The significant deterioration in housing affordability in the second quarter in Saskatchewan was largely reversed in the third quarter, according to the latest Housing Trends and Affordability Report, issued today by RBC Economics Research. The report indicates that a moderation in home price increases and increased household incomes contributed to an improvement in affordability in the province.
"Homeowners' budgets in Saskatchewan were somewhat stretched in the second quarter as home prices spiked, particularly in markets like Saskatoon and Regina," said Craig Wright, senior vice-president and chief economist, RBC. "While property appreciation continued in the third quarter, gains were comparatively modest and any impact on affordability was offset by rising household incomes."
RBC notes that Saskatchewan's housing affordability levels were far from excessive, with measures standing just above their long-term averages for all housing categories, indicating little in the way of undue affordability-induced strain on the market.
RBC's housing affordability measures, which capture the province's proportion of pre-tax household income needed to service the costs of owning a home at market values, declined across all housing types (a decrease in the measure represents an improvement in affordability). The RBC measure for the benchmark detached bungalow fell by 0.9 percentage points to 38.2 per cent, the standard two-storey home eased by 1.3 percentage points to 41.7 percent and the measure for condominium apartments declined by 1.0 percentage points to 26.2 per cent.
"Housing market activity in the province has moderated since the spring, providing some slack to the tighter conditions that Saskatchewan experienced earlier in the year," added Wright. "Nonetheless, given the strong start to the year, home resales remain on pace to set a new record high in the province in 2012."
Where housing affordability stands in Canada
RBC's housing affordability measure for the benchmark detached bungalow in Canada's largest cities is as follows: Vancouver 83.2 per cent (down 5.8 percentage points from the previous quarter); Toronto 52.4 per cent (down 0.7 percentage points); Montreal 40.2 per cent (up 0.1 percentage points); Ottawa 38.7 per cent (down 0.4 percentage points); Calgary 38.3 per cent (down 0.7 percentage points) and Edmonton 31.1 per cent (down 0.6 percentage points).
The RBC Housing Affordability Measure, which has been compiled since 1985, is based on the costs of owning a detached bungalow (a reasonable property benchmark for the housing market in Canada) at market value. Alternative housing types are also presented, including a standard two-storey home and a standard condominium apartment. The higher the reading, the more difficult it is to afford a home at market values. For example, an affordability reading of 50 per cent means that homeownership costs, including mortgage payments, utilities and property taxes, would take up 50 per cent of a typical household's monthly pre-tax income.
