In-Depth Housing Analysis for Canada, the Provinces, and Nine Metropolitan Areas. Metropolitan Housing Outlook Spring 2010

Transcription

1 Metropolitan Housing Outlook Spring 21 In-Depth Housing Analysis for Canada, the Provinces, and Nine Metropolitan Areas ECONOMIC PERFORMANCE AND TRENDS

2 Metropolitan Housing Outlook: In-Depth Housing Analysis for Canada, the Provinces, and Nine Metropolitan Areas by Alan Arcand, Mario Lefebvre, Jane McIntyre, Greg Sutherland, and Robin Wiebe About The Conference Board of Canada We are: The foremost, independent, not-for-profit applied research organization in Canada. Objective and non-partisan. We do not lobby for specific interests. Funded exclusively through the fees we charge for services to the private and public sectors. Experts in running conferences but also at conducting, publishing, and disseminating research; helping people network; developing individual leadership skills; and building organizational capacity. Specialists in economic trends, as well as organizational performance and public policy issues. Not a government department or agency, although we are often hired to provide services for all levels of government. Independent from, but affiliated with, The Conference Board, Inc. of New York, which serves nearly 2, companies in 6 nations and has offices in Brussels and Hong Kong. Publication The Conference Board of Canada* Printed in Canada All rights reserved Agreement No *Incorporated as AERIC Inc. Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice. Genworth Financial Canada Genworth Financial Canada, a subsidiary of Genworth MI Canada Inc. (TSX:MIC), has been the leading Canadian private residential mortgage insurer since Known as The Homeownership Company, it provides default mortgage insurance to Canadian residential mortgage lenders that enables low down payment borrowers to own a home more affordably and stay in their homes during difficult financial times. Genworth Financial Canada combines technological and service excellence with risk management expertise to deliver innovation to the mortgage marketplace. As of March 31, 21, Genworth MI Canada had $5.1 billion in total assets and $2.7 billion in shareholders equity. Based in Oakville, Ontario, the Company employs approximately 265 people across Canada. Additional information about Genworth Financial Canada is available at Preface This report provides an in-depth analysis of the housing market at the national, provincial, and metropolitan levels. Covering a wide range of housing market statistics, such as interest rates, housing starts, mortgage approvals, and home prices, this report connects the economy with housing market activity. It also provides insights into the financial situation of consumers. Nine census metropolitan areas are covered: Québec City, Montréal, Toronto, Ottawa Gatineau, Winnipeg, Calgary, Edmonton, Vancouver, and Victoria. Provincial coverage includes the Atlantic provinces, Quebec, Ontario, the Prairies, Alberta, and British Columbia. This report is completed two times a year, in the spring and fall.

3 Contents What Has Changed? Executive Summary National Overview Canada Provincial Overview Atlantic Canada Quebec Ontario Prairies Alberta British Columbia Metropolitan Overview Québec City Montréal Toronto Ottawa Gatineau Winnipeg Calgary Edmonton Vancouver Victoria

4 What Has Changed? Real gross domestic product in Canada is forecast to increase by 3.2 per cent in 21, up from 2.9 per cent in the previous Metropolitan Housing Outlook. Real GDP rose by 5 per cent, seasonally adjusted at annual rates, in the fourth quarter of 29, as consumption, government spending, and exports were all stronger than expected. The Canadian dollar is expected to average US$.98 this year, up considerably from the previous forecast of US$.92. Higher commodity prices and strong economic fundamentals, including Canada s healthy banking system and abundant raw materials, account for the upward revision. Continued low interest rates and tight resale supply have pushed housing starts up much higher than expected so far in 21. Activity in the new home market has also been spurred by buyers trying to purchase homes before sales tax harmonization, through the HST, comes into effect in Ontario and British Columbia on July 1. Starts are now forecast to reach 187,3 units this year, an upward revision from the 164,8 units in the last outlook. In line with higher demand, the growth in new homes prices is also now expected to be stronger in 21. In the current outlook, the average price of a new home is forecast to rise by 1.6 per cent this year. This compares with no growth in the last forecast. Resale price growth will also be higher than was previously expected 3.7 per cent versus 1.7 per cent. Stronger-than-expected activity in both the new and existing markets will translate into higher growth in mortgage approvals, both in terms of volumes and dollar value. The previous forecast called for the number of mortgage approvals to grow by 1.3 per cent in 21 and for their value to increase 2.7 per cent. It is now expected that the volume of mortgage approvals will rise 6. per cent this year and their dollar value by 3.5 per cent. 2 The Conference Board of Canada

5 Executive Summary National Overview After three consecutive quarterly declines, Canada s real gross domestic product advanced modestly in the third quarter of 29 and surged to an annualized pace of 5 per cent in the fourth quarter. Thus, after contracting by 2.6 per cent in 29, real GDP in Canada is expected to advance by 3.2 per cent in 21.3 points higher than forecast in our previous Metropolitan Housing Outlook. Household and government spending will be this year s biggest contributors to economic growth. Private sector investment is also recovering, though at a slower pace. Similar overall GDP growth of 3.3 per cent is on tap for 211. Annual output advances are forecast to average 3 per cent in Even though employment and real GDP remain well below potential, Bank of Canada officials are concerned about nascent inflationary pressures. Indirect tax increases like the introduction of the harmonized sale tax in Ontario and British Columbia and increases in the Quebec sales tax, along with rising energy prices and mortgage rates, will lift inflation, despite a partial offset from the high Canadian dollar. Such tensions, combined with domestic economic strength, will likely force the Bank to start raising rates mid-year. The onset of the recession in 28 cut housing starts 7.6 per cent that year and a further 29.4 per cent in 29. This slowdown limited new home prices to a 3.4 per cent increase in 28 and cut them 2.3 per cent last year. On the resale side, recordlow mortgage rates and the emergence of a recovery in the second half of 29 boosted homebuyer enthusiasm, leading to strong demand for existing dwellings and rising resale prices. The recovery has also spurred housing starts, reducing supply concerns. Early this year, starts were nearing annualized levels of 2, units, well above the 13, units during the first half of 29. Low interest rates and the push to buy homes before the July 1 sales tax harmonization in Ontario and British Columbia will keep both new and resale markets strong through the first half of 21. Thereafter, tighter mortgage qualification rules, rising interest rates, and the harmonized sales tax will cool housing demand. Total housing starts are forecast to average 187,3 this year and 193,6 in 211. These figures are well below the average annual 221,3 housing starts recorded over 22 to 28. Meanwhile, total mortgage approvals rose by double-digit rates last year, both in level and dollar terms. Recent years price hikes have forced more buyers into highratio loans. These grew more than twice as fast as conventional mortgage approvals last year. Approvals are expected to increase again in 21, albeit at a slower rate. Growth in approvals was expected to remain strong through the first quarter of this year, then soften as interest rates rise and new government rules on mortgage qualifications bite. Still, volumes of conventional and highratio mortgage approvals are expected to increase by 5.8 per cent and 6.2 per cent respectively this year. But weaker price growth in 21 will mean dollar volumes of mortgage approvals will rise at a slower pace than the number of approvals for the first time since the early 199s. Mortgage approvals will continue to soften in 211, resulting in a 3.7 per cent decrease in the number of approvals for the year as a whole. Provincial Overview Housing starts fell in all regions during 29 but are projected to rise everywhere in 21, albeit modestly in Quebec and Atlantic Canada. Resale prices, down only in Alberta last year, are forecast to advance across the board in 21. New house prices are slated to rise tepidly, following mixed 29 results. British Columbia s GDP is forecast to grow 3.7 per cent in 21, following last year s 2.5 per cent decline. Forestry sector improvement will set a more positive economic tone. The 1.7 per cent gain in employment in 21 will partially reverse the 2.4 per cent loss in 29. Housing starts are projected to leap 68.6 per cent to over 27, units this year, following two annual setbacks, but remain well below 27 s peak. House price growth will accelerate this year to 2.6 per cent for new homes and 4.3 per cent for resale units. The Conference Board of Canada 3

