A surge in newly-listed homes ultimately helped improve Manitoba's housing affordability in the fourth quarter of 2013, according to the latest Housing Trends and Affordability Report issued by RBC Economics Research.
While home resales rose in the province in the fourth quarter, a surge in listings provided more choice for Manitoba home buyers which helped drive prices lower for single-detached homes, improving affordability in the process in these housing categories. Condo affordability, on the other hand, bucked the trend.
“Owning a home in Manitoba remained relatively affordable in the final months of 2013, especially when comparing against conditions in other markets across Canada,” said Craig Wright, senior vice-president and chief economist for RBC. “Our measures for all housing types in the province stayed reasonably on par with historical norms in the province, suggesting that little affordability pressure is being exerted on Manitoba’s home buyers at the present time.”
“There’s a good inventory of homes available to buyers,” added David Powell, the president of WinnipegREALTORS®.
According to statistics released by WinnipegREALTORS®, listings entered on the MLS® system by the end of the year were 18 per cent above the 10-year average.
The RBC housing affordability measures, which capture the proportion of pre-tax household income needed to service the costs of owning a home at market values, predominantly eased in Manitoba in the fourth quarter (a decrease in the measure represents improvement in affordability).
RBC’s affordability measures fell by 1.1 percentage points to 38.6 per cent for two-storey homes and by 0.6 percentage points to 38.0 per cent for bungalows. However, the measure for condos rose by 0.8 percentage points to 24.9 per cent.
WinnipegREALTORS® reported that condo sales grew by 13 per cent in 2013 when compared to 2012.
RBC’s housing affordability measure for the benchmark detached bungalow in Canada’s largest cities in the fourth quarter of 2013 is as follows: Vancouver 81.6 (down 2.3 percentage points from the previous quarter); Toronto 55.6 (up 0.1 percentage points); Montreal 38.8 (unchanged); Ottawa 36.7 (down 0.4 percentage points); Calgary 33.8 (down 0.2 percentage points); Edmonton 33.3 (up 0.1 percentage points).
The higher the reading, the more difficult it is to afford a home. 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.
Following two consecutive quarters of deterioration, housing affordability across Canada slightly improved in the fourth quarter of 2013, according to the affordability report.
The RBC report noted that Canadian household incomes outpaced a modest rise in mortgage carrying costs associated with buying a home at market value in the fourth quarter, which contributed to the improvement in affordability.
Easing price gains in most markets across the country and marginal increases in mortgage rates kept the rise in mortgage carrying costs subdued. While the Bank of Canada rate is expected to be unchanged in 2014, Wright forecasts a rise in the bond market, which is the main driver of fixed mortgage rates.
“The relative strength in income gains in Canada offset the minor increase in homeownership costs in the final months of 2013, meaning that homes were more affordable for those looking to buy,” said Wright. “When you look at Canada’s year-on-year affordability trend, 2013 was little changed from 2012, and even from 2011 or 2010, for that matter.
“That being said, this stationary trend also means that a divergence still exists — owning a detached home at market value is more of a stretch for home buyers than owning a condo.”
“Condominiums are an affordable option for first-time buyers,” said Powell. “Condos are a great starting point to build an equity position, which is a lot easier as the market continues to appreciate in value.”
“Looking ahead in 2014, we expect home resales to rise 0.6 per cent to 461,000 units, keeping Canada's housing market near its recent not-too-hot and not-too-cold levels," added Wright.