> Canada
Consider Affordability When Changing Provinces
by PJ Wade
Although real estate and construction can drive the Canadian economy, a good real estate market and vibrant home building climate do not automatically ensure the strong provincial economy necessary to support individual job, career and business activity. When considering a move to another province, prudent real estate buyers should evaluate economic patterns for the region rather than merely considering the current real estate snapshot of the selected community. Affordability of housing may be an excellent reason to select an area, but long-term affordability is vital to successful real estate ownership. Provincial economies rise and fall along with changing patterns of affordablity so selecting an ideal relocation site for improving employment, starting a business venture or embarking on retirement can be a challenge. This year offers different challenges across Canada as economic patterns continue to change. British Columbia remains the least affordable region to own a home with an affordability index of 41.9 per cent while Alberta is currently considered the most affordable province in which to live. According to RBC Economics' latest Housing Affordability Index, which measures the proportion of pre-tax household income needed to service the costs of owning a benchmark detached bungalow, affordability has improved in Alberta this year, moving to 25.8 per cent from 27.2 in the previous quarter. This translates into an estimated monthly payment of C$1,174 for principal, interest, tax and utilities, compared to a national average of 31.4 per cent or C$1,254 per month for the first quarter of 2004. According to a recent provincial economic forecast, Alberta's economy remains healthy despite downward pressures on the agriculture and cattle industries. Real GDP is expected to grow by 3.3 per cent this year and 3.2 per cent in 2005. Soaring oil and gas prices combined with a depreciating Canadian dollar are giving the economy a boost. "Alberta's economy remains strong with solid employment gains, strong consumer and retail sectors, healthy income growth, the lowest unemployment rate and the highest saving rate of all provinces," said Derek Holt, assistant chief economist, RBC Financial Group. "However, the lack of rain in some of Alberta's crop growing regions and uncertainty surrounding mad cow disease and the related export restrictions to the U.S. present significant challenges." While Alberta combines affordability with a strong economy, there are significant regional variations across Canada. Last year's growth leaders -- Saskatchewan and Newfoundland and Labrador -- will likely experience the greatest economic slowdown of all provinces this year. Saskatchewan faces the biggest economic slowdown of all provinces due to a renewed threat of drought-like conditions, fiscal restraints and ongoing net outward migration, cancelling out gains from potash production and the energy sector. Manitoba is expected to experience the largest increase at 4.1 per cent, up substantially from 1.4 per cent last year, due to crop conditions, net migration, and fewer constraints on demand for hydroelectricity. Although limited inventory caused sharp increases in 2003 home prices, housing affordability has improved to 29.8 percent this year due to lower borrowing rates and improving income growth. As the year progresses, an increased supply of new and resale homes is expected to ease market conditions and help moderate price growth. British Columbia, where ownership affordability is the lowest, has previously been at the back of the pack, but forecasts project it will be third only to Manitoba and Alberta as a growth leader this year. BC's economy is improving due to fiscal prudence over the past three years that has given BC the second lowest provincial debt-to-GDP ratio after Alberta. In addition, net migration inflows are on the rise and the province's energy sector is a significant source of growth. When evaluating a new province and its real estate market, explore employment growth, unemployment rates, retail sales, housing starts, international exports, manufacturing output and the consumer price index. A lot for you to take on but government agencies like Statistics Canada and Canada Mortgage and Housing Corporation and private companies like RBC Financial Group and real estate brokerages regularly provide ongoing financial forecasts for provinces, regions and cities across Canada. The more you know about the economic environment you are buying into, the more able you'll be to improve your economic future in the process. | 