6 Alberta s economy is also in recovery, largely thanks to firmer energy prices. Real GDP is forecast to expand 2.5 per cent and employment will rise 1. per cent this year. Housing starts, down 3. per cent last year, are forecast to jump 47.3 per cent to 3, units in 21, but are not expected to regain peak levels during our forecast. House prices have stopped falling; the average new home value is expected to rise fractionally in 21, and the average resale value is expected to be up nearly 4 per cent. The combined GDP of Manitoba and Saskatchewan is predicted to rise 2.2 per cent in 21 after a 2.4 per cent dip in 29. While employment grew last year, its.7 per cent gain was a four-year low. Similar growth is forecast for 21. Manitoba s recovery will feature manufacturing sector expansion, increased mining extraction, and a robust finance, insurance, and real estate industry. Saskatchewan will enjoy rebounding commodity markets and improved potash sales. An 18.3 per cent rise to nearly 9,6 housing starts is forecast for 21, after last year s 34.7 per cent drop. House price growth was nil for new homes in 29 and under 5 per cent for existing units. Little change in new home prices is expected again in 21, but existing house values are predicted to rise 2.4 per cent. Ontario is expected to bounce back from a 3.6 per cent GDP contraction in 29 to post 3.5 per cent growth this year. Exports, particularly of automobiles and their parts, will fuel the recovery. Employment, down 2.4 per cent in 29, is forecast to rise 1.1 per cent in 21. Housing starts fell by a third to 5, units in 29, the fewest since 1996, but a forecast 31.4 per cent jump this year will produce nearly 66, units. Price increases are set to clock in at 1.7 per cent for new homes and 4.2 per cent for resale dwellings. Quebec s 29 downturn was comparatively moderate, and so its recovery will also be muted. The 2.2 per cent GDP expansion forecast for 21 significantly lags Canada s expected 3.2 per cent. The province s manufacturing sector, although expected to expand, will be held back by past declines in aerospace orders and the high Canadian dollar. Although job counts dipped less than 1 per cent during 29, this year s forecast gain is only.6 per cent. Housing starts have fallen in four of the past five years, including 29 s 9.3 per cent dip to 43,45 units. Little improvement is expected for 21. New home prices are slated to rise 1.3 per cent this year a 12-year low while prices for resale units are forecast to grow 2.9 per cent, down from 4.4 per cent in 29. The combined output of the four Atlantic provinces is forecast to rise 2. per cent in 21, following last year s 1.6 per cent contraction. Stronger oil output and a return to production at the Voisey s Bay mine headline prospects for Newfoundland and Labrador. Wind power generation in Prince Edward Island, production from the Deep Panuke natural gas field in Nova Scotia, and prospective potash mining in New Brunswick are other highlights. In turn, employment will rebound from 29 s.6 per cent decline, increasing.7 per cent this year. Housing starts are forecast to rise 1.1 per cent in 21, after drops of 1.3 per cent and 11. per cent in the last two years. Price growth for both new and existing houses will slow this year, to.5 per cent for new units and.9 per cent for existing homes. Municipal Overview All nine cities covered by this report are forecast to enjoy economic expansion in 21 following across-the-board declines in 29. GDP advances are slated to range from 2.2 per cent in Winnipeg to 4. per cent in Vancouver. Most cities will see growth accelerate in 211; only Ottawa Gatineau, Vancouver, and Victoria will see the pace of growth ease. The Alberta cities are forecast to enjoy the strongest growth prospects as GDP is expected to advance at least 4.3 per cent per year on average. All cities except Québec City suffered housing starts declines during 29. Drops ranged from an 8.4 per cent dip in Edmonton to a 58.1 per cent plunge in Vancouver. Québec City starts rose 1.7 per cent. For all five of our Western cities, 29 represented the second straight year of declining starts, putting construction sharply off peak volumes. This was true only for Montréal in the East. While most cities are forecast to see advances in 21, expected starts will typically remain below their peak. In Vancouver, for example, while starts are slated to advance 75.5 per cent this year, our nine cities largest relative gain, the 14,4-unit volume will still lag 27 s high near 2,64 units. Conditions are similar in the other four Western cities, but mixed patterns are expected in the East: Toronto is forecast to see 22.1 per cent more 4 The Conference Board of Canada

7 starts this year, while new home construction is expected to ease in Ottawa Gatineau and Québec City. While sales of existing homes are forecast to rise in all nine cities this year, increases will typically lag 29 advances. Winnipeg is one exception, as its sales fell last year. Québec City will also see slightly faster growth. Toronto s 12.5 per cent sales increase leads 21 projections, while Ottawa Gatineau should see sales rise only 1.5 per cent. Transactions are forecast to rise more slowly across the board in 211, with outright decreases expected in four cities. This report s cities are all expected to feature balanced markets in 21. This represents cooling everywhere, since the sales-to-new-listings ratio is forecast to dip in all nine cities this year. Québec City, Vancouver, and Victoria are expected to have the strongest markets this year, with ratios of per cent. Other cities ratios are clustered between 57 and 59 per cent. Balanced resale markets suggest moderate price hikes. Led by Edmonton s projected 4. per cent increase, the highest in this report, prices in our four westernmost cities are set to rebound from declines last year. In 211, expected price growth will range from Winnipeg s 1.4 per cent to 3.1 per cent in Victoria. Low mortgage rates and softer house prices cut principle and interest payments deeply in all nine of our cities during 29. Québec City s 13.5 per cent payment drop was last year s smallest, while Calgary s payment fell 23.5 per cent. Although principle and interest charges are slated to rise everywhere in 21, hikes will be moderate. Vancouver s 3.6 per cent rise will be the largest. The Conference Board of Canada 5

