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Winnipeg Free Press - PRINT EDITION

Canadian home costs continue to rise: report

By: Staff Writer

Posted: 08/28/2012 1:00 AM | Comments: 0

MONTREAL -- Housing affordability continued to erode in most markets across Canada in the second quarter as a result of higher home prices and interests rates, but there were a couple of bright spots.

Alberta, in particular, solidified its position as having the most affordable housing market thanks to a significant drop in prices for electricity and natural gas, says a quarterly Royal Bank (TSX:RY) housing report.

In Manitoba there was a notable drop in affordability in the second quarter of 2012, according to the report.

Home-ownership costs rose in Manitoba in the second quarter, as prices were driven up by very strong demand relative to supply of homes for sale but affordability levels were only slightly worse than they have been historically.

Montreal also enjoyed improved affordability, prompting resales to rise 8.6 per cent to reach their third-highest second-quarter total, the report said.

A 17 per cent reduction in Alberta utility costs was the biggest contributor to the improvement in the cost of owning a home as a share of household income.

"Usually changes in utilities don't do much to affordability and, in that particular case, the swing was substantial in the second quarter," senior economist Robert Hogue said in an interview.

Attractive affordability and a vibrant economy are strong incentives for home buying. Alberta resales in the second quarter were the best in five years, rising 18 per cent from a year earlier.

On a national level, however, modest increases in home prices and mortgage rates slightly eroded housing affordability in the quarter.

Hogue said the change wasn't particularly troubling. But with house affordability in most of the country running ahead of the long-term average, possible interest rate increases next year could add to the strain on home ownership and ultimately cool housing markets.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition August 28, 2012 B4

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