House prices could slide further: Report
February 19, 2009
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tony wong
BUSINESS REPORTER
A drop in housing prices meant affordability improved markedly in Canada in the fourth quarter of 2008. But with values still above historic averages, prices have more room to fall, says a study released yesterday.
From the peak reached in 2007, home prices have declined by an average of 15 per cent across Canada, with Ontario showing the biggest decline in the fourth quarter. That's according to the Desjardins Affordability Index, which is calculated by determining the ratio between the average household disposable income and the income needed to obtain a mortgage on an average-priced home.
"Although the housing market has been more affordable for a few quarters now, this will not be enough to turn things around," says Desjardins senior economist Hélène Bégin. "The deterioration in the economic situation, among other things resulting in substantial job losses and low consumer confidence, will put additional weight on housing activity in Canada."
The index reached 121.9 for Canada at the end of 2008, from 115.4 in the earlier quarter, suggesting disposable income is about 21.9 per cent higher than income lenders require to finance a house purchase.
The index stands at 116 for the Toronto area, up from 110 in the third quarter. Toronto's long-term average affordability is 118.
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