ontario economic & housing outlook...kingston toronto windsor canada mortgage and housing...

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ONTARIO ECONOMIC &HOUSING OUTLOOK

TED TSIAKOPOULOS

Ontario Regional Economist

Canada Mortgage & Housing Corporation

[email protected]

September 2015

CANADA MORTGAGE AND HOUSING CORPORATION

What to Expect Ahead

• Rebalancing of Growth Underway

• Demand Shifts to More Affordable Housing

• Price Growth Will Slow But Correction Not Likely

• Higher Price Risk in Toronto, Less So Elsewhere

• Higher Price Risk for Singles vs Condos


Demand for Resale Housing Remains Strong

Source: CREA, CMHC Forecast(f)

MLS® Sales - ONTARIO

160000

170000

180000

190000

200000

210000

220000

2005 2007 2009 2011 2013 2015f


North & East Not As Strong as Southern Ontario Markets

Existing Home Sales % chg By Selected CMA - 2014

Source: CREA

-10 -5 0 5 10

Barrie

Hamilton

Oshawa

Ottawa

Sudbury

Kingston

Toronto

Windsor


Residential Starts Mirror Similar Picture in 2014

Housing Starts % chg By Selected CMA - 2014

Source: CMHC

-60% -40% -20% 0% 20% 40%

Barrie

Oshawa

Windsor

Hamilton

Toronto

Ottawa

Greater Sudbury


Ontario Housing Star ts Running Below Long Run Potential

0100002000030000400005000060000700008000090000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

f

2016

f

Starts Low High

Source: CMHC

Demographic Range


Economy & Labour Market Growing Below Historic Norms

3

2.2

1.51.3

0

0.5

1

1.5

2

2.5

3

3.5

Pre-Recession Post Recession

GDP Growth Emp Growth

Source: CMHC , Statistics Canada


Population Growth Slowing As Migration Below Historic Norms

-40000

-20000

0

20000

40000

60000

80000

100000

120000

140000

2010 2011 2012 2013 2014 2015(F) 2016(F) 2017(F)

Total Net Migration Net Intl Net Inter

Source: CMH , Statistics Canada


Affordability Favours Some Markets Over Others

Source: CREA, Statistics Canada, CMHC calculations

Actual Income as % Share of Required Income to Purchase Resale Home - 2015

0 50 100 150 200

Toronto

Oshawa

Hamilton

Barrie

London

Ottawa

Thunder Bay

Windsor

Affordable


GTA & Surrounding Labour Markets Stable, SW Strong,

North and East Weaker

Source: Statistics Canada, CMHC Forecast(f)

Job Growth %–

-3

-2

-1

0

1

2

3

4

5

6

Hamilton Oshawa Ottawa Windsor Sudbury GTA

2014

2015f

2016f


A Rebalancing of Growth* in Canada

Source: Statistics Canada, CMHC Forecast(f) *Forecast as of May 2015 (Q2)

Employment % chg

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

2015(F)

2016(F)


Lower Commodity Prices A Drag on Growth in Prairies & Atlantic

Commodity Price Index - US$ (2005=100)

Source: IMF Commodity Price Database

0

50

100

150

200

250

300

2008 2010 2012 2014

All

Metals

Energy

http://www.google.ca/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.frumforum.com/tag/energy-industry/&ei=DFcIVZLdCIKkyAT-64GIBw&bvm=bv.88198703,d.aWw&psig=AFQjCNE8n7Z55C8e8bq-ZHnLNg2G87r5CA&ust=1426696290434772


Ontario Manufacturing Sales Fast Approaching 2004 Highs

60

65

70

75

80

85

90

95

100

105

2000 2002 2004 2006 2008 2010 2012 2014

Manufacturing sales – six month average index (2004=100)

Source: Statistics Canada


Rebalancing of Global Growth Favours Advanced Economies

Source: Consensus Forecasts, IMF

GDP % chg - 2007$

-4

-2

0

2

4

6

8

United States

Japan Europe China Russia

2014

2015f

2016f


Can US Decouple From Rest of World? Consumers Say Yes!

