New report ranks Calgary high in affordability

Posted by Justin Havre. on Friday, May 20th, 2016 at 11:55am.

Layoffs and oil prices aside, our city still has a high level of household income.   When you compare that with house prices and what’s happening in other cities across Canada, Calgary is still shining with an affordability index that remains better than many other urban centres across our nation.

The report

Every three months, RBC Economics conducts a survey to see just how affordable cities are by measuring household income as it relates to the cost of housing in any given city.  Robert Hogue, a senior economist,  said in a recent media release that Calgary remains a city with high incomes and stacks up very well compared to Canada’s other major cities such as Montreal, Toronto and Vancouver.  Hogue emphasizes that this affordability index has nothing to do with the actual cost of housing in Calgary and whether or not house prices are low.  It’s strictly the relationship between incomes and prices, using a formula to determine the percentages.

RBC Economics looks at what percentage of household income is spent on servicing mortgages, including principal, interest, property taxes and even utilities.   This recent announcement offered survey results from the last quarter of 2015 where Calgary was given a 35.3% rating.  The average percentage of household income allocated across Canada is 46.7%.  The least affordable urban centre in the country was Vancouver at 81.1%.  Next was Toronto at 60.6%, Victoria at 46.4% and Montreal which came in at 43%.

Not the MOST affordable

While Calgary fares very well in comparison, there are other places in Canada that are much more affordable.  Take Saint John, NB for example.  The RBC survey says that the average household spends only 27.1% of their annual income to keep up with the mortgage and utilities.  Next in line is Regina with 28.3%, Halifax at 29.7 percent.   Stacking up in order after Halifax is Winnipeg, Ottawa, Edmonton, Saskatoon and Quebec City – all more affordable than Calgary in regards to mortgage expenses.

Historical data

The RBC Economics affordability index for Calgary has increased slightly over the past year by just 0.2% and nationally, the average is up 1.7%.   In 1985, 31 years ago, this number in Calgary was 40.1% and across Canada it was 42.7 %.  That was also a time of higher interest rates.

Going forward

One of the reasons for the stability in the affordability index for Calgary is the fact that property values have remained resilient up to this point.  However, this year the market is starting to see some downward pressure with every month that goes by and by the end of 2016, experts say we should see Calgary’s affordability numbers get better. 

That is only if incomes remain high in Calgary.  Lower incomes in Alberta could also be on the way according to numbers from Statistics Canada, reporting that average weekly income in our province is on the decline.

The Calgary Real Estate Board reports that the benchmark price in Calgary in the first three months of 2016 is 3.37% lower.  It will be interesting to see what the RBC Economics report for the first quarter of this year turns up.

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