Housing affordability slips on rising prices: RBC

* source: http://www.cbc.ca/money/story/2007/06/15/houseafford.html#skip300x250

Rising prices reduced housing affordability in (the) first three months of (the) year, RBC Economics said Friday. In its quarterly review of house affordability, (the) bank said (the) decline came about despite ( the) strongest gain in pre-tax household income in about ( a ) year-and-a-half. In its latest national report, RBC said ( a ) standard condo required 27.5 per cent of pre-tax household income to service ( the) costs of ownership, while ( a ) standard townhouse took 31.5 per cent. A detached bungalow required 39 per cent of pre-tax income, while ( a ) standard two-storey house was (the) least affordable class, consuming 44 per cent of income. Across (the) country, Saskatchewan witnessed (the) biggest drop in affordability — especially in Saskatoon — as demand from (an ) influx of migrants exceeded (the) housing market supply. Home prices in Saskatoon are up more than 40 per cent in (the) past year. RBC said home affordability also declined in Alberta, Manitoba and Quebec. There were some pockets of improvement in affordability across (the) country, namely in two-storey homes in B.C. and Atlantic Canada, and in bungalows in Ontario. But (the) average bungalow in Vancouver would require 68 per cent of pre-tax income to service. In Toronto, it would take 43 per cent, and in Calgary 40 per cent. Mortgage rates were not on (the) rise during (the) first three months of (the) year, so they were not ( a ) factor in making home ownership less affordable. But RBC said affordability across (the) country is likely to slide further later this year as mortgage rates rise. Fixed mortgage rates have climbed four times in (the) last month and variable rates are expected to rise as early as July. "RBC forecasts short-term, prime-linked borrowing products will rise by ( a ) full percentage point by early next year, and with hikes likely starting this summer," (the) report said. "Long-term mortgages are likely to rise by about 75 basis points [three-quarters of ( a ) percentage point] from today's levels next year."