Download 2015 Toronto Housing Market Outlook National

11/18/2014
National Economic and Housing
Market Outlook
CANADA MORTGAGE AND HOUSING CORPORATION
TORONTO HOUSING OUTLOOK CONFERENCE
Bob Dugan
Chief Economist
Housing market intelligence you can count on
Presentation Outline
Housing market intelligence you can count on
House Prices
 Compositional effects
 Supply and demand drivers of prices
Household Debt
Outlook and Risks
 Risks to the forecast
 Economic assumptions
 Potential Housing Demand
 Housing market outlook
CANADA MORTGAGE AND HOUSING CORPORATION
1
11/18/2014
Canada average price is pulled up by Toronto and Vancouver
Seasonally adjusted nominal MLS®
average price
$450,000
Nominal year-to-date
(January to September) price
change 2014 over 2013
Canada
Canada without Toronto and Vancouver
Canada
Vancouver
Calgary
Toronto
Montreal
$400,000
$350,000
$300,000
$250,000
$200,000
6.9%
6.3%
5.5%
8.1%
1.9%
Average share of MLS® Sales
$150,000
7%
6%
$100,000
Vancouver
Calgary
$50,000
19%
$-
Toronto
Montreal
1990Q1
1991Q1
1992Q1
1993Q1
1994Q1
1995Q1
1996Q1
1997Q1
1998Q1
1999Q1
2000Q1
2001Q1
2002Q1
2003Q1
2004Q1
2005Q1
2006Q1
2007Q1
2008Q1
2009Q1
2010Q1
2011Q1
2012Q1
2013Q1
2014Q1
60%
Other
9%
Last data point 2014Q3
Source: CREA
Share of MLS® sales in higher price ranges increasing
in Vancouver and Toronto
In Vancouver, the price growth of single-detached is 7.6%, and 4.6% for condominium apartments (year-to-date)
Share of single-detached
Share of condominium apartments
60%
60%
Year-to-date 2013
Year-to-date 2014
Year-to-date 2013
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
Year-to-date 2014
0%
<$500,000
$500,000-$999,999 $1,000,000-$1,499,999
>$1,500,000
<$300,000
$300,000-$399,999
$400,000-$499,999
>$500,000
In Toronto, the price growth of single-detached is 9.2%, and 5.5% for condominium apartments (year-to-date)
Share of single-detached
Share of condominium apartments
60%
60%
Year-to-date 2013
Year-to-date 2014
Year-to-date 2013
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
Year-to-date 2014
0%
<$400,000
$400,000-$599,999
$600,000-$799,999
>$800,000
<$300,000
$300,000-$399,999
$400,000-$499,000
>$500,000
Source: CREA
2
11/18/2014
In some centres, there has been a notable shift towards
more expensive new single homes
Vancouver
Calgary
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
< $600,000
$600,000 $800,000 > $1,000,000
$799,999
$999,999
Jan to Sept 2012
Jan to Sept 2013
Jan to Sept 2014
< $400,000
Jan to Sept 2012
Toronto
$400,000 $600,000 > $800,000
$599,999
$799,999
Jan to Sept 2013
Jan to Sept 2014
Montreal
80%
80%
60%
60%
40%
40%
20%
20%
0%
0%
< $400,000
$400,000 $599,999
2012
2013
$600,000 $799,999
2014
> $800,000
< $400,000
$400,000 $599,999
2012
2013
$600,000 $799,999
2014
> $800,000
Source: CMHC
Market conditions are tighter in Western Canada
Source: Canadian Real Estate Association, QFREB by the Centris® system, 2014Q3
3
11/18/2014
Units under construction are increasing but inventories of
completed and unabsorbed units are relatively low
2012
2014
2014
2010
2012
2008
2006
2004
2000
1998
1996
1994
1992
2002
2010
2008
Units unabsorbed
2002
2000
1998
1996
1994
1988
2014
2012
2010
2008
2006
2004
2002
2000
0
1998
20
0
1996
40
20
1994
60
40
1992
60
1990
Units under construction
80
1990
Toronto
100
Units unabsorbed
80
1988
Units unabsorbed
2006
Calgary
Units under construction
1988
2014
2012
2010
2008
2006
2004
2002
2000
1998
0
1996
20
0
1994
40
20
1992
60
40
1990
60
1988
80
1990
Units under construction
80
100
Vancouver
100
Units unabsorbed
1992
Units under construction
2004
Canada
100
Source: CMHC
Completed and unabsorbed units are near or below
historical averages
Vancouver
Canada
8
Multi-family units
7
Single-family units
All-unit type
35
30
6
25
5
20
4
Multi-family units
Single-family units
All-unit type
15
3
10
2
5
0
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1
Calgary
20
Multi-family units
Single-family units
Toronto
All-unit type
15
8
7
Multi-family units
Single-family units
All-unit type
6
5
10
4
3
5
2
1
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0
Source: CMHC
4
11/18/2014
Key Messages on House Prices
Growth in National Average MLS® price is driven by Toronto and
Vancouver.
 Share of MLS® sales in higher price ranges is increasing in Toronto and
Vancouver.
 Price growth of single-detached is stronger than the price growth for
apartments. Single-detached price growth is driving average MLS® price
growth in Vancouver and Toronto.
In general, balanced market conditions and low inventories of completed
and unabsorbed units are supportive of housing market activity and
prices.

