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Manitoba homes still affordable

Index changed only slightly: RBC

By: Murray McNeill

Posted: 05/30/2012 1:00 AM | Comments: 0

Two-storey homes were a little more affordable for Manitobans in the first few months of 2012, but bungalows and condominiums became slightly pricier, according to RBC Economics.

In its latest quarterly Housing Trends and Affordability Report, released on Tuesday, the bank said the average percentage of household income needed to own a two-storey home dipped 0.2 of a percentage point to 38.4 per cent in the first quarter of this year.

The cost of owning a standard bungalow edged up 0.1 of a percentage point to 35.9 per cent, and the index for a standard condo rose 0.4 of a percentage point to 22.2 per cent.

RBC's housing-affordability index measures the proportion of pre-tax household income needed to service the costs of owning a home, based on market value. For example, a rate of 38.4 per cent means average homeowner costs, including mortgage payments, utilities and property taxes, take up 38.4 per cent of a typical household's monthly pre-tax income. The higher the rate, the less affordable the home.

RBC senior economist Robert Hogue said Manitoba homeowners are still in pretty good shape.

"The provincial housing market remains one of the more affordable areas in the country," Hogue said. "In fact, Manitoba was one of the few provinces which bucked the broad national trend of deterioration in affordability for two-storey homes, as this market segment became slightly more wallet-friendly for buyers in the last quarter."

The fact homes are more affordable here also means Manitobans should be better positioned to handle an anticipated increase in interest rates later this year, he said.

The RBC report said rising house prices were responsible for a modest deterioration in affordability in most major markets in Canada in the first quarter, after two quarterly improvements.

"Strong buyer demand was a principal driver of the modest rise in home-ownership costs," Craig Wright, RBC's chief economist, said in a statement. "While the deterioration in affordability was felt to varying degrees across the country, it was mild in most cases."

The prospect of higher interest rates is a more pressing concern, he said.

"Exceptionally low interest rates have been the key force in keeping affordability from hitting dangerous levels in Canada in recent years," he said. "Affordability headwinds are likely to increase next year, as interest rates make their way towards more normal levels."

RBC expects Canada's central bank will hike rates gradually, starting in the fourth quarter, he said.

RBC's affordability index for Canada for a detached bungalow stood at 43.1 per cent in the first quarter, up 0.8 of a percentage point from the fourth quarter of 2011 and up 1.5 percentage points from the first quarter of 2011.

The deterioration of affordability was most acute in Vancouver, where the costs associated with owning a detached bungalow rose 3.1 points to 88.9 per cent of annual income.

murray.mcneill@freepress.mb.ca

-- with files by The Canadian Press

Republished from the Winnipeg Free Press print edition May 30, 2012 B5

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