TORONTO - Royal Bank of Canada says the cost of home ownership was more affordable in the third quarter, thanks to a drop in mortgage rates and softer house prices since earlier in the year.
The bank's affordability measure shows how much pre-tax income is required to service the cost of mortgage payments, property taxes and utilities for the home.
The RBC report says housing affordability improved at the national level by between 1.4 and 2.5 percentage points from the second quarter, depending on the type of property, but remained above the long-term average.
The costs associated with owning a detached bungalow fell by 2.4 percentage points between the second and third quarters, to 40.4 per cent of pretax income.
That's still 0.3 percentage points above the third quarter of 2009, when Canada was just beginning to come out of a major recession, and above the 15-year average of 39 per cent.
The situation was similar with standard two-storey homes, which gobbled up 46.3 per cent of pre-tax income -- 2.5 percentage points less than in the second quarter of 2010 but up 0.3 percentage point from the third quarter of 2009.
The average measure for two-storey homes, since RBC began compiling the numbers in 1985, has been 43.3 per cent.
Condos remained the most affordable type of housing track, requiring 27.8 per cent of pre-tax income to cover mortgages, taxes and utilities and one percentage point above the long-term average of 26.8 per cent.
However, the improvement from the second quarter of 2010 was only 1.4 per cent and remained 0.1 percentage point above the third quarter of 2009.
RBC says all provinces had improvements in housing affordability during the third quarter, especially British Columbia.
However, the cost of home ownership in British Columbia remained high by historical standards -- following increases that began in the first quarter of 2009.
A detached bungalow in British Columbia consumed 59 per cent of pre-tax income, while two-storey homes ate up 67.5 per cent of income and condos required 32.9 per cent of pre-tax income -- all above the national average.