In some centres, the number of units under construction relative to the
population is high. Demand should channelled toward these units under
construction otherwise there is a risk that inventories of completed
unabsorbed units could trend higher.
The use of various sources and methodologies confirms
rising a debt-to-income trend for Canada
Canadian and Australian Debt to National Disposable Income
Continues to Trend Up Since the Recession
Debt as a % of net national disposable income
200
Australia
U.S.
U.K.
Canada
Adjusted* Canadian Household Credit Market Debt-to-Personal
Disposable Income (%) vs. U.S.
%
200
Adjusted Canadian Ratio
U.S.
180
180
160
160
140
140
120
120
100
100
19
91
Q
19 1
92
Q
19 1
93
Q
19 1
94
Q
19 1
95
Q
19 1
96
Q
19 1
97
Q
19 1
98
Q
19 1
99
Q
20 1
00
Q
20 1
01
Q
20 1
02
Q
20 1
03
Q
20 1
04
Q
20 1
05
Q
20 1
06
Q
20 1
07
Q
20 1
08
Q
20 1
09
Q
20 1
10
Q
20 1
11
Q
20 1
12
Q
20 1
13
Q
20 1
14
Q
1
80

OECD debt-to-income ratio for Canada for 2012 is 161.7, up from 159.1 in 2011.

The adjusted debt-to-income ratio for Canada is 152.2 for 2014Q2, up from 151.4 in 2014Q1.
5
11/18/2014
Relatively low household liquidity and concentration of net
worth in residential real estate is a vulnerability that can
exacerbate an economic shock
Credit Market Debt to Personal Disposable Income vs. Liquid
Assets to Credit Market Debt
Household Real Estate Assets Including Land as a Percentage
of Net Worth
%
%
55
170
Credit Market Debt to Personal Disposable Income
Liquid Assets to Credit Market Debt
160
50
150
140
45
130
120
40
110
100
35
90
80
19
90
Q
19 1
91
Q
19 1
92
Q
19 1
93
Q
19 1
94
Q
19 1
95
Q
19 1
96
Q
19 1
97
Q
19 1
98
Q
19 1
99
Q
20 1
00
Q
20 1
01
Q
20 1
02
Q
20 1
03
Q
20 1
04
Q
20 1
05
Q
20 1
06
Q
20 1
07
Q
20 1
08
Q
20 1
09
Q
20 1
10
Q
20 1
11
Q
20 1
12
Q
20 1
13
Q
20 1
14
Q
1
19
90
Q
19 1
91
Q
19 1
92
Q
19 1
93
Q
19 1
94
Q
19 1
95
Q
19 1
96
Q
19 1
97
Q
19 1
98
Q
19 1
99
Q
20 1
00
Q
20 1
01
Q
20 1
02
Q
20 1
03
Q
20 1
04
Q
20 1
05
Q
20 1
06
Q
20 1
07
Q
20 1
08
Q
20 1
09
Q
20 1
10
Q
20 1
11
Q
20 1
12
Q
20 1
13
Q
20 1
14
Q
1
30
Source: Statistics Canada, CMHC calculations
Overall for Canada, growth in the last year in household
credit at chartered banks has moderated with the
exception of personal loans



The largest increase since 2000 has been from Personal Lines of Credit (PLC),
which includes Home Equity Lines of Credit (HELOC), at a compound annual
growth rate (CAGR) of 16.4%.
Despite a series of parameter changes under the Government Guarantee
Framework, the largest increase over the past five years has been in residential
mortgages, at 13.9% (CAGR).
Over the last full year (2013), the largest increases have been in personal loans.
PLC Incl. H ELOC
Credit Cards
Res. Mortgages
Personal Loans
Other
Since 2000
16.4%
11.7%
9.8%
6.0%
-2.8%
10-Year
14.8%
8.9%
10.5%
8.5%
-0.4%
5-Year
9.7%
7.9%
13.9%
13.2%
-3.8%
3-Year
5.0%
8.9%
22.9%
14.0%
-6.2%
1-Year
1.9%
-4.5%
5.8%
19.9%
-8.8%
% of 2013 T otal
19.6%
5.5%
67.1%
6.5%
1.3%
Note: Percent changes are compound annual growth rates, except for the final column which is a per cent of the total for 2013.
Source: Bank of Canada, CMHC calculations
6
11/18/2014
Key Messages on Household Debt
 Relatively low household liquidity and concentration of net worth
in residential real estate is a vulnerability that can amplify an
economic shock
 Overall for Canada, growth in the last year in household credit at
chartered banks has moderated with the exception of personal
loans
While the outlook for the Canadian housing sector is one
of relative stability, there are still risks
Given that Canada is an open economy, there are a number of global market
risks to consider:

