Two reports released today highlight the affordability of housing in Canada.

Lower borrowing rates and slowing price growth improved Canada’s housing affordability in the final quarter of 2004, as the year set a number of housing records, according to the latest Housing Affordability Index by RBC Economics.

The RBC report notes that 2004 set new records in home sales, average prices, new listings and was the best year for housing starts since 1987. In addition, last year marked the sixth consecutive year with growth in home sales volumes and the third consecutive year with double-digit growth in average selling prices in major markets across Canada.

“Canada’s housing market remains healthy despite steadily rising house prices, thanks to good overall housing affordability and lower borrowing rates,” said Allan Seychuk, RBC economist.

The RBC Affordability Index – slightly improved to 33.3% for the fourth quarter of 2004 from 33.6% the previous quarter.

Many regions across Canada saw improvements in affordability from the third to fourth quarter of 2004 mainly due to lower mortgage rates. B.C. remains the least affordable region to own a home in Canada with an affordability index of 43.7% and Alberta remains the most affordable at 25.4% for the fourth quarter of 2004.

Meanwhile, a record number of Canadian households have taken advantage of improved affordability and now own their own homes, according to the latest Real Estate Trends, released by Scotia Economics.

“Given the strength of new and existing home sales over the past three years and the steady rise in the rental vacancy rate, we estimate that Canada’s home ownership rate is now hovering just over 67%, up from 65.8% in 2001,” said Warren Jestin, chief economist, Scotia Economics. “This adds close to half a million more households to those who own their homes and builds upon the almost 750,000 new owner households that emerged over the 1996-2001 period.”

The report notes that part of the rise in home ownership reflects the aging of the population. In fact, homeownership rates have been increasing steadily over the past three decades as Canada’s large “baby boom” generation made the transition from renters to owners. The “boomers”, today in their 40s and 50s, are now in their prime homeowning years.

“However, this is only part of the story, as age-specific ownership rates increased in all major age groups between 1996 and 2001, a trend we expect has continued over the past several years,” saod Jestin. “A number of factors, including rising disposable incomes, strong job growth and low mortgage rates, have allowed many Canadians to make the jump to homeownership. New mortgage products, mortgage insurance that reduced minimum down payments, and tax- deferred RRSP withdrawals for first-time buyers have also supported home purchases.”