* Affordability rises as home prices fall, incomes gain
* Rise in affordability reverses previous drop; trend is
* Vancouver still least affordable city though prices lower
By Andrea Hopkins
TORONTO, Nov 22 Falling home prices and an
uptick in household income made Canadian home ownership slightly
more affordable in the third quarter, but the longer-term trend
is largely unchanged, according to a report by RBC Economics
released on Thursday.
RBC, Canada's largest bank and a huge mortgage lender,
measured affordability as the percentage of monthly pre-tax
income for a household needed to cover the typical costs of
owning a home, including mortgage payments, utilities and
By that measure, the cost of owning a home edged down by 1.0
percentage point to 42.0 percent for a detached bungalow, by 1.2
percentage points to 47.8 percent for a two-story home, and by
0.6 percentage point to 28.0 percent for a condominium, the RBC
Housing Affordability index showed.
"The broad affordability picture has been somewhat
stationary over the last two years, alternating between periods
of improvement and deterioration, resulting in an affordability
trend that is, on net, essentially flat," RBC chief economist
Craig Wright said in a statement.
"We saw this directionless trend in the third quarter as
housing affordability fully reversed the mild erosion witnessed
in the first half of the year."
While a government move to tighten mortgage lending has
helped cool Canada's hot housing market, RBC said it expects the
restrictive effects of rule changes to ease by the end of the
year, with resale activity stabilizing in 2013.
Under changes that took effect in July, the maximum length
of an insured mortgage was shortened to 25 years, and the amount
homeowners could borrow with a home equity loan was capped. The
changes make it more difficult for homeowners to take on too
much debt in Canada's red-hot housing market.
Wright said he expects the Bank of Canada to begin raising
interest rates gradually in the second half of 2013, assuming
problems in Europe and the United States are addressed.
"This, along with the expected continued growth in household
income, will lessen the risk of marked erosion in
affordability," Wright said.
Home ownership remained least affordable in Vancouver, where
the benchmark for detached bungalows fell 5.8 percentage points
from the previous quarter to 83.2 percent.
Affordability also improved in Toronto, with the benchmark
down 0.7 percentage point to 52.4 percent. Ottawa was down 0.4
percentage point to 38.7 percent, Calgary was down 0.7
percentage point to 38.3 percent, and Edmonton was down 0.6
percentage point to 31.1 percent.
Affordability rose in Montreal for a detached bungalow by
0.1 percentage point to 40.2 percent, the report showed.