Apparently, yes, according to Maxim Magazine.
Housing affordability in Canada ended last year at its lowest level since 1990, Royal Bank said Friday.
In its quarterly outlook on the cost of owning a home, the bank said affordability eroded in every quarter of 2007 as house prices rose on the strength of the economy and job growth.
RBC assistant chief economist Derek Holt said the home affordability deterioration back in 1990 was driven by soaring interest rates and a recession.
During the fourth quarter of last year, housing affordability in four classes — condominium, townhomes, detached bungalows and two-storey homes — fell across the country, except in the cooling Alberta market.
In Alberta, average prices in all four classes dropped in the October-December quarter, improving affordability.
RBC’s affordability study measures how much of pre-tax household income is necessary to carry the cost of owning a home.
Condos most affordable
Nationally, the standard condo remained the most affordable housing type, requiring about 30 per cent of pre-tax household income. A standard townhouse was next at 34.5 per cent, followed by a detached bungalow at 42.5 per cent while a standard two-storey home required 48 per cent.
Rising fixed mortgage rates continue to push up home-ownership costs, but RBC said it sees some improvement on the horizon. The bank said it expects the five-year mortgage rate will drop by three-quarters of a percentage point by the end of 2008.
The bank also said that falling mortgage rates, weakening house price gains and decent income growth should all boost home affordability across most markets.
Holt said new homeowners are taking out longer mortgage amortizations to cope with skyrocketing prices, adding that the 40-year mortgage is now dominating the market.
“We’re actually estimating about 60 per cent of mortgage applications in the insured segment are now going for longer amortization products, longer than the traditional cookie-cutter 25-year mortgage,” Holt told CBC News.
“And of that share, about half is going into the 40-year mortgage product, and that’s an industry-wide figure that’s true across most lenders in the marketplace today.”
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| Percentage of household income needed to afford a detached bungalow |
| |
| Vancouver |
74% |
| Toronto |
47% |
| Calgary |
42% |
| Montreal |
37% |
| Ottawa |
32% |
| Source: Royal Bank |
Last week the Gazette wrote about how St Laurent had been killed in one year by the city. They were right. Last year, in January 2006, we moved our office on the Main corner of Prince Arthur, it was vibrant and happening.
Sure, the parking was a disaster and the noise too much, but for a startup in the web video space, it made lots of sense.
Then come summer we got a notice that La Mairie was going to beautify our Main, oh-oh.
We moved out on March 2007 but by then it was kill that the Main had flatlined… the mess is ongoing. This city is incompetent… Big Owe anyone?
Today the Gazette continues to play messenger of Death by looking at Ste Catherine just east of the Old Forum.
In the inaugural edition of Montreal Centre-Ville, there’s an article on the booming real estate market in Montreal, and the impact of the gentrification of many downtown areas.
There’s nothing particularly new if you have kept an eye on the construction going on and the increasing number of for sale/rent signs, but the facts and figures are interesting nonetheless:
Some stats:
- Starting price for a 800 square-foot condo unit is $250,000 to buy, or $1,000/month to rent.
- Montreal remains the best city for real estate in North America, explaining the draw of European, Asian or Arab investors.
- Average annual income on the island of Montreal is $62,000.
- The three groups that are driving demand for new units are:
1. young career couples with no children and high incomes
2. 50-60 year olds whose children have left the house
3. foreign investors.
- Montreal has a target of 30% of new residential construction to be affordable housing for low or modest income households.
- Demographically, people aged 50 and over make up 30% of the population (vs. 25% a decade ago); people under 30 now only make up 38% (vs. 43% a decade ago).
- The city has plenty of undeveloped land (parking lots, etc.) that could represent 15,000 new units.
But don’t expect a rush in building these, because:
- Slightly 1600 new units have not yet found buyers, this represents demand for two years.
All in all, I don’t think real estate in Montreal is going to hit a wall because there’s still much room for growth in an increasingly global market, but clearly, on a micro scale, the real estate market for condos is a buyer’s market.