8 Economic Indicators GDP (22 $ millions) Employment (s) Unemployment Rate Personal Income per Capita Retail Sales ($ millions) 29 21f 211f 29 21f 211f 29 21f 211f 29 21f 211f 29 21f 211f Canada 1,286,431 1,328,144 1,371,697 16,849 17,117 17, ,581 37,722 39,12 413, ,87 458, Atlantic Provinces 68,877 7,236 72,314 1,13 1,111 1, ,888 32,538 33,713 3,867 31,937 33, Quebec 244, , ,17 3,844 3,868 3, ,35 34,86 35,18 94,127 97,256 11, Québec City 24,548 25,161 25, ,436 37,97 38,147 11,29 11,71 12, Montréal 12, , ,443 1,879 1,911 1, ,377 35,57 36,5 42,36 43,831 46, Ontario 473,546 49,97 58,21 6,528 6,62 6, ,722 37,626 39,47 147,14 153, , Ottawa Gatineau 45,46 46,678 47, ,954 41,764 42,713 14,71 15,278 15, Toronto 216, , ,576 2,89 2,942 3, ,58 39,39 4,736 58,22 6,81 64, Prairies 76,619 78,331 8,395 1,128 1,135 1, ,965 34,916 35,872 28,755 29,789 3, Winnipeg 25,31 25,578 26, ,43 37,2 38,176 9,319 9,67 1, Alberta 173,5 177,42 184,722 1,99 2,1 2, ,89 48,524 5,543 55,42 56,116 59, Calgary 61,888 63,61 66, ,422 54,586 56,248 2,223 2,524 21, Edmonton 49,93 51,358 53, ,623 44,864 46,39 17,595 17,85 19, British Columbia 147, , ,96 2,259 2,297 2, ,645 36,371 37,484 53,431 56,433 59, Vancouver 79,799 82,983 86,13 1,234 1,249 1, ,319 36,97 38,225 24,216 25,836 27, Victoria 11,55 11,868 12, ,246 4,6 41,37 3,739 3,931 4, Sources: Bank of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association; Statistics Canada; The Conference Board of Canada. 6 The Conference Board of Canada

9 Demographic and Housing Indicators Population (s) Housing Starts Housing Completions Existing Home Prices New Home Prices 29 21f 211f 29 21f 211f 29 21f 211f 29 21f 211f 29 21f 211f Canada 33,69 34,9 34, ,81 187, ,63 176, ,12 181, , , , ,56 393,187 4, Atlantic Provinces 4,444 4,476 4,499 1,888 11,9 9,285 11,275 1,832 9, , , , , , , Quebec 7,82 7,881 7,938 43,452 43,572 39,53 44,228 44,44 4, ,63 231,44 235, ,841 29, , Québec City ,416 4,93 4,87 5,12 5,342 4, , , ,57 215, , , Montréal 3,815 3,861 3,93 19,39 19,755 19,549 19,486 19,826 19, ,21 278, ,462 32,377 35,73 311, Ontario 13,52 13,175 13,331 5,177 65,956 74,77 56,179 56,768 65,63 315, ,92 335,53 463, ,337 48, Ottawa Gatineau 1,221 1,235 1,244 8,916 8,835 6,525 9,44 9,135 7, , ,52 297, , , , Toronto 5,623 5,717 5,82 26,237 32,46 38,37 28,356 32,4 38,362 49,759 42, ,79 536, ,15 555, Prairies 2,247 2,273 2,292 8,74 9,55 8,931 9,759 8,96 8,82 216, , , ,16 358, , Winnipeg ,31 2,522 2,798 2,67 2,468 2,767 27, ,13 214, ,52 383, , Alberta 3,675 3,736 3,85 2,43 3,44 31,62 27,44 24,561 28,78 34,53 353,63 362, ,461 43,89 438, Calgary 1,23 1,263 1,29 6,192 8,689 9,957 8,238 8,431 9,25 385, ,459 48, , ,58 487, Edmonton 1,155 1,18 1,21 6,199 8,316 9,15 9,232 7,558 8,29 32, ,95 341, ,78 377, , British Columbia 4,449 4,59 4,57 16,89 27,128 29,494 25,94 2,761 26, , ,46 491,71 622, , , Vancouver 2,328 2,369 2,45 8,228 14,443 16,64 16,788 12,799 13,18 592,474 65, , , , , Victoria ,6 1,421 1,752 2,463 1,24 1, ,13 49,78 56,33 43, , , Financial Indicators (Canada only) 29 21f 211f 29 21f 211f 29 21f 211f Exchange rate (US$/C$) One-year mortgage rate Federal bonds: 1 3 years Inflation rate Three-year mortgage rate Federal bonds: 7 years Bank rate Five-year mortgage rate Federal bonds: long term Sources: Bank of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association; Statistics Canada; The Conference Board of Canada. The Conference Board of Canada 7

10 Canada Household and government spending roared ahead over the second half of 29, putting Canada's economy on a firm path of recovery. Activity in the housing market has picked up significantly. In particular, demand for existing homes surged in recent months. Meanwhile, new home construction is on the comeback trail too, as housing starts are expected to rise by 25.6 per cent this year. Price growth in the resale market is forecast to remain fairly strong this year, at 3.7 per cent, while new home prices are expected to rise by a modest 1.6 per cent. Mortgage approvals are expected to grow by a solid 6. per cent this year, before dipping in 211 as higher mortgage rates begin to bite. Economic Outlook Given the collapse of the global economy in 28 and 29, Canada is in a remarkably good position today. Prudent Canadian financial institutions survived the turmoil relatively unscathed. Housing markets endured only a temporary downswing in prices, and labour markets did better than expected, with most firms hanging on to their employees despite a massive hit to corporate profits. These factors helped maintain household income and confidence, encouraged consumers to reopen their wallets, and (coupled with unprecedented monetary and fiscal stimulus) have put the Canadian economy firmly on a path of recovery. After three consecutive quarterly declines, Statistics Canada reported meek real growth in the economy in the third quarter of 29. Growth then surged in the fourth quarter with real gross domestic product advancing at an annualized pace of 5 per cent. Thus, after contracting by 2.6 per cent in 29, real GDP in Canada is forecast to advance by 3.2 per cent in 21.3 points higher than forecast in our previous housing outlook. Household and government spending will be the biggest contributors to economic growth this year. Private sector investment is also recovering, though at a slower pace. Similar overall GDP growth of 3.3 per cent is on tap for 211, and annual output advances are forecast to average 3 per cent in Financial Markets Outlook Even though employment and real GDP remain well below potential, Bank of Canada officials are concerned about budding inflationary pressures that have been showing up in the Bank s measure of core inflation. Moreover, indirect tax increases in the form of sales tax harmonization in Ontario and British Columbia and increases in the Quebec sales tax will complicate the Bank s efforts to tame overall inflation. Higher costs of living will undoubtedly put some upward pressure on wages over the next two years. Meanwhile, rising energy prices and mortgage rates will add to home ownership and transportation costs. These factors will help lift overall Consumer Price Index inflation to 1.8 per cent in 21 and 2.6 per cent in 211. However, inflationary pressures are being partly offset by the highflying Canadian dollar. While higher commodity prices are helping to restore profits, cash flow, and capital investment in the resource sector, they are also putting significant upward pressure on the value of the Canadian dollar. Over the first quarter of 21, the loonie averaged over US$.96, a 2 per cent appreciation over year-ago Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) 25, 2, 15, 1, 5, Singles Multiples 2 year average f 11f 12f 13f 14f New Resale 8 9 1f 11f 12f 13f 14f Series Database. Series Database; Canadian Real Estate Association. 8 The Conference Board of Canada

