The StarPhoenix, February 26, 2014 - The affordability of a home for prospective Saskatchewan homebuyers remained stable in the last quarter of 2013, but that could change in the next year, according to the latest Housing Trends and Affordability Report issued by RBC Economics Research.
"Home resales in Saskatchewan stayed at elevated levels for the second consecutive quarter, at just under 13,700 units on a seasonally adjusted and annualized basis, fuelled by a healthy job market - with the jobless rate at a 24-year low in the fourth quarter - and positive demographic trends," said Craig Wright, senior vice-president and chief economist, RBC, in a note. "Affordability in the province continued to trend sideways, as it has done since 2009, and is clearly not putting much undue stress on prospective homebuyers."
The RBC index represents the percentage of pre-tax household income that is needed to service the cost of owning a home at current market prices, including payments for a mortgage, utilities and property taxes. A decline in the measure means housing is more affordable.
In Saskatoon the RBC measures decreased by 1.1 percentage points to 40.1 per cent for two-storey homes and 0.2 percentage points to 37.0 per cent for bungalows.
The measure for condominiums partially reversed the substantial drop registered in early 2013 by gaining 0.4 percentage points to 25.5 per cent.
Across the country the affordability benchmark for a detached bungalow in Canada's largest cities in the fourth quarter of 2013 is as follows: Vancouver 81.6 (down 2.3 percentage points from the previous quarter); Toronto 55.6 (up 0.1 percentage points); Montreal 38.8 (unchanged); Ottawa 36.7 (down 0.4 percentage points); Calgary 33.8 (down 0.2 percentage points); Edmonton 33.3 (up 0.1 percentage points).
But with mortgage rates expected to start rising later this year fewer people will be able to afford a house.
"RBC anticipates that as longer-term interest rates begin to moderately rise, the costs of owning a home at market value will gradually outpace (growth) household incomes by late-2014, leading to strained affordability in several markets across Canada, much like the trend in Toronto," Wright said in the report.
In the fourth quarter, the bank estimates maintaining a detached bungalow at current market prices would have taken up 43.1 per cent of average household income, while the cost of a two-storey home would have taken 48.7 per cent.
Both measures are 0.2 points lower than was the case in the third quarter.
The improvement was mostly attributed to growth in average household incomes outstripping moderately increased home ownership costs in the last three months of the year.
As well, there is a major difference in affordability based on the nature of the home ownership, with owning a detached home at market value "more of a stretch" for homebuyers than owning a condominium, the report states.
With files from The Canadian press