A new Royal Bank of Canada study dispels the popular notion that Manitoba is one of the most affordable places in the country to own a home.
On the contrary, thanks to a combination of escalating house prices and near-stagnant income growth, Manitoba is now one of the least affordable places to own a home, according to the bank’s latest housing affordability index report.
The affordability index measures the proportion of pretax household income needed to finance a home, including, mortgage principal and interest, taxes and utilities.
It found that only British Columbia had a worse affordability index than Manitoba (42.2 per cent compared to 31.0 per cent).
The housing market with the best affordability rating was Atlantic Canada, at 26.8 per cent, followed by Alberta at 28.3 per cent, Saskatchewan at 29.9 per cent, Quebec at 30.5 per cent, and Ontario, which tied Manitoba at 31.0 per cent.
The survey results caught some local real estate and business officials off guard yesterday. “It was a bit of a surprise to me,” Winnipeg Real Estate Board president Tom Fulton admitted in an interview.
“But obviously it has more to do with median incomes that it has to do with house prices,” Fulton added.
“According to statistics we have from the Canadian Real Estate Association, although house prices have increased in Winnipeg, they are still among the lowest of any major city in Canada.”
Loren Remillard, director of public relations for the Winnipeg Chamber of Commerce, agreed.
“What we need to do is take a look at the income side of this,” Remillard said in an interview.
He said what’s alarming about the study’s findings is that income growth in Manitoba clearly hasn’t been keeping pace with income growth in most other parts of the country. He said that’s one of the unfortunate byproducts of having a diversified, steady-as-she-goes economy that doesn’t produce the kinds of dramatic growth spurts seen in provinces like Alberta and Ontario.
“You also don’t see the growth in incomes that you do in some other provinces like Alberta and Ontario,” he added.
Remillard said what Manitoba needs is a long-term economic growth strategy that brings more new-economy-type businesses and industries to the province.
“That’s where the higher paying jobs are.”
Fulton said easing the property tax burden on homeowners also would go a long way to making home ownership more affordable in Manitoba.
The Royal Bank study found that while Manitoba had the third lowest average selling price for a home among the seven markets surveyed — the four western provinces, Ontario, Quebec and Atlantic Canada — at $133,806, it also had the second lowest median household income at $41,120.
The only market where the median household income was lower was Saskatchewan, at $40,083. By comparison, the two markets with the highest median income were Ontario at $53,900 and Alberta at $52,028.
Carl Gomez, an economist with RBC Economics, said it’s important to note that the housing affordability index is based on median household incomes. “The circumstances may be different with each person,” he added, noting that because housing prices are still quite a bit lower in Winnipeg than they are in other major cities like Toronto, Vancouver or Calgary, owning a house in Winnipeg is still going to be more affordable for anyone who is earning the same kind of money as someone in one of those other centres.
“So it really depends on the situation.”
Gomez said it was a combination of excessive demand and a tight supply of resale homes on the market that drove up housing prices in Manitoba by more than 10 per cent in the first quarter of this year and by a similar amount in 2002.
“Manitoba currently has one of the tightest housing markets in the country,” he said, and there are no indications of that changing in the near future.
He said while Manitoba’s housing affordability index could remain fairly stable through the summer, it will likely start climbing again in the last quarter of the year if the supply of homes for sale remains low and mortgage rates begin to creep up again.
And it will likely rise at a faster clip in Manitoba than in most other parts of the country, he added.