11 levels. As the global recovery becomes more firmly entrenched, Canada s solid banking system, strong domestic economy, relatively healthy fiscal situation, and wealth in raw materials especially oil will continue to support a strong loonie. Moreover, the strength of the Canadian economy, coupled with budding inflationary pressures, will likely force the Bank of Canada to remove stimulus and start raising rates by mid-year. Increases in the bank rate are thus expected to lead rate hikes in the United States a factor that will be enough to push the loonie above parity temporarily. Overall, the Canadian dollar is forecast to average US$.98 this year and just above parity in 211. Housing Outlook The start of the global recession in 28 brought the housing market to its knees. In the new home market, construction plummeted, a reaction typical of prudent developers. Housing starts dropped 7.6 per cent that year and 29.4 per cent in 29. In turn, new home prices increased by a much more modest 3.4 per cent in 28, and then fell 2.3 per cent last year the first annual decline in new home prices since But the economy started to recover in the second half of 29, leading to a solid rebound in consumer confidence. Added to this was a limited supply of new homes and record-low mortgage rates, and the result was frenzied demand for existing homes. Home resale activity has been solid in most regions of the country, and listings have so far failed to keep pace. Accordingly, prices have climbed sharply. However, the strong demand for resale homes has encouraged developers to start building again. Early this year, housing starts closed in on annualized levels just shy of 2, units, after averaging just 13, units over the first half of 29. Low interest rates and the push to buy homes before the July 1 sales tax harmonization in Ontario and British Columbia will keep the housing market strong through the first half of 21. The federal government also announced stricter mortgage rules that took effect on April 19. The implementation of tighter mortgage rules and of the HST in Ontario and B.C., combined with rising interest rates, will cool the heated housing market. True, housing starts are forecast to climb from 149, units in 29 to 187,3 in 21 and to 193,6 in 211. But these figures are well below the average annual 221,3 housing starts recorded over 22 to 28. Mortgage Outlook Interest rates declined steadily over the past two years as the Bank of Canada sought to improve liquidity in the financial system and help stimulate the economy. Mortgage rates fell in tandem with overall interest rates the conventional five-year rate reached a low of 5.6 per cent last year. Mortgage rates are expected to bottom out at 5.3 per cent in the second quarter of 21, and then begin to move back upward to average 6.5 per cent in 211. The persistence of low interest rates kept mortgage demand on an upward trend through the recession. Total mortgage approvals rose by double-digit rates last year, in level and dollar terms. But with more buyers forced into the high-risk category (meaning they have less than a 25 per cent down payment), high-risk mortgage approvals grew more than twice as fast as conventional mortgage approvals last year. Mortgage approvals are expected to increase again in 21, albeit at slower rate. Growth in approvals was expected to remain strong through the first quarter of this year, but will Chart 3 Mortgage Approval Growth (dollar volume per cent change) Chart 4 Household Net Worth (as a per cent of disposable income) Conventional High ratio f 11f 12f 13f 14f Sources: The Conference Board of Canada; GE Mortgage Insurance Canada; CMHC Housing Time Series Database Sources: The Conference Board of Canada; Statistics Canada. The Conference Board of Canada 9

12 soften as interest rates rise and as the government s stricter rules on mortgage qualifications take effect. The implementation of the HST in Ontario and British Columbia on July 1 will also limit mortgage approval growth in these two key provinces. In fact, future demand has likely been pulled forward by buyers seeking to purchase homes before interest rates rise and before the HST and stricter mortgage rules are implemented. In unit terms, total mortgage approvals are expected to climb by 6. per cent this year, before falling by 3.7 per cent in 211. Similar results are expected in both the conventional and high-ratio markets. The number of conventional mortgage approvals is expected to increase by 5.8 per cent this year and then dip by 3.9 per cent in 211. The number of high-risk approvals is forecast to rise 6.2 per cent in 21 and fall by 3.4 per cent next year. Chart 5 Consumer Finances: Atlantic Provinces Chart 6 Consumer Finances: Quebec Mort. in arrears (%) Mort. in arrears (%) Bankruptcies per 1 mil. persons Bankruptcies per 1 mil. persons Sources: The Conference Board of Canada; Canadian Bankers Association; Superintendent of Bankruptcy Canada. Sources: The Conference Board of Canada; Canadian Bankers Association; Superintendent of Bankruptcy Canada. Chart 7 Consumer Finances: Ontario Chart 8 Consumer Finances: Prairie Provinces Mort. in arrears (%) Mort. in arrears (%) Bankruptcies per 1 mil. persons Bankruptcies per 1 mil. persons Sources: The Conference Board of Canada; Canadian Bankers Association; Superintendent of Bankruptcy Canada. Sources: The Conference Board of Canada; Canadian Bankers Association; Superintendent of Bankruptcy Canada. Chart 9 Consumer Finances: Alberta Chart 1 Consumer Finances: British Columbia Mort. in arrears (%) Mort. in arrears (%) Bankruptcies per 1 mil. persons Bankruptcies per 1 mil. persons Sources: The Conference Board of Canada; Canadian Bankers Association; Superintendent of Bankruptcy Canada. Sources: The Conference Board of Canada; Canadian Bankers Association; Superintendent of Bankruptcy Canada. 1 The Conference Board of Canada