Slowdown in China

Potential for deflation in the Euro area

Renewed geo-political tensions in the Middle East

Weaker than forecast U.S. economic growth

Higher interest and mortgage rates due to continued sustained growth in
Canadian consumer prices
The impact in Canada of an external shock could be amplified by vulnerabilities
related to high levels of household debt.
7
11/18/2014
Economic Assumptions
 We do not expect interest rate increases before the latter part of 2015 for
both Canada and the United States. Inflation remains under control in both
countries.
 Income is expected to increase modestly as economic conditions in Canada
improve. Income growth will remain supportive of housing demand over the
forecast horizon.
 Canada’s economy is expected to continue to attract a high level of immigrants.
The level of net migration will remain above its historical average and help
support Canada’s housing sector.
 There is a lot of uncertainty. Therefore, we consider a range of outcomes for
the economic outlook.
2014
2015
2016
GDP (growth, %)
2.1 – 2.5
2.2 - 2.9
1.8 - 2.9
Unemployment rate (%)
6.7 - 7.2
6.4 - 7.3
5.7 - 6.9
Employment (growth, %)
0.6 – 1.1
1.3 – 2.2
1.2 – 2.5
Average MLS® price expected to grow at
moderate pace moving forward
Source: Canadian Real Estate Association, CMHC (forecasts)
8
11/18/2014
Growth of MLS® price expected to moderate
$900,000
2014(F)
2015(F)
2016(F)
$800,000
$700,000
$600,000
$500,000
$400,000
$300,000
$200,000
$100,000
$-
Vancouver Calgary Saskatoon Winnipeg
Toronto
Ottawa
Montreal
Québec
Moncton
Halifax
St. John's
Source: CMHC (forecasts)
Resale Market: Recovery in 2014 and 2015
Total MLS® Sales* - Canada
Number of MLS® Sales
600,000
MLS Sales (F) Weak Growth
MLS Sales (F)
MLS Sales (F) Strong Growth
MLS Sales
500,000
400,000
300,000
200,000
100,000
20
1
20 3
14
(F
20 )
15
(F
20 )
16
(F
)
20
12
20
11
20
10
20
09
20
08
20
07
20
06
20
05
20
04
20
03
20
02
20
01
20
00
19
99
19
98
19
97
19
96
19
95
19
94
0
*Seasonally adjusted rates
Source: CMHC (forecasts), Canadian Real Estate Association
9
11/18/2014
Estimates of Household Formation coincide with
Housing Starts over the 2011 to 2016 period
2011
Housing starts
193,950
2012
214,827
2013
187,923
2014 (F) & range
189,000 (186,300-191,700)
2015 (F) & range
189,500 (172,800-204,000)
2016 (F) & range
187,000 (168,000-205,800)
2011-2016 Average
193,700
Household formation
Previous estimate (CMHC published
December 2013)
186,000
(Range: 143,000 - 238,000)
Current estimate
2011-2016
Average
193,000
(Range: TBD)
Estimate of household formation
 Using 2011 Census demographic
data, the PHD model estimates the
average annual pace of household
formation at 193,000.
 This coincides with the 2011 to
2016 forecast pace of housing
starts.
 The pace of new home
construction is in line with
demographics drivers.
Headship rate - the rate at which people in a given age group form households. Historical headship rates are calculated as the number of primary
household maintainers in a given age bracket divided by the total number of people in the same age bracket.
Fertility rate - the total fertility rate refers to the number of children that a female would have over the course of her reproductive life. It is
calculated as the sum of all the age-specific fertility rates. Typically, age-specific fertility rates are calculated for women aged 15 to 49, as only a very
small proportion of births occur to women outside that age range.
Source: CMHC, based on Statistics Canada definitions
Modest growth price expected in short-term for housing
sector, and moderation expected over medium term
Number of Housing Starts
250,000
Total Starts
Total Starts (F) Weak Growth
Total Starts (F)
Total Starts (F) Strong Growth
200,000
150,000
100,000
50,000
20
07
Q
1
20
07
Q
3
20
08
Q
1
20
08
Q
3
20
09
Q
1
20
09
Q
3
20
10
Q
1
20
10
Q
3
20
11
Q
1
20
11
Q
3
20
12
Q
1
20
12
Q
3
20
13
Q
1
20
13
Q
3
20
14
Q
1
20
14
Q
20
3
15
Q
1(
F)
20
15
Q
3(
F)
20
16
Q
1(
F)
20
16
Q
3(
F)
0
Source: CMHC
10
11/18/2014
Contact Information
Bob Dugan
[email protected]
613-748-4009
CANADA MORTGAGE AND HOUSING CORPORATION
11