to raise its trendsetting overnight interest rate next year, are likely to erode affordability.
"Exceptionally low interest rates have been a key factor keeping housing affordability levels in a largely manageable state in recent years," Wright said in a statement.
"The knock-on effect of the anticipated rise in rates would be most visible in high-priced markets."