13 Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at market prices 1,315,97 1,321,36 1,286,431 1,328,144 1,371,697 1,417,153 1,459,993 1,497,455 (22 $ millions) Total employment (s) 16,864 17,121 16,849 17,117 17,545 17,9 18,161 18, Unemployment rate (%) Personal income per capita ($) 35,597 36,861 36,581 37,722 39,12 4,513 41,883 43, Population (s) 32,887 33,276 33,69 34,9 34,458 34,834 35,219 35, Retail sales ($ millions) 412,37 426,47 413, ,87 458, , ,22 517, Exchange rate (U.S./Can.) Inflation rate (%) Table 2 Financial Indicators (%) Bank rate Prime lending rate Three-month Treasury bill One-year conventional mortgage rate Three-year conventional mortgage rate Five-year conventional mortgage rate Federal bonds: 1 year Federal bonds: 5 years Federal bonds: 7 years Federal bonds: 1 years Federal bonds: long term Table 3 Housing Indicators Housing starts 228, ,56 149,81 187, ,63 198,926 2,165 22, Singles 118,917 93,22 75,659 99,189 11,345 12,864 11,61 12, Multiples 19, ,854 73,422 88,7 92,285 96,62 98,555 1, Housing completions 29, , , ,12 181,688 19, , , Singles 115,75 14,92 78,367 92,98 97,762 11,48 1,68 1, Multiples 93,432 11,123 98,475 84,31 83,926 89,45 92,944 95, Average price of a new home ($) 383, , ,56 393,187 4,515 49, ,1 427, Average price of a resale home ($) 36,72 31, , , , , ,543 36, Sources: The Conference Board of Canada; Bank of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 11

14 Atlantic Canada Stronger economic growth will not translate into a rapid recovery for Atlantic Canada s housing market this year. Growth in housing starts will be held to 1.1 per cent as the market begins to adjust to underlying demographic fundamentals. By the end of the forecast period in 214, housing starts in the Atlantic region are predicted to be nearly 2 per cent, or 2, units, lower than their current level. In response to the lower demand, price growth in the new and resale home markets is also expected to moderate. Economic Outlook Real gross domestic product in Atlantic Canada fell by 1.6 per cent in 29, dragged down by a 5.5 per cent contraction in the Newfoundland and Labrador economy. Fortunately, rising demand for commodities and the eventual resumption of operations at the Voisey s Bay nickel mine and mill will help real GDP in the province expand 2.4 per cent in 21. After slipping by.2 per cent in 29, Nova Scotia s economy will benefit from $8 million in government stimulus spending and a revival in consumer demand, which will help lift growth in real GDP by 1.9 per cent. New Brunswick is also expected to ride the tide of economic recovery, with real GDP expected to advance by 1.7 per cent, up from last year s mild contraction of.4 per cent. In Prince Edward Island, public spending on goods and services helped the provincial economy stay out of recession in 29 and will support a 1.8 per cent increase in real GDP for the province. Overall, Atlantic Canada s economy is set to grow by 2. per cent in 21. Housing Outlook Pent-up demand and healthy economic growth averaging 4.3 per cent annually in Atlantic Canada from 1999 to 23 helped housing starts increased by 11.8 per cent per year. In fact, starts hit a 14-year high of 13,1 units in 23. But with demand largely satisfied and economic growth slipping to 1.3 per cent, builders cut starts by an average of 3 per cent per year from 24 to 26. Price growth in the new home market also eased slightly, to an annual average of 2.5 per cent, from 3. per cent per year from 1999 to 23. Resale price growth remained high during this entire period, however, averaging a stronger 6.1 per cent per year. Significant growth in Newfoundland and Labrador s oil and gas sector helped to boost the demand for new housing once more in 27, in turn pushing total starts in the Atlantic region up by 3.7 per cent. Unfortunately, the upswing didn t last long. The beginnings of a global downturn in late 28 had consumers turning their backs on the market in 28 and 29, leading to declines in housing starts in both years. Better economic conditions in 21 and low interest rates are expected to bring some consumers back to the new home market, lifting housing starts by 1.1 per cent to 11, units this year. However, at this level, starts are well above demographic requirements for the region. At the same time, interest rates are expected to start rising to more normal levels, dampening demand for new homes. As a result, starts are expected to weaken over the coming years, Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) 15, 12, 9, 6, 3, Singles Multiples 2 year average f 11f 12f 13f 14f New Resale f 11f 12f 13f 14f Series Database. Series Database; Canadian Real Estate Association. 12 The Conference Board of Canada

15 falling by 4.8 per cent per year from 211 to 214. Construction is expected to begin on 9,1 new homes in 214, about 1,7 units below the 2-year average. Price growth in both the new and resale markets is also forecast to slow. Indeed, the average price of a new home is expected to rise by just.5 per cent in 21, while resale prices will grow by.9 per cent the lowest annual increases since From 211 to 214, average annual new and resale home price growth is forecast to come in at 1.9 per cent and 1.8 per cent, respectively. Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 69,185 69,994 68,877 7,236 72,314 74,65 75,78 76,48 (22 $ millions) Total employment (s) 1,97 1,11 1,13 1,111 1,129 1,156 1,16 1, Unemployment rate (%) Personal income per capita ($) 3,54 31,374 31,888 32,538 33,713 35,227 36,381 37, Population (s) 4,38 4,47 4,444 4,476 4,499 4,52 4,543 4, Retail sales ($ millions) 29,15 3,789 3,867 31,937 33,152 34,871 36,5 36, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators f 211f 212f 213f 214f Housing starts 12,391 12,229 1,888 11,9 9,285 9,495 9,43 9, Singles 8,377 8,41 7,37 8,359 6,927 6,946 6,88 6, Multiples 4,14 3,828 3,518 2,65 2,358 2,549 2,595 2, Housing completions 11,463 12,496 11,275 1,832 9,597 9,49 9,587 9, Singles 7,515 8,413 7,43 7,767 7,253 7,3 6,951 6, Multiples 3,948 4,83 3,844 3,65 2,343 2,46 2,636 2, Average price of a new home ($) 275,422 35, , , ,2 327,32 334,49 34, Average price of a resale home ($) 158, , , , , , ,52 197, Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 13

