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RBC Study: Housing more affordable in BC

VANCOUVER — Housing affordability has improved significantly in British Columbia during the first three months of the year, but it's still well about the national average, according to a report released today by RBC Economics.

Affordability improvements in the province ranged from 7.4 percentage points for a standard two-storey home to 3.5 percentage points for a standard condominium.

So while in the last quarter of 2008 it took 72.7 per cent of pre-tax income to service the purchase of a two-storey home in the province, that number dropped to 65.3 per cent in the first three months of 2008.

Condominiums were still the most affordable, requiring only 32.7 per cent of income at the beginning of the year, compared to 36.2 per cent at the end of last year.

In Vancouver, the decreases were more significant: from 8.6 percentage points for standard two-storey home — from 77.5 to 68.9 — to 3.6 percentage points for a condominium — from 39.7 to 36.1. When coupled with earlier drops, affordability has improved year-over-year by 14.7 percentage points for a two-storey home in the city to 8.9 percentage points for a condominium, one of the steepest drops in Canada, the report said.

"We're quite encouraged because affordability had deteriorated quite substantially during the boom and it had put tremendous weight on the [housing] market," RBC senior economist Robert Hogue said in an interview.

And that increased affordability has led to a rebound in the sale of houses.

But there is still room for improvement, with the province's affordability measure still on the high side compared to the historical average, Hogue said.

Historically, buying a two-storey home in B.C. took about 53.7 per cent of pre-tax income. Now, even after the softening, it takes 65.3 per cent. The long-term average affordability of a bungalow is 48.7, compared to 59 in the first quarter of 2009.

And British Columbia and Vancouver still remain the most expensive places in Canada to buy a home. Canadians, on average, need to pay 39.4 per cent of pre-tax income to service the purchase of a detached bungalow, compared to the 59 per cent in B.C. and 62.6 per cent in Vancouver. For a condominium, the average amount needed in Canada is 27.1 per cent of income but in B.C. that number is 32.7 and in Vancouver 36.1.

"That's Vancouver, that's B.C.," Hogue said. "Vancouver traditionally in terms of the affordability measure and in terms of housing prices has been far above pretty much everyone else except perhaps Toronto. That's the nature of the beast."

And further improvements in affordability may not be on the horizon.

"Most of the improvement is likely behind us," Hogue said. "The drop in mortgage rates is mostly behind us. The drop in prices is probably mostly behind us as well. For further improvement it would have to come from rising family income and there it rests mostly on the economy."

RBC's affordability measure uses data from Statistics Canada to determine median income and data from Royal LePage for average house prices. The monthly payments are based on a 25-per-cent down payment, and a 25-year amortization at a five-year fixed mortgage rate.

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