BY BRIAN MORTON, VANCOUVER SUN
It's getting harder to buy a home in B.C. as an increasingly hot real estate market pushes prices higher, according to an RBC report on housing affordability released Wednesday.
"We're talking about a very expensive market in Vancouver," RBC senior economist Robert Hogue said in an interview. "Mortgage payments there take a much bigger chunk [of paycheques]. And it appears the rebound in the market has been stronger there than in other parts of the country. It has been quite an astonishing rebound."
According to the report, B.C. and Vancouver posted the biggest increases by far across Canada in the RBC index measures.
"The cost of home ownership in B.C. increased in the third quarter following five consecutive declines -- cumulatively the steepest drop since the early 1990s," the report by RBC Economics Research concluded. "Notable rises in home prices in the province's large urban centres and the modest pick-up in mortgage rates have boosted typical mortgage payments for the first time since early 2008."
It said the Vancouver market "continues to roar back in a spectacular way and property prices are now heating up closer and closer to a boil."
But that's no surprise to Cameron Muir, chief economist for the B.C. Real Estate Association, who said Vancouver prices might even be rising faster than the RBC report suggests.
"[Prices] are beginning to scratch near record levels," Muir said in an interview. "Affordability in Vancouver has likely eroded a bit more than RBC's third quarter numbers suggest. It's a three-month average [and] we've seen prices climbing since the summer months."
However, Muir also suggested that while home sales will remain relatively strong next year, 2010 prices will moderate as pent-up demand is satisfied and interest rates move up a bit. "Our forecast for 2010 won't be as hot as what what we've seen in the past few months."
Nationally, the RBC report concluded that the cost of home ownership became more expensive for the first time since the spring of 2008 across all housing segments.
Hogue said that home affordability deteriorated in all provinces and major markets in Canada due to a slight rise in key mortgage rates and because of property appreciation. Despite that, he added, "affordability measures have still shown improvement from a year ago."
Hogue, who also said that it seems unlikely that affordability will improve in the near future, added that he doesn't know why the Vancouver and B.C. markets are stronger than the rest of Canada. "It's a phenomenon I find fairly puzzling, given that it's such an expensive market to begin with."
According to the report, the RBC housing affordability measure captures the proportion of pre-tax household income needed to service the costs of owning a home. During the third quarter of 2009, the measure at the national level rose across all housing types. The benchmark detached bungalow moved up by one per cent to 40.2 per cent of pre-tax income needed, the standard townhouse rose by 0.7 per cent to 32.3 per cent, the standard condo climbed by 0.5 per cent up to 27.6 per cent and the standard two-storey home increased by 1.2 per cent to 45.8 per cent.