16 Quebec Quebec s economy will expand by 2.2 per cent this year, following a 2. per cent dip in 29. The improving economy will allow housing starts to increase slightly, despite rising mortgage rates. But a boom in the province s housing market through the early years of the previous decade resulted in a current level of starts that remains above demographic fundamentals, in spite of declines in 28 and 29. Accordingly, in the coming years, housing starts are expected to trend downward and price growth for new and resale housing will moderate. Economic Outlook While other provinces were deeply affected by the global recession, Quebec managed to delay the decline and even reduce the damage done. Timely public infrastructure investment flowed into the province, and the aerospace industry had orders to fill for much of 29. Nevertheless, the province s real gross domestic product still declined by 2. per cent last year. And because Quebec experienced a more moderate decline in output than many other provinces, it will not enjoy as strong a rebound. In fact, the economy is expected to expand by a modest 2.2 per cent this year, ranking it sixth out of the ten provinces in terms of growth. Because of the long-term nature of aerospace orders, this industry will continue to suffer declines in output until its recovery begins in 211. The high-valued Canadian dollar and relatively fragile demand will not make things easier on other manufacturing industries such as pulp and paper. Overall, exports will grow only moderately this year, after a double-digit decline in 29. Housing Outlook From 21 to 24, strong demand, thanks to low interest rates and pent-up demand from the previous decade, led to average annual growth in housing starts of 25 per cent. Prices followed suit, rising by 5.7 per cent per year, on average, to reach $231,. Meanwhile, resale prices grew by an average of 11.3 per cent annually, indicating strength in the existing home market as well. But as growth in the provincial economy slowed in 25, so too did demand for new homes. Builders began to pull back from the market, reducing starts by nearly 19 per cent over 25 and 26. Better growth in real GDP brought a few builders back to the market in 27, increasing starts a modest 1.4 per cent. But, as the recession became reality in late 28, builders once again exercised caution, leading to a 1.3 per cent decline in housing starts that year and a further 9.3 per cent drop in 29. Although still healthy, price growth has also slowed. The average price of a new home increased 4.8 per cent annually from 26 to 28, before slowing further to 2.9 per cent in 29. In the resale home market, price growth averaged 5.8 per cent per year from 25 to 28, and then decelerated to 4.4 per cent last year. Still, new home prices in the province averaged $286,8 in 29 while resale home prices topped $224, over $1, more than at the start of the decade. Although starts are forecast to increase slightly in 21 (up.3 per cent), Quebec s new home market is expected to lose steam in the coming years. In spite of the recent declines, Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) 5, 4, 3, 2, 1, Singles Multiples 2 year average f 11f 12f 13f 14f New Resale f 11f 12f 13f 14f Series Database. Series Database; Canadian Real Estate Association. 14 The Conference Board of Canada

17 demographic requirements for the province suggest that the current level of housing starts is still too high. Starts are therefore expected to decline 9.6 per cent per year on average from 211 to 213. Price growth will continue to slow this year in both the new and resale home markets. New home prices are forecast to rise by 1.3 per cent in 21 and then average growth of 2.3 per cent annually from 211 to 214. The resale market is expected to see prices rise 2.9 per cent this year and then by an annual average of 2.5 per cent through the medium term. Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 246,3 249, , , ,17 261,52 266, ,762 (22 $ millions) Total employment (s) 3,852 3,881 3,844 3,868 3,922 3,982 4,1 4, Unemployment rate (%) Personal income per capita ($) 32,511 33,369 33,35 34,86 35,18 36,338 37,46 38, Population (s) 7,68 7,745 7,82 7,881 7,938 7,996 8,53 8, Retail sales ($ millions) 9,663 95,326 94,127 97,256 11,938 16,667 11, , Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators f 211f 212f 213f 214f Housing starts 48,553 47,94 43,452 43,572 39,53 33,355 32,33 32, Singles 22,177 19,781 17,54 2,657 18,96 15,973 15,218 15, Multiples 26,376 28,123 25,948 22,915 2,624 17,382 16,815 17, Housing completions 49,242 47,654 44,228 44,44 4,394 36,943 33,12 32, Singles 21,857 19,172 16,85 18,355 19,57 17,158 15,36 15, Multiples 27,385 28,481 27,378 26,85 21,337 19,784 17,796 17, Average price of a new home ($) 265, , ,841 29, ,61 32,655 39, , Average price of a resale home ($) 27, , ,63 231,44 235, ,9 248, , Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 15

18 Ontario A rebound in Ontario s economy this year will help boost demand for new homes. After falling by 33.2 per cent last year, housing starts are forecast to rise by 31.4 per cent in 21, although prices will increase by just 1.7 per cent. But growth in resale prices will continue to be fairly strong in 21, coming in at 4.2 per cent. Both markets are expected to see moderate price growth near 2.5 per cent through the medium term. Economic Outlook After a crippling 29, when virtually every aspect of Ontario s economy suffered from the effects of the global recession, 21 will prove to be a year of gradual recovery for the province. Net depletions of capital stock most importantly, of automotive machinery and equipment will nearly be reversed this year, allowing Ontario to bring more of its significant industrial production capacity back online. Meanwhile, export growth will pick up steam alongside a broad recovery in the U.S. consumer sector. At the same time, government infrastructure spending will continue to grow at a double-digit pace for a second consecutive year, backstopping a feeble resurgence in private-sector construction investment. All told, Ontario s economy will grow by 3.5 per cent in 21 and by a further 3.7 per cent in 211 as private sector activity accelerates. Housing Outlook Healthy economic growth through the second half of the 199s, together with spillover demand from the resale market and lower interest rates after 21, propelled housing starts to an average annual increase of 11.9 per cent from 1996 to 23. But the 85,2 new homes started in 23 were above Ontario s demographic requirements, and so builders began to retreat from the market. Housing starts slipped.1 per cent in 24 and then by 7.2 per cent per year, on average, over 25 to 27, bringing them back down to 68,1 units by 27. Growth in new home prices remained fairly strong from 24 to 27, increasing by an average of 4 per cent annually, up slightly from the 3.9 per cent average annual growth over 1997 to 23. Resale prices increased at an even faster 7.2 per cent per year over 24 to 27. Housing starts increased in 28, rising by 1.2 per cent. But this growth was entirely driven by a jump in multiple starts in the first quarter of the year, thanks to new high-rise construction in downtown Toronto. As the worldwide economic slowdown took hold in late 28, consumers exercised a great deal of caution, reducing expenditures, especially on big-ticket items. Accordingly, housing starts tumbled through the final three quarters of the year and into first half of 29 as well, leading to an overall decline of 33.2 per cent in 29. Fortunately, the worst of the recession is over. Real gross domestic product increased in the last two quarters of 29 and further improvements are expected for 21. This year is expected to see 74, new jobs and steady growth in wages and personal disposable incomes, factors that will help boost consumer spending by 2.5 per cent in real terms. In turn, housing starts are expected to rebound by 31.4 per Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) 1, 8, 6, 4, 2, Singles Multiples 2 year average f 11f 12f 13f 14f New Resale f 11f 12f 13f 14f Series Database. Series Database; Canadian Real Estate Association. 16 The Conference Board of Canada

