Lower mortgage rates made houses slightly more affordable in B.C. in the first quarter despite rising prices, says a report by RBC Economics.

Prices in urban centres in British Columbia are still significantly higher than in the rest of the nation.

“Because of its comparatively higher home prices, B.C. is one of the most sensitive regions in Canada to movements in mortgage rates,” said Carl Gomez, an RBC economist. “The province’s current frenetic housing market is largely attributed to this one factor, as record low mortgage rates have unleashed a considerable pool of pent-up housing demand in this expensive market.”

The RBC Housing Affordability Index for B.C. improved to 41.9 per cent in the first quarter of 2004 from 42.9 per cent during the previous quarter. The index measures the proportion of pre-tax household income needed to service the costs of owning a house.

This works out to monthly payments for principal, interest, taxes and utilities of $1,610 for an average detached bungalow and compares to a national average of 31.4 per cent or $1,254 per month for the first quarter of 2004.

The Housing Affordability Index, which RBC has compiled since 1985, is based on the costs of owning a detached bungalow, a typical target home for first-time buyers. The higher the index, the more difficult it is to afford a house.

For example, an affordability index of 50 per cent means that home ownership costs, including mortgage payments, utilities and property taxes, take up 50 per cent of a typical household’s monthly pre-tax income.

Affordability in Vancouver improved to 45 per cent for the first quarter of 2004 from 46.2 per cent in the previous quarter largely due to lower borrowing costs. This translates into an average monthly payment of $1,922, 2.4 per cent lower than the last quarter of 2003.

With limited new listings of homes, the resale market remained firmly entrenched in a seller’s zone with the benchmark price of a detached bungalow up 8.6 per cent from a year ago in the first quarter to $334,974.

RBC affordability indices for other large Canadian cities in the first quarter of 2004 are: Toronto 36.8 per cent, Montreal 30.6 per cent, Calgary 27.1 per cent and Ottawa 31.3 per cent.

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