Calgary is a star performer on the Canadian housing market scene with pretty much everything going for it at the moment – a strong economy, solid demographic demand and attractive affordability, according to the latest Housing Trends and Affordability Report released Tuesday by RBC Economics Research.
The report said the trend in activity is sloping upward but it shows few signs that the market is getting ahead of itself.
“Home prices are rising at the fastest rate in the country, yet these increases can be absorbed fairly easily given Calgary’s high, and growing, household income levels,” it said. “Housing affordability has eroded slightly in the past year, including in the first quarter, yet it remains at historically favourable levels. All RBC’s measures for the area continue to be well below their long-term averages, which suggest that developments to date in the Calgary-area market have been quite sustainable.”
The RBC Housing Affordability Measures show the proportion of median pre-tax household income that would be required to service the cost of mortgage payments (principal and interest), property taxes and utilities.
In the first quarter, RBC’s measures increased in all three categories from the last quarter: by 0.9 percentage points for bungalows (to 34.5 per cent), one percentage point for two-storey homes (to 35 per cent) and 0.5 percentage points for condo apartments (to 20.4 per cent).
The report painted a similar picture for Alberta’s housing markets on the whole with few signs of overheating.
RBC’s measures in the province rose by 0.1 percentage points to 32.6 per cent for detached bungalows and 0.4 percentage points to 20.2 per cent for condominium apartments, while the measure for two-storey homes was unchanged at 34.4 per cent.
“All RBC’s measures continue to be below their long-term average in the province,” said the report.
Across the country, RBC said home price increases in some of Canada’s largest markets further accelerated in the first quarter of 2014, boosting home ownership costs and triggering some erosion in affordability.
“Prices for single-family homes in Calgary, Toronto and Vancouver had considerable upward momentum during the first quarter, and led to the strongest annual price gains nationally in nearly two years,” said Craig Wright, senior vice-president and chief economist of RBC. “This stood in the way of any widespread improvement in affordability conditions across Canada.”
But RBC said the latest “knock to affordability” was modest and did not pose any immediate threat to the health of Canada’s housing market.
During the first quarter, affordability measures at the national level rose in two of the three categories of homes tracked by RBC. RBC’s measures edged higher by 0.1 percentage points to 43.2 per cent for detached bungalows, and by 0.3 percentage points to 49.0 per cent for two-storey homes. RBC’s measure for condos, however, fell 0.1 percentage points to 27.9 per cent, indicating that affordability slightly improved for this category of home.
“We expect the rest of the spring season to offer a pick-up in housing activity, largely owing to fixed mortgage rates that recently eased to historical lows,” said Wright. “This strength will be short-lived, though, as we believe that there is limited pent-up demand in the first place, and that longer-term interest rates will start to rise by the third quarter of this year.”