Housing gets more affordable

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Housing gets more affordable

By TAVIA GRANT

Thursday, December 22, 2005 Posted at 8:07 AM EST

Globe and Mail Update
 
 Housing became sligGhtly more affordable for most Canadians in the third quarter of the year as incomes grew and the pace of house-price increases slowed, a Royal Bank of Canada report showed Thursday.

The RBC affordability index, which measures the proportion of pre-tax household income needed to service the costs of owning a home, shows a standard condo remains the most affordable type of housing. A standard townhouse is next, followed by a detached bungalow. A standard two-storey home remains the least affordable.

Housing markets, which have been on fire this year, are cooling gradually across most of Canada as the pace of price increases slowed, RBC said. There are exceptions, however, notably in Alberta, Saskatchewan, Manitoba, and parts of Atlantic Canada.

Overall, "as demand softens, there has been a gradual decline in new home construction activity across most markets as well, helping to alleviate any sudden price movements," said Derek Holt, RBC's assistant chief economist, in the report.

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"Even with interest rates going up, housing markets will remain healthy going into 2006," he said.

Condominiums remain "by far" the most affordable housing option across all markets, the report said.

"Rising apartment rental vacancy rates and significant numbers of investor-owned condos will likely serve to keep condo affordability well in line as price pressures ease."

In a comparison of affordability among the largest cities, Vancouver remains the most expensive place to own a detached bungalow, followed by Toronto. Housing is more affordable, however, in Calgary and Ottawa.