19 cent in 21. Higher interest rates will result in lower, albeit still strong, growth of 13.4 per cent in starts in 211. New home price growth stagnated in 29, in line with the decline in housing starts. Growth in new home prices over the next two years is expected to remain modest, at 1.7 per cent in 21 and 1.9 per cent in 211. Meanwhile, price growth in the resale market is forecast to reach 4.2 per cent this year, before slowing to 2. per cent next year. Over the medium term (212 to 214), price growth in the new and resale housing markets is projected to average a moderate 2.5 per cent per year. Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 492, , ,546 49,97 58,21 527,48 543, ,632 (22 $ millions) Total employment (s) 6,592 6,687 6,528 6,62 6,797 7,4 7,154 7, Unemployment rate (%) Personal income per capita ($) 36,362 37,324 36,722 37,626 39,47 4,521 41,894 43, Population (s) 12,777 12,917 13,52 13,175 13,331 13,496 13,672 13, Retail sales ($ millions) 146, ,39 147,14 153, ,19 172,23 179,73 186, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators f 211f 212f 213f 214f Housing starts 68,123 75,72 5,177 65,956 74,77 83,439 86,33 87, Singles 37,91 31,15 22,647 32,92 37,81 4,51 4,938 41, Multiples 3,213 43,967 27,529 33,37 37,689 42,939 45,392 46, Housing completions 64,111 67,881 56,179 56,768 65,63 75,522 81,444 83, Singles 36,38 34,538 24,81 27,38 34,372 38,852 4,242 4, Multiples 27,731 33,343 31,377 29,388 3,69 36,669 41,22 43, Average price of a new home ($) 445,99 463, , ,337 48, ,552 54, , Average price of a resale home ($) 299,677 31,16 315, ,92 335,53 343, ,125 36, Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 17

20 Prairies Decent economic conditions prevailing on the Prairies are generating housing market optimism. GDP growth this year will largely erase last year s downturn, while continued employment growth will keep the unemployment rate relatively low. Housing starts are on the mend, with good fourth-quarter volumes a highlight in 29. Healthy expected population growth should maintain housing demand, keeping starts above historical averages. Regional house price growth has slowed following several brisk years and is expected to remain moderate for both new and existing units. Economic Outlook Following a 2.4 per cent dip in 29, Manitoba and Saskatchewan s combined gross domestic product is forecast to expand 2.2 per cent in 21 and average 2.7 per cent growth per year in Uniquely among our six regions, employment rose during the 29 downturn, although its.7 per cent gain was the smallest in four years. Similar job growth is forecast for 21, but acceleration to 1.5 per cent is on tap for And, while faster growth in the labour force nudged the unemployment rate up to 5 per cent last year, it was over three percentage points below Canada s average. This year s expected unemployment rate, 5.6 per cent, remains modest by national standards. Manitoba should enjoy broad-based expansion as its manufacturing sector recovers, mining companies ramp up work, and finance, insurance, and real estate industry strength lifts the services sector. In Saskatchewan, rebounding commodity markets are expected to energize growth in 21. Potash sales are expected to climb as buyers restock inventories and new contracts are signed with China and India. Housing Outlook Housing markets in Manitoba and Saskatchewan are in recovery. Total housing starts rose in each of 29 s final three quarters, although a first-quarter plunge to a seven-year low of only 5,6 units on an annualized basis cut the annual total to near 8, units the lowest since 23. Still, annualized fourth-quarter starts hit nearly 1, units, strong regionally, setting the stage for a good 21. Demographics are generating healthy housing demand. Strong job markets have attracted in-migrants, lifting population growth to 1.4 per cent in 29, the highest on record. A 1.2 per cent population advance expected this year would mark the third consecutive gain above 1. per cent. While population increases are slated to dip to near.8 per cent in , this is far above the annual average.14 per cent during the 2 years to 27. Such underpinnings will support an 18 per cent rise in housing starts to 9,55 units this year, significantly below boom-era levels near 12, units annually, but still well above the annual average of 6,46 starts posted in the 2 years to 29. A small dip, to just below 9, units in 211, will be followed by modest annual hikes through 214, bringing that year s total to 1,4 units. House prices have held up well, despite market softness. The average new home price was essentially flat last year, a welcome pause following Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) 14, 12, 1, 8, 6, 4, 2, Singles Multiples 2 year average f 11f 12f 13f 14f New Resale f 11f 12f 13f 14f Series Database. Series Database; Canadian Real Estate Association. 18 The Conference Board of Canada

21 hikes of 2 per cent and 15 per cent during the previous two years and a doubling of the average price in the past decade. A modest.2 per cent hike in new home prices this year is forecast to be followed by per cent annual gains in By 214, the average new home in Manitoba and Saskatchewan is forecast to cost $378,187. Price hikes for existing homes have been even stronger. The average resale home sold for $216,672, last year, up 4.9 per cent from 28. Such growth, healthy compared with advances in the past two decades, nonetheless trailed twin 2.2 per cent price hikes in 27 and 28. It took only the seven years ending 29 for the average resale price to double. Moderate price growth of 2.4 per cent is forecast for 21, with annual gains averaging 1.8 per cent in Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 76,12 78,542 76,619 78,331 8,395 83,1 85,23 87,249 (22 $ millions) Total employment (s) 1,98 1,119 1,128 1,135 1,152 1,17 1,183 1, Unemployment rate (%) Personal income per capita ($) 32,59 34,525 33,965 34,916 35,872 37,69 38,266 39, Population (s) 2,191 2,217 2,247 2,273 2,292 2,311 2,33 2, Retail sales ($ millions) 26,992 29,377 28,755 29,789 3,815 32,25 33,44 34, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators f 211f 212f 213f 214f Housing starts 11,745 12,365 8,74 9,55 8,931 9,876 1,89 1, Singles 7,874 8,28 5,871 7,177 6,685 7,348 7,433 7, Multiples 3,871 4,157 2,23 2,373 2,245 2,529 2,657 2, Housing completions 9,316 12,15 9,759 8,96 8,82 9,348 9,691 9, Singles 7,3 8,3 6,43 6,484 6,59 6,937 7,18 7, Multiples 2,313 4,147 3,329 2,422 2,211 2,41 2,673 2, Average price of a new home ($) 31,33 358,37 358,16 358, , ,37 372, , Average price of a resale home ($) 171,98 26, , , , , , , Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 19

