Affordability improves substantially in Saskatchewan for Q4/09: RBC
The final quarter of 2009 saw softer sales and growing inventory “put a damper” on rising house prices in Saskatchewan, according to RBC’s March 2010 Housing Trends and Affordability Study. While housing affordability “eroded mildly” on a national level, Saskatchewan showed “substantial improvement.”
The big bounce in resale activity that took place during the spring and summer of 2009 in Saskatchewan showed signs of letting up late in the year, just as more properties were listed for sale. This put a damper on price increases recently, which allowed affordability to improve further in the province. In the fourth quarter of 2009, RBC measures fell between 0.1 and 1.1 percentage points (for condominiums and townhouses, respectively), in most cases extending the sharp declining trends since about the middle of 2008. Nonetheless, the cost of home-ownership remains historically high in Saskatchewan, with the unprecedented surge from late-2006 to early-2008 only partly reversed. This might not be cause for concern, however, considering that housing prices that prevailed prior to the boom were likely depressed by unfavourable migration flows, which have since turned around.
Housing affordability in Saskatoon also improved, though far more modestly when compared to the whole province.
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2 comments so far. We'd love to hear your thoughts.
March 25th, 2010 at 2:11 PM
The percentage of house income used for owning houses isn’t a good measure of affordability, as people will choose to extend their mortgage such that they only pay a certain percentage of their income on houses that they can afford. This is why these curves are almost the same for all cities. Most people are rational. Another simpler measrure is just looking at the ratio of the average house price per square feet to the average per capital annual income. Are there such curves available online?
March 25th, 2010 at 2:27 PM
lhli,
Thanks for comment. If that information is available online, I’m unaware of it, but I would think that cost per square foot is also subject to some swings depending on what type of home might be most popular at any given time. For instance, bungalows sell at a substantially higher ppsf compared to a 2-storey.
Interestingly, RBC’s affordability measure is based on parameters that remain constant from one survey to the next. I believe that it’s always based on a 25-year amortization regardless of the options that are available. The only variables are interest rates, incomes and house prices.