An Ontario Housing Market in Transition

Transcription

1 An Ontario Housing Market in Transition CMBA Conference - March 218 Ted Tsiakopoulos Regional Economist Canada Mortgage & Housing Corporation ttsiakop@cmhc.ca CANADA MORTGAGE AND HOUSING CORPORATION

2 Key Takeaways Housing & Credit Market Vulnerabilities Still High But Some Signs of Easing Strong 217 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 CANADA MORTGAGE AND HOUSING CORPORATION 2

3 Broad Based Growth in Global Economy in 217 US Bucking Slowing Growth Trend in 218 Real GDP % e 218f 219f United States Canada Europe China Japan WORLD Source: Consensus Economics, IMF, Bank of Canada, CMHC CANADA MORTGAGE AND HOUSING CORPORATION 3

4 Commodity Prices Respond To Stronger Global Economy & Supply Agreement 3. US dollar index (25=1) Metals Fuels. 27M1 21M1 213M1 216M1 Source: IMF CANADA MORTGAGE AND HOUSING CORPORATION 4

5 Bond Market Pricing-In Growth & Inflation Risks Especially in US Year Government Bond Yields % 1.5 Canada 1yr Bond US 1yr Bond Source: Bank of Canada, US Federal Reserve CANADA MORTGAGE AND HOUSING CORPORATION 5

6 Ontario Economy Outpacing Rest of Canada But Gap Closing GDP Index (29=1) Rest of Canada GDP Ontario GDP 9 27Q1 29Q1 211Q1 213Q1 215Q1 217Q1 Source: Statistics Canada, Ontario Ministry of Finance, CMHC CANADA MORTGAGE AND HOUSING CORPORATION 6

7 Ontario Economy To Grow At Slower Rate 3.5 Best Years For Ontario Economy Likely Behind Us GDP % chg Emp % chg 217e 218f 219f Pre 28 Source: Statistics Canada Economic Accounts, Statistics Canada LFS, CMHC Forecast (f) CANADA MORTGAGE AND HOUSING CORPORATION

8 Growth in Ontario Consumption Not Sustainable Ontario household consumption vs household disposable income - % chg. 6 5 Cons Inc Source: Ontario Ministry of Finance, Statistics Canada, CMHC CANADA MORTGAGE AND HOUSING CORPORATION 8

9 Difficult to Rely on Debt and Savings To Finance Consumption Household Debt to Disposable Income % Q1 27 Q1 21 Q1 213 Q Ontario Household Savings Rate Source: Statistics Canada, Ontario Ministry of Finance CANADA MORTGAGE AND HOUSING CORPORATION 9

10 Credit Growth Running at Half the Pre-Recession Rate Consumer and Mortgage Credit yr/yr % chg Source: Statistics Canada, Bank of Canada CANADA MORTGAGE AND HOUSING CORPORATION 1

11 Ontario Wages Starting to Respond To Low Unemployment Growth in Earnings vs Unemployment Rate - Ontario earnings unemprt (RS) Q1 21Q1 212Q1 214Q1 216Q1 Source: Statistics Canada CANADA MORTGAGE AND HOUSING CORPORATION 11

12 27Q4 28Q4 29Q4 21Q4 211Q4 212Q4 213Q4 214Q4 215Q4 216Q4 217Q4 Record Low Unemployment Rates Dampens Delinquency Rates Much Less So For Non Mortgage Debt Delinquency Rates by Credit Type - ONTARIO HELOC Credit Card Auto LoC Mtg Source: Equifax, Statistics Canada, CBA CANADA MORTGAGE AND HOUSING CORPORATION 12

13 Mortgage Holders Protected By Rising Incidence of Fixed Rate Mortgages % of new (flow) and existing (stock) mortgages holding fixed mortgage rate New Mtg Existing Mtg Resetting of Mortgages - Canada 22% 47% 31% Less than 1yr 1 to 3 yrs >3yrs Source: FIRM, Bank of Canada Financial System Review CANADA MORTGAGE AND HOUSING CORPORATION 13

14 Less Urgency to Buy But More Urgency To List in Ontario Centres 28, MLS sales 42, MLS Listings 26, 4, 24, 38, 22, 36, 2, 34, 18, 16, Ontario Fair Tax 32, 14, 3, 12, , Source: CREA, CMHC CANADA MORTGAGE AND HOUSING CORPORATION 14

15 GTA Price Expectations Resetting by Late 216 BC Tax Having Impact? 14 Toronto Print & Social Media News/Search Index* on Housing Correction Source: Google Trends, Print & Social Media Selected Data, CMHC calculations *A value of 1 or above is the peak popularity for the term. A value of 5 means that the search term is half as popular. Likewise a score of 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. CANADA MORTGAGE AND HOUSING CORPORATION 15

16 Survey Suggests Foreign Buyers Impacting Prices Biggest Influence on Home Prices - % of Respondents City Attractive Foeign Investment Land Availability Population Speculators Employment Source: CMHC HBMS, Fall 217 CANADA MORTGAGE AND HOUSING CORPORATION 16

