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Manitoba housing affordability deteriorates

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HOME ownership is becoming less affordable in Manitoba and rising house prices are to blame, according to a new report from the Royal Bank.

In its latest quarterly housing affordability index report, which was released on Thursday, RBC Economics said the percentage of household income needed to own a standard bungalow in Manitoba climbed to 38.9 per cent in the first quarter of this year from 38.1 per cent in the final three months of 2012.

The 0.8 per cent gain was the highest among the three types of housing examined in the report. Condos saw the second-biggest gain -- up 0.4 per cent to 24.4 per cent, followed by two-storey homes -- up 0.2 per cent to 38.7 per cent.

The RBC housing affordability index measures the proportion of pre-tax household income needed to service the costs of owning a home, based on market value. That includes the cost of mortgage payments (principal and interest), property taxes and utilities. An increase in the index represents deterioration in affordability.

The bank said Q1 was the second consecutive quarter housing affordability deteriorated due to price gains across most housing categories.

The good news is while affordability is deteriorating, "levels are still not in dangerous territory," the bank added.

RBC's senior economist, Robert Hogue, said the definition of "dangerous territory" can vary between provinces. But nationally, it begins at around 44.5 per cent of household income.

Hogue noted affordability levels here are still below where they were in the late 1980s and early 1990s, when the index for a bungalow climbed well above 40 per cent.

"So we're not quite at that level yet."

The RBC report said that from the final quarter of last year to the first quarter of this year, the average selling price for a standard bungalow in Manitoba rose by 2.1 per cent to $309,000. The average price for a condo climbed by 1.1 per cent to $195,800. The average price of a two-storey home, on the other hand, fell by 3.3 per cent to $302,000.

Hogue noted sales of existing homes have softened in Manitoba in recent months. If that trend continues, it could put downward pressure on selling prices, "which could lead to better affordability."

Nationally, RBC said home ownership in Canada remains largely affordable, even if there are signs of mild financial stress among indebted families.

It said its affordability levels were relatively unchanged in the first quarter of 2013. In the case of standard two-storey homes and condos, the overall index readings were largely unchanged at 48 and 28.1 per cent, respectively. For detached bungalows, the index deteriorated by 0.3 points to 42.5 per cent.

The bank says low mortgage interest rates are the main reason affordability remains stable.

With home prices still near or at record levels and household debt per annual income also at an all-time high, the Bank of Canada has been warning Canadians need to prepare their finances for when mortgage costs begin to rise.

 

-- with files from The Canadian Press

murray.mcneill@freepress.mb.ca

Republished from the Winnipeg Free Press print edition May 24, 2013 0

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