RBC Affordability November 2011
| 25 November 2011
RBC released its affordability report today and I wanted to share two sections. As I mentioned in the Calgary Economic Drivers video, I expect affordability to erode over the next while. Strong GDP growth in Alberta and Calgary will be the main fundamental reason. Investors want to be in the market before this happens.
Alberta — Still the most affordable market in Canada
The Alberta housing market is showing signs that it is finally on a strengthening path, benefiting from the provincial economy shifting to a higher gear this year (in particular, the impressive employment gains that have been recorded so far this year). In the third quarter, home resales and, especially, housing starts picked up steam and reached their highest levels in more than a year. Renewed demand for housing also likely benefitted from attractive
affordability levels in the province. The RBC affordability measures for Alberta remained the lowest among the provinces, mostly unchanged in the third quarter (the measure for two-storey homes, the only housing type that
changed, in fact, improved by -0.4 percentage points). We expect positive underlying fundamentals to keep resale activity on a strengthening path in the period ahead.
Calgary — Regaining momentum
The good news is that the Calgary market regained some momentum in the
third quarter after somewhat of a lull in the second quarter. Both home resales and prices picked up again for most housing categories in the area. The Calgary market has been invigorated by strengthening local employment
where more than 25,000 net new jobs (a 3.7% increase) have been created so far this year. The flipside of renewed momentum, however, has been an erosion of affordability. The RBC affordability measures deteriorated for most housing types in the third quarter, rising between 0.2 and 0.5 percentage points. Two-storey homes were an exception, as the measure edged lower by 0.3 percentage points. Despite the modest deterioration that took place in the latest period, affordability remains quite attractive in Calgary, ranking at some of the better levels among Canada’s largest cities.
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