17 Eroding Affordability To Dampen First Time Buyer Demand First time buyer* (FTB) share % 8% 7% 6% 5% 4% 3% 2% 1% % FTB share Affordability* Forecast Affordability** 16% 14% 12% 1% 8% 6% 4% 2% % 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 CANADA MORTGAGE AND HOUSING CORPORATION 17

18 Toronto Off Sales Peak, Windsor and Ottawa Leading Pack Existing home sales index (27=1) Tor Ham Kit Ott Win Sud Q1 29Q1 211Q1 213Q1 215Q1 217Q1 Source: CREA, CMHC CANADA MORTGAGE AND HOUSING CORPORATION 18

19 High Levels of Affordability in Eastern & Southwest vs Rest of Region Required income* as % of actual Income 218f Toronto Barrie Hamilton Kitchener Ottawa Sudbury Windsor % 2% 4% 6% 8% 1% 12% 14% 16% 18% Source: CREA, CMHC calculation, Statistics Canada, Bank of Canada *Based on 25yr amort, 5yr posted, 1% dp, avg resale price CANADA MORTGAGE AND HOUSING CORPORATION 19

20 Market Imbalances in Toronto & Hamilton Cause Slower Price Recovery Existing home prices (all dwellings) 217q4 25% 2% Drop From Peak Growth From Trough 15% 1% 5% No change % Ont Tor Ham Kit Win Ott Sud Source: CREA, CMHC CANADA MORTGAGE AND HOUSING CORPORATION 2

21 Housing Imbalances Easing But Overvaluation Pointing To Moderate Price Growth Ahead Toronto Average Overvaluation (Deviations From Historic Norms) Ontario Resale Prices, s.a Standard deviations Source: CREA, CMHC, Statistics Canada CANADA MORTGAGE AND HOUSING CORPORATION 21

22 Moderate Price Growth Supported by More Balanced Ontario Markets 8% % of new listings sold by quarter 217q4 7% 6% 5% 4% 3% 2% 1% % Windsor Ottawa Sudbury Hamilton ONTARIO Barrie Toronto Source: CREA, CMHC, Statistics Canada CANADA MORTGAGE AND HOUSING CORPORATION 22

23 Price Outlook Also A Function of Supply Which is Tight Supply Responses to Price Increases in the five studied CMAs Calgary Montreal Edmonton Vancouver Toronto Source: JRL, Landcor, MPAC calculations by CMHC CANADA MORTGAGE AND HOUSING CORPORATION 23

24 Investors Have Been Active Due To Growing Rental Demand New Rental Completions*(Supply) Growth in Renter Households (Demand) - CMHC Forecast (211-16) Actual Growth in Rental Households (216 Census) (f) Ontario Rental Apartment Vacancy Rates - Overall Source: CMHC, Statistics Canada Census Annual Averages *Does not include condominiums completed and available for rent CANADA MORTGAGE AND HOUSING CORPORATION 24

25 Investment in Higher Density Housing Is Responding 45, Completions - Ontario 16, 4, 14, 35, 3, 25, 2, 15, 1, Condo Rental (RS) 12, 1, 8, 6, 4, 5, 2, Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION 25

26 New Condo & Rental Investments Not Affordable To Everyone Distribution of Renter Household Income - Ontario 35% 3% 25% 2% 15% 1% 5% $65K required for newer existing rental unit occupancy (33%) earning>$6k $83K required for newly constructed rental units (18%) earning >8K % Less Than $2, $2, to $39,999 $4, to $59,999 $6, to $79,999 $8, to $99,999 $1, And Over Source: Statistics Canada Census, CMHC RMS calculations CANADA MORTGAGE AND HOUSING CORPORATION 26

27 Are New Units Built Suitable in Size? 6 % of total starts % of households by dwelling type singles apts Other CANADA MORTGAGE AND HOUSING CORPORATION 27

28 Opportunities/Challenges From Changing Demographics: Age specific % share of hhld growth ONTARIO 3% 34% 2% 8% 24% Age Cohort % share of hhld growth Opportunity/Challenge % Demand for rental and condos accelerates - Investor demand growing % Millennials become repeat buyers & looking for more space as fertility rates grow % Younger boomer mobility slows. More equity extraction to assist kids/renovate % Some Downsizing To Rental 75+ 3% Survival Rates Rise Boosting Aging in Place/Retirement Home Occupancies Source: Statistics Canada Census 216, CMHC Baseline Ontario Demographic Projections CANADA MORTGAGE AND HOUSING CORPORATION 28

29 Economic & Housing Forecast Risks 3 2 Ontario, MLS Sales (s) Upside Risks Tight supply, foreign investment fuelling expectations Stronger US/Global economy 1 Inner range Outer range $8, $6, $4, Ontario, MLS Price Downside Risks Declining business sentiment (US tax, NAFTA, minimum wage) Sharper increase in interest rates New mortgage rules A disorderly unwinding of imbalances $2, $ Inner range Outer range Source: CMHC, Bank of Canada, IMF CANADA MORTGAGE AND HOUSING CORPORATION 29