Hey there, time traveller!
This article was published 27/8/2013 (1425 days ago), so information in it may no longer be current.
HOUSING affordability is under attack in Manitoba as a combination of higher house prices and rising interest rates drive up the cost of owning a home.
A new quarterly housing-affordability report from RBC Economics shows there was a further erosion in housing affordability locally and nationally in the second quarter this year.
"Generally, housing affordability is modestly poorer than it has been, on average, since the mid-1980s in Manitoba and may be exerting some mild stress on homebuyers," the report said.
It said two of the three most popular types of homes -- two-storeys and condominiums -- became costlier to own in Manitoba in the second quarter.
It said the percentage of household income needed to own a two-storey home jumped 1.8 per cent to 39.9 per cent from 38.1 per cent in the first quarter this year. It was up 1.1 per cent from a year earlier.
The quarter-to-quarter increase for condos was a more modest 0.2 per cent -- 24.2 per cent versus 24.0 per cent-- and the year-over-year gain was 0.4 per cent.
Bungalow owners and buyers got a bit of a break, with the affordability index dipping 0.2 per cent to 38.1 per cent from the first to second quarters.
But the Q2 rate was still 0.3 per cent higher than a year earlier.
RBC said escalating house prices were the main reason for the erosion in affordability from quarter to quarter.
It said the average price of a standard two-storey home jumped 7.9 per cent to $325,800, the average price of a standard condo rose 2.1 per cent to $200,000 and the average price of a standard bungalow edged up 0.7 per cent to $311,100.
However, rising interest rates are expected to have the biggest effect on home affordability in the last half of this year.
RBC senior economist Robert Hogue said lenders have been bumping up mortgage rates in recent months because of rising yields in the bond markets, and the trend is likely to continue.
But Hogue said the good news for homeowners and buyers is mortgage rates are expected to climb at a slower pace in the coming months, and that should slow the erosion in affordability.
RBC and most major Canadian banks boosted mortgage rates last week. RBC raised many of its rates by between 0.2 and 20 basis points.
For example, its fixed, five-year closed rate climbed to 5.34 per cent and its five-year special rate rose to 3.89 per cent.
RBC expects Canadian economic growth to accelerate later this year and in 2014 as the long-awaited U.S. economic rebound picks up steam.
Stronger economic growth usually leads to higher household incomes, which will help offset the negative impact of higher mortgage rates.
Nationally, the affordability index rose 0.3 percentage points to 42.7 per cent for a detached bungalow and 0.4 per cent to 48.4 per cent for a standard two-storey home. The index on a condo was unchanged at 27.9 per cent.
Vancouver and Toronto continued as the least affordable cities in Canada in which to own a home.
During the second quarter, Vancouver's affordability reading rose 2.2 percentage points to 82.1 per cent on a detached bungalow, while Toronto's edged up half a percentage point to 54.5 per cent.
-- with files by Ashley Prest