IMBA CONFERENCE April 2011

Transcription

1 Economic & Real Estate Outlook IMBA CONFERENCE April 2011 TED TSIAKOPOULOS Regional Economist CMHC Housing market intelligence you can count on

2 AGENDA Key Insights for 2011/12 Housing Outlook: Sales & Prices Factors Shaping Housing Outlook Risks to the Outlook Summary Q & As

3 Key Insights for 2011/12 Canadian/Ontario housing market stabilizing Southern Ontario to lag activity in Northern Ontario & Western Canadian markets Pi Prices to grow below bl long term rate of growth No evidence of housing price bubble Inflation and interest rates will rise First time buyers sensitive to interest rates, demographics Outlook still subject to uncertainty/risk

4 Canadian Sales Stabilize But Less Impetus For Growth in 2011 Existing home sales, saar - CANADA Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1(F) 2011Q3(F) Source: CREA, CMHC forecast

5 But Sales Grow Faster in the West in 2011 CANADA -1.1% -21% 0.5% 8.5% 2.0% -5.9% 59% Source: CMHC MLS Forecast, CREA

6 Northern Ontario Leads Housing Market Activity in % existing home sales, %chg - Ontario 20% 2.0% 1.0% 0.0% -1.0% -2.0% -3.0% -4.0% -5.0% 50% -6.0% Northern Ontario Eastern Ontario Southern Ontario Western Ontario Source: CMHC MLS Forecast, CREA

7 Canadian Housing Prices Stabilize Existing home price, s.a - Canada Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1(F) 2011Q3(F) Source: CREA, CMHC forecast

8 Are Real Estate Markets Defying Logic? Maybe House Price to Income Ratios Are High Household Debt to Income Ratios Are High Source: Statistics Canada, Bank of Canada, CMHC

9 Deeper Analysis Suggests No Housing Bubble Exists 103 Actual Resale Price vs Fundamental Price Ratio - ONTARIO Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 Actual vs Fundamental Price Ratio Fair Market Value Source: CREA, CMHC model estimates

10 The Big Picture & Why it Matters Why is housing momentum set to slow?

11 DRIVERS OF MORTGAGE BROKER BUSINESS ECONOMY (SHORT RUN) HOUSING MARKETS & POLICY (SHORT & LONG RUN) MORTGAGE BROKER BUSINESS CREDIT CONDITIONS (SHORT RUN) DEMOGRAPHICS (LONG RUN)

12 2010 GDP Growth Ontario Among Leaders 6 Real GDP % f BC ALTA SAS MAN ONT QUE NFLD CAN Source: Statistics Canada, CMHC forecast (f)

13 Migratory Inflows from Rest of Canada Improve in ,000 Net provincial migratory inflows to Ontario 7,500 5,000 2, ,500-5,000-7,500-10, Source: Statistics Canada

14 As Does Ontario`s Share of International Migration 85% Ontario as share % of Canada immigration 75% Long Term Avg 65% 55% 45% 35% 25% 2000Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 Source: Statistics Canada

15 But Canada's Economic Story Changing MANUFACTURING INVESTMENTS 2009/10 story ENERGY/NON ENERGY INVESTMENTS 2011/12 story

16 Resource Poor Emerging Economies Growing Real GDP % chg Q1 2000Q3 2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 World Advanced economies Emerging g economies Source: IMF

17 Western Canada Tapping Into Emerging Markets % share of exports to emerging markets Source: Industry Canada Source: Industry Canada Western Canada Ontario

18 6% 4% 2% 0% 2% 4% 6% 8% But US Economy Improving US GDP Growth - Annualized 2008Q1 2008Q2 2008Q3 2008Q4 2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4 Source: US Bureau of Economic Accounts

19 Business Spending Will Lead During Expansion Phase Quarterly real growth (2002$) - ONTARIO 09q3 09q4 10q1 10q2 10q3 Consumption Growth % Business Spending Growth % Source: Provincial Economic Accounts

20 Credit Growth is Slowing in Canada Credit Growth, annualized - Canada 12% 10% 8% 6% 4% 2% 0% Source: Statistics Canada

21 Canadian Households Will Pay Down Some Debt 600,000 $ 500, ,000 Household Assets 300, , ,000 Household Debt Q1 1991Q1 1992Q1 1993Q1 1994Q1 1995Q1 1996Q1 1997Q1 1998Q1 1999Q1 2000Q1 2001Q1 2002Q1 2003Q1 2004Q1 2005Q1 2006Q1 2007Q1 2008Q1 2009Q1 2010Q1 Sources: Statistics Canada, National Income and Expenditure Accounts, National Balance Sheet Accounts. 6

22 First Time Buyers Sensitive to the Interest Rate Story yr posted mtg rate % Source: CMHC Forecast, Bank of Canada, Statistics Canada

23 First Time Buyers Sensitive to the Demographic Story Ontario Population Age Age Age Age Source: Statistics Canada, CMHC

24 FORECAST Ontario Region Economic Outlook Preliminary Estimates, First Quarter ECONOMY 2010e 2011f % chg 2012f % chg GDP Employment % chg Labour Force % chg Unemployment Rate Average Weekly Earnings %chg MIGRATION Net Migration % % Net International % % Net Interprovincial % % Source: Statistics Canada, CMHC Forecast *The outlook is subject to a heightened degree of uncertainty. Although point forecasts are presented in this publication, CMHC also presents forecast ranges and risks where appropriate. The forecasts included in this document are based on information available as of January 17, *

25 Economic & Housing Summary Ontario Housing Momentum Slows Through 2011 Growth in Housing Resumes in 2012 : Economy & Migration Offset Rate Hikes Emerging Economies Leading Global Growth Energy & Industrial Goods Sector Leads Western Canada & Northern Ontario Will Outperform Signs US Economic Recovery Sustainable Inflation Expectations and Interest Rates on the Rise