An Ontario Housing Market in Transition€¦ · 2007Q1 2009Q1 2011Q1 2013Q1 2015Q1 2017Q1 Rest of...

CANADA MORTGAGE AND HOUSING CORPORATION

An Ontario Housing Market in Transition

Ted Tsiakopoulos

Regional Economist

Canada Mortgage & Housing Corporation

[email protected]

CMBA Conference - March 2018


Key Takeaways

• Housing & Credit Market Vulnerabilities Still High But Some Signs of Easing

• Strong 2017 Economy Helping To Ease Imbalances

• Sales and Starts To Slow Over the Forecast Horizon – Prices to Grow Moderately

• Eastern and Western Ontario Region To Outperform vs Southern Ontario

• Households Aged 35-44/55-64 An Area of Opportunity For Mortgage Brokers

2

CANADA MORTGAGE AND HOUSING CORPORATION 3

Broad Based Growth in Global Economy in 2017 – US Bucking Slowing Growth Trend in 2018

Source: Consensus Economics, IMF, Bank of Canada, CMHC

Real GDP %

0

1

2

3

4

5

6

7

8

United States Canada Europe China Japan WORLD

2016 2017e 2018f 2019f


Commodity Prices Respond To Stronger Global Economy & Supply Agreement

4

0.00

50.00

100.00

150.00

200.00

250.00

300.00

2007M1 2010M1 2013M1 2016M1

Metals Fuels

Source: IMF

US dollar index (2005=100)


Bond Market Pricing-In Growth & Inflation Risks – Especially in US

10 Year Government Bond Yields %

Source: Bank of Canada, US Federal Reserve

0

0.5

1

1.5

2

2.5

3

3.5

2016-02 2016-06 2016-10 2017-02 2017-06 2017-10 2018-02

Canada 10yr Bond US 10yr Bond


Ontario Economy Outpacing Rest of Canada But Gap Closing

90

95

100

105

110

115

120

125

2007Q1 2009Q1 2011Q1 2013Q1 2015Q1 2017Q1

Rest of Canada GDP Ontario GDP

GDP Index (2009=100)

Source: Statistics Canada, Ontario Ministry of Finance, CMHC


Best Years For Ontario Economy Likely Behind Us

7

Source: Statistics Canada Economic Accounts, Statistics Canada LFS, CMHC Forecast (f) 2017-19

Ontario Economy To Grow At Slower Rate

0

0.5

1

1.5

2

2.5

3

3.5

2017e 2018f 2019f Pre 2008

GDP % chg Emp % chg


Growth in Ontario Consumption Not Sustainable

-1

0

1

2

3

4

5

6

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Cons Inc

Ontario household consumption vs household disposable income - % chg.

Source: Ontario Ministry of Finance, Statistics Canada, CMHC


90

100

110

120

130

140

150

160

170

180

Q1 2007 Q1 2010 Q1 2013 Q1 2016

Household Debt to Disposable Income %

Source: Statistics Canada, Ontario Ministry of Finance

Difficult to Rely on Debt and Savings To Finance Consumption

0

1

2

3

4

5

6

7

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ontario Household Savings Rate


Credit Growth Running at Half the Pre-Recession Rate

2

4

6

8

10

12

14

16

18

88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

Source: Statistics Canada, Bank of Canada

Consumer and Mortgage Credit – yr/yr % chg.


Ontario Wages Starting to Respond To Low Unemployment

0

2

4

6

8

10

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

2008Q1 2010Q1 2012Q1 2014Q1 2016Q1

Growth in Earnings vs Unemployment Rate - Ontario

earnings unemprt (RS)

Source: Statistics Canada


Record Low Unemployment Rates Dampens Delinquency Rates – Much Less

So For Non Mortgage Debt

Source: Equifax, Statistics Canada, CBA

Delinquency Rates by Credit Type - ONTARIO

0

0.5

1

1.5

2

2.5

2007

Q4

2008

Q4

2009

Q4

2010

Q4

2011

Q4

2012

Q4

2013

Q4

2014

Q4

2015

Q4

2016

Q4

2017

Q4

HELOC Credit Card Auto LoC Mtg


Mortgage Holders Protected By Rising Incidence of Fixed Rate Mortgages

60

65

70

75

80

2015 2016 2017

% of new (flow) and existing (stock) mortgages holding

fixed mortgage rate

New Mtg Existing Mtg

Source: FIRM, Bank of Canada Financial System Review

47%

31%

22%

Resetting of Mortgages - Canada

Less than 1yr 1 to 3 yrs >3yrs


Less Urgency to Buy But More Urgency To List in Ontario Centres

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

280,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Ontario Fair Tax

Source: CREA, CMHC

280,000

300,000

320,000

340,000

360,000

380,000

400,000

420,000

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

MLS sales MLS Listings


GTA Price Expectations Resetting by Late 2016 – BC Tax Having Impact?

Source: Google Trends, Print & Social Media Selected Data, CMHC calculations

*A value of 100 or above is the peak popularity for the term. A value of 50 means that the search term is half as popular. Likewise a score of 0 means the term was of

less interest. A rising index could be interpreted as more concern about the market while the reverse is true for a declining index.