Source: US BEA

Contribution to US Economic Growth By Sector %

-3

-2

-1

0

1

2

3

4

2011 2012 2013 2014 2015

Consumers

Net Exports


Lift from US Economy Depends on Competitiveness

0

5

10

15

20

25

2004 2006 2008 2010 2012 2014

China

Canada

Mexico

Japan

Country Specific Share of US Imports

Source: Industry Canada Trade Database


Bank of Canada More Accommodative vs Fed

Source: Bank of Canada

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2007 2009 2011 2013 2015


Home Prices Growing Faster Versus Incomes

Source: CREA, Statistics Canada, CMHC

MLS® Price, Income Growth - ONTARIO

0

1

2

3

4

5

6

7

8

2010 2011 2012 2013 2014

Price

Income


Source: CREA II, Toronto Real Estate Board, CMHC Calculations

-20

-10

0

10

20

30

40

50

<$400,000 $400,000 - $799,999 $800,000 - $999,999 >$1,000,000

Growth in Toronto single-detached MLS sales is concentrated in higher price ranges

2014Q1/2015Q1

% chg yr/yr

Higher End Home Sales Skewing Prices Higher


Other Explanations?

• Lower interest rates

• Land supply

• Wealth increasing for households aged 55+


Toronto Risk Rating Turns Higher: Regina & Winnipeg Also High

Low Moderate High

Risk Level

Source: CMHC, House Price Analysis and Assessment Framework – 2015q1

VancouverCalgary

Toronto

Regina

MontréalOttawa

Winnipeg

QuébecHalifax

OverheatingPrice

Acceleration Overvaluation OverbuildingOverall

Assessment

St.John’s

SaskatoonEdmonton

Canada


Market Not Overheating: North & East Cooler Markets

Source: CREA, CMHC

Share of New Listings Sold By Quarter By CMA – 2015q2

0%10%20%30%40%50%60%70%80%

SELLERS


Ontario Apartment Construction Strengthening

Source: CMHC Forecast(f)

05000

10000150002000025000300003500040000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

f

2016

f

Apt Starts 15 yr Avg


Demographics Support High Density Demand

0

2

4

6

8

10

12

14

one person lone parents couple without kids

Total households

2001

2011

Growth by Household Type - ONTARIO

Source: Statistics Canada Census


Demand Not Just From End Users – Investors More Active

Estimated Share % of Existing Condominium Universe Rented Out

Source: CMHC Fall RMS Survey

10

15

20

25

30

35

2007 2008 2009 2010 2011 2012 2013 2014

Toronto

Ottawa


Rental Demand Outstripping Supply in Ontario

Source: CMHC Forecast 2011-16, Statistics Canada*Does not include condominiums completed and available for rent

0

5000

10000

15000

20000

2006-11 2011-16

Renter Household Growth (Demand)

Rental Completions*(Supply)


New Unsold Apartment Units Rising

Source: CMHC

Apartment unsold units as % of population per 10,000 - ONTARIO

0

1

2

3

4

5

Jan-

90

Dec

-90

Nov

-91

Oct

-92

Sep-

93

Aug

-94

Jul-

95

Jun-

96

May

-97

Apr

-98

Mar

-99

Feb-

00

Jan-

01

Dec

-01

Nov

-02

Oct

-03

Sep-

04

Aug

-05

Jul-

06

Jun-

07

May

-08

Apr

-09

Mar

-10

Feb-

11

Jan-

12

Dec

-12

Nov

-13

Oct

-14

Unsold apts per 10,000 (pop) Average


Condo Vacancy Rates May Edge Higher But Condo Rental Market Tight

1.1 1

1.8

2.7

3.6

0.71.1

1.3

3.4

1.7

0

0.5

1

1.5

2

2.5

3

3.5

4

Van Cal Tor Mon Ott

2013

2014

Source: CMHC

Condominium Apartment Vacancy Rates by CMA – 2013 vs 2014


Condo Resale Market Tight Enough To Absorb Unsold Units

.1

.2

.3

.4

.5

.6

.7

1998 2000 2002 2004 2006 2008 2010 2012 2014

Sales To Active Listings Ratio, s.a - GTA

BALANCED

SELLERS

Source: CREA, CMHC calculation


Ontario Housing Outlook - RISKS

• Confidence shaken by continued Asian & European growth concerns

• Lift from US economy tempered by global competition

• Rising Inventories remain unabsorbed and dampen price gains

• Slowing GTA prices spill into neighbouring communities

• Rising share of wealth held in real estate & prone to shocks

UPSIDE RISKS

• US economic growth accelerates above forecast

• Sluggish growth in global economy, lower C$ supports capital inflows

DOWNSIDE RISKS

Thank You

Questions?

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