But prices here are still well above the national average, according to a new report
Fiona Anderson
Sun
Diane Wild decided the time is right to buy a unit in this condominium complex in Vancouver because prices have come down from their record-high levels. Photograph by: Steve Bosch, Vancouver Sun
Housing affordability has improved significantly in British Columbia during the first three months of the year but it’s still well above the national average, according to a report released Wednesday by RBC Economics.
Affordability improvements in the province ranged from 7.4 percentage points for a standard two-storey home to 3.5 percentage points for a standard condominium.
So while in the last quarter of 2008 it took 72.7 per cent of pre-tax income to service the purchase of a two-storey home in the province, that number dropped to 65.3 per cent in the first three months of 2008.
Condominiums were still the most affordable option requiring only 32.7 per cent of income at the beginning of the year, compared to 36.2 per cent at the end of last year.
In Vancouver, the decreases were more significant: From 8.6 percentage points for a standard two-storey home — 77.5 to 68.9 — to 3.6 percentage points for a condominium — from 39.7 to 36.1. When coupled with earlier drops, affordability has improved year-over-year by 14.7 percentage points for a two-storey home in the city to 8.9 percentage points for a condominium, one of the steepest drops in Canada, the report said.
“We’re quite encouraged because affordability had deteriorated quite substantially during the boom and it had put tremendous weight on the [housing] market,” RBC senior economist Robert Hogue said in an interview.
The increased affordability has caused resale activity to rebound with June being the second-busiest month on record for the Greater Vancouver area.
Jennifer Smith, 30, decided the time was right for her to get into the market. She bought a three-bedroom townhouse in Pitt Meadows, with 1,300 square feet of space, much bigger than the one-bedroom condo she had been renting. Her new home, which she moved into in June, has two storeys, a garage and a backyard, everything she wanted.
“It was a good time because the housing prices have come down and the interest rates were really great,” Smith said. “And I’m at a point in my life where I’m done with renting.”
Smith had thought about buying a year or two ago but wanted to save more for a down payment.
“And the housing prices even just a year ago were still rather high and I never would have been able to buy what I wanted,” she said.
“So I think I got in at a pretty good time because I got everything I wanted.”
Diane Wild, 38, had been putting off buying a place, but felt the time was finally right. She bought a two-bedroom condo in Vancouver, a step up from the one-bedroom she was renting, and will be moving in at the end of August.
“A couple of years ago I just thought prices in Vancouver were still crazy,” Wild said. “When they went down a bit it seemed like a better decision to buy.”
British Columbia and Vancouver still remain the most expensive places in Canada to buy a home. Canadians, on average, need to pay 39.4 per cent of pre-tax income to service the purchase of a detached bungalow, compared to 59 per cent in B.C. and 62.6 per cent in Vancouver. For a condominium, the average amount needed in Canada is 27.1 per cent of income but in B.C. that number is 32.7 and in Vancouver, 36.1.
“That’s Vancouver, that’s B.C.,” Hogue said. “Vancouver traditionally in terms of the affordability measure and in terms of housing prices has been far above pretty much everyone else except perhaps Toronto. That’s the nature of the beast.”
And further improvements in affordability may not be on the horizon.
“Most of the improvement is likely behind us,” Hogue said. “The drop in mortgage rates is mostly behind us. The drop in prices is probably mostly behind us as well. For further improvement it would have to come from rising family income and there it rests mostly on the economy.”
RBC’s affordability measure uses data from Statistics Canada to determine median income and data from Royal LePage for average house prices. The monthly payments are based on a 25-per-cent down payment, and a 25-year amortization at a five-year fixed mortgage rate.
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