0

20

40

60

80

100

120

140

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Toronto Print & Social Media News/Search Index* on Housing Correction


Survey Suggests Foreign Buyers Impacting Prices

16

0 10 20 30 40 50 60 70

Employment

Speculators

Population

Land Availability

Foeign Investment

City Attractive

Biggest Influence on Home Prices - % of Respondents

Source: CMHC HBMS, Fall 2017


Eroding Affordability To Dampen First Time Buyer Demand

Source: Statistics Canada, CREA, CMHC

* Based on CMHC high and low ratio data

**Required income as a share of actual household income to buy average resale home, Ontario

First time buyer* (FTB) share % Affordability**

0%

20%

40%

60%

80%

100%

120%

140%

160%

0%

10%

20%

30%

40%

50%

60%

70%

80%

FTB share Affordability*

Forecast


Toronto Off Sales Peak, Windsor and Ottawa Leading Pack

Source: CREA, CMHC

40

60

80

100

120

140

160

2007Q1 2009Q1 2011Q1 2013Q1 2015Q1 2017Q1

Tor Ham Kit Ott Win Sud

Existing home sales index (2007=100)


High Levels of Affordability in Eastern & Southwest vs Rest of Region

Required income* as % of actual Income – 2018f

Source: CREA, CMHC calculation, Statistics Canada, Bank of Canada*Based on 25yr amort, 5yr posted, 10% dp, avg resale price

0% 20% 40% 60% 80% 100% 120% 140% 160% 180%

Windsor

Sudbury

Ottawa

Kitchener

Hamilton

Barrie

Toronto


Market Imbalances in Toronto & Hamilton Cause Slower Price Recovery

Source: CREA, CMHC

0%

5%

10%

15%

20%

25%

Ont Tor Ham Kit Win Ott Sud

Drop From Peak Growth From Trough

No change

Existing home prices (all dwellings) – 2017q4


Housing Imbalances Easing But Overvaluation Pointing To Moderate Price Growth Ahead

Ontario Resale Prices, s.a

Source: CREA, CMHC, Statistics Canada

0

100000

200000

300000

400000

500000

600000

700000

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

Standard deviations

Toronto Average Overvaluation (Deviations From Historic Norms)


Moderate Price Growth Supported by More Balanced Ontario Markets

22

0%

10%

20%

30%

40%

50%

60%

70%

80%

Windsor Ottawa Sudbury Hamilton ONTARIO Barrie Toronto

% of new listings sold by quarter – 2017q4

Source: CREA, CMHC, Statistics Canada


Price Outlook Also A Function of Supply Which is Tight

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

Calgary Montreal Edmonton Vancouver Toronto

Supply Responses to Price Increases

in the five studied CMAs

Source: JRL, Landcor, MPAC calculations by CMHC


Investors Have Been Active Due To Growing Rental Demand

24

0

5000

10000

15000

20000

25000

30000

35000

40000

2006-11 2011-16(f)

New Rental Completions*(Supply)

Growth in Renter Households (Demand) - CMHC Forecast (2011-16)

Actual Growth in Rental Households (2016 Census)

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2000 2002 2004 2006 2008 2010 2012 2014 2016

Ontario Rental Apartment Vacancy Rates - Overall

Source: CMHC, Statistics Canada Census Annual Averages*Does not include condominiums completed and available for rent


Investment in Higher Density Housing Is Responding

25

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

1990 1993 1996 1999 2002 2005 2008 2011 2014 2017

Condo Rental (RS)

Source: CMHC

Completions - Ontario


New Condo & Rental Investments Not Affordable To Everyone

0%

5%

10%

15%

20%

25%

30%

35%

Less Than

$20,000

$20,000 to

$39,999

$40,000 to

$59,999

$60,000 to

$79,999

$80,000 to

$99,999

$100,000 And

Over

2011 2016

Distribution of Renter Household Income - Ontario

Source: Statistics Canada Census, CMHC RMS calculations

$65K required for newer

existing rental unit occupancy

(33%) earning>$60k

$83K required for newly

constructed rental units

(18%) earning >80K


Are New Units Built Suitable in Size?

27

0

10

20

30

40

50

60

singles apts Other

% of total starts % of households by dwelling type


Opportunities/Challenges From Changing Demographics:2016-2026

28

20%

24%

8%34%

30%

Age specific % share of hhld growth 2016-26 - ONTARIO

25-34 35-44 55-64 65-74 75+

Source: Statistics Canada Census 2016, CMHC Baseline Ontario Demographic Projections

Age Cohort % share of hhld growth Opportunity/Challenge

25-34 20%

Demand for rental and condos accelerates -

Investor demand growing

35-44 24%

Millennials become repeat buyers & looking

for more space as fertility rates grow

55-64 8%

Younger boomer mobility slows. More equity

extraction to assist kids/renovate

65-74 34% Some Downsizing To Rental

75+ 30%

Survival Rates Rise Boosting Aging in

Place/Retirement Home Occupancies


Economic & Housing Forecast Risks

• Tight supply, foreign investment fuelling expectations

• Stronger US/Global economy

Upside Risks

Downside Risks

• Declining business sentiment (US tax, NAFTA, minimum wage)

• Sharper increase in interest rates

• New mortgage rules

• A disorderly unwinding of imbalances

Source: CMHC, Bank of Canada, IMF

0

100

200

300

Ontario, MLS® Sales (000s)

Inner range Outer range

$0

$200,000

$400,000

$600,000

$800,000

Ontario, MLS® Price

Inner range Outer range

Date post:	13-Sep-2020
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An Ontario Housing Market in Transition€¦ · 2007Q1 2009Q1 2011Q1 2013Q1 2015Q1 2017Q1 Rest of...

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