22 Alberta A better tone to energy markets is setting the stage for economic revival in Alberta. Gross domestic product will expand decently in 21 and even faster in 211. Rebounding employment will improve consumer confidence this year and support homebuying, although moderately easing population growth will temper market gains. Housing starts are firming and will rise significantly this year, albeit not to peak levels. Better markets will propel house price gains, particularly for resale units. Economic Outlook Alberta s economy is on the mend following a miserable 29. Previously collapsed energy prices are now firmer, spurring drilling activity in the last few months of 29. Lower input costs in the energy sector a silver lining to the recession helped rekindle development of oil sands mining projects. Income growth will help spur a 2.1 per cent expansion in servicesproducing industries. Overall, real GDP will expand by 2.5 per cent this year and 4.1 per cent in 211. Output expansion will buoy labour markets, with over 2, net new jobs forecast this year, mainly in construction and services. But the labour force will expand even faster, lifting the unemployment rate to a 15-year high of 7.2 per cent. Net job creation will accelerate to 7, positions in 211, finally cutting the unemployment rate to 6.4 per cent. Although population growth is forecast to average a solid 1.7 per cent per year in , it will be lower than the 2.2 per cent rate during the decade to 29. Housing Outlook The firming Alberta economy is prompting a housing market turnaround. Provincial housing starts firmed throughout 29, hitting an annualized 29, units in the fourth quarter, more than twice the first quarter rate. A near tripling of multiple starts led the increase, while singles starts almost doubled. These late-year gains could not prevent total starts from falling 3 per cent to 2,4 units, the second straight yearly drop and the fewest since Such levels seem well behind demographic requirements, giving starts a relatively optimistic outlook. The slump in housing starts, combined with slower but still solid population growth during the downturn, suggests that pent-up demand is brewing. A climb back to a starts-to-population ratio in line with historical norms will persist through our forecast, keeping starts solid. In 21, a 47.3 per cent snap-back will bring total starts to 3, units, the best in three years, but still nowhere near annual peaks above 48, units. Starts of single-family units are forecast to advance 38.3 per cent to just under 19,9 units, following a 2.4 per cent easing in 29. Multiple-unit starts, meanwhile, are expected to rebound from last year s 58.2 per cent loss with a 68.5 per cent leap to almost 1,2 units. The medium term is expected to see total starts hover between 31, and 33, units. The share of single-unit starts, which hit an 11-year high of 7 per cent in 29 as multiples collapsed, will ease to just under two-thirds in , similar to the past decade s average. Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) 5, 4, 3, 2, 1, Singles Multiples 2 year average f 11f 12f 13f 14f New Resale f 11f 12f 13f 14f Series Database. Series Database; Canadian Real Estate Association. 2 The Conference Board of Canada

23 The downturn has eroded prices for both new and existing houses in Alberta, but such losses seem over. The average price for a new home here fell 8.6 per cent to $429,461 in 29 the first drop since Although average prices for existing homes fell only 3.4 per cent last year, this represented the second straight annual decline. Prices for both new and existing units will advance in 21 a fractional.3 per cent for new homes, but a more substantial 3.8 per cent for resale dwellings. While new home prices are forecast to remain behind their 28 peak by 214, resale units, on average, will surpass their 27 high in 211. Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 179, , ,5 177,42 184, , ,993 25,711 (22 $ millions) Total employment (s) 1,959 2,13 1,99 2,1 2,8 2,15 2,193 2, Unemployment rate (%) Personal income per capita ($) 45,46 48,82 47,89 48,524 5,543 52,838 54,779 56, Population (s) 3,52 3,583 3,675 3,736 3,85 3,871 3,937 4, Retail sales ($ millions) 61,16 61,57 55,42 56,116 59,657 63,839 67,238 7, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators f 211f 212f 213f 214f Housing starts 48,336 29,165 2,43 3,44 31,62 32,434 31,646 31, Singles 28,15 14,716 14,37 19,878 2,645 2,751 19,96 19, Multiples 2,231 14,449 6,33 1,166 1,975 11,683 11,741 11, Housing completions 41,825 39,446 27,44 24,561 28,78 3,74 3,624 3, Singles 29,7 22,624 13,777 16,625 19,516 2,413 19,843 19, Multiples 12,818 16,821 13,267 7,935 9,263 1,291 1,782 1, Average price of a new home ($) 464,97 469, ,461 43,89 438, , , , Average price of a resale home ($) 359,71 352,613 34,53 353,63 362, ,98 381,354 39, Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 21

24 British Columbia Economic recovery in British Columbia, particularly in its forestry industry, is paving the way for improved housing markets this year. Housing starts are already accelerating, driven by improvement in the all-important multiple-unit sector. Still, the expected recovery will leave housing starts behind the past decade s peak levels this year and through 214 as population growth moderates. Price growth for both new and existing units is expected to pick up this year, but remain modest through 214. Economic Outlook B.C. s economy is emerging from a deep recession. Indicators like retail sales trended upward over last year s second half and employment edged higher in its final quarter. Building on this momentum, real gross domestic product in B.C. is expected to advance by 3.7 per cent this year. A modest rebound in the U.S. housing market will propel gains in B.C. s battered forestry industry. An increase in demand for commodities will also boost manufacturing. Output in the goods-producing side of the economy will also be spurred by strong growth in the mining sector, particularly natural gas extraction. A revived B.C. housing market will benefit the construction sector this year and in 211, with help in 21 from strong non-residential investment. On the services side, the influx of visitors for the Olympic Games provided a boost to retail sales and other services sector industries earlier this year. Stronger provincial labour markets will help maintain some of this positive momentum through the rest of 21. Provincial GDP growth will slow moderately to 3.1 per cent in 211. Housing Outlook British Columbia s housing market is recovering after several tough quarters. Housing starts across the province accelerated strongly in 29 s second half, exceeding 21, units in the fourth quarter on an annualized basis, up 6 per cent from an anemic first quarter. The advance was driven by rebounding multipleunit starts, which surged 59 per cent in the fourth quarter of 29. This is an optimistic sign since multiple starts typically make up a greater share of total starts in B.C. than in any of this report s six regions and suffered disproportionately during the downturn. Indeed, despite the late-year pickup, the annualized rate of multiple-unit starts below 11,7 was well off yearly totals above 2, units in Moreover, in 29, multiple starts were down two-thirds from their 27 peak, while 29 single-unit starts were down a significant but comparatively smaller 49 per cent from a 26 high. Accordingly, total provincial starts clocked in just below 16,1 units last year, the fewest since 2. Economic improvement and better housing affordability, two high-octane housing market fuels, are forecast to propel B.C. s housing starts. In any other year, a projected 29.1 per cent rise for single-unit starts would headline construction advances, but in 21, multiple-unit starts are forecast to more than double. Expected hikes in multiple-unit starts in Vancouver and Victoria will lead the ascent to above 16,9 multiple starts in 21. Single starts will hit Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) 5, 4, 3, 2, 1, Singles Multiples 2 year average f 11f 12f 13f 14f New Resale f 11f 12f 13f 14f Series Database. Series Database; Canadian Real Estate Association. 22 The Conference Board of Canada

25 1,2 units. Total starts are thus forecast to exceed 27,1 units in B.C. this year, up 68.6 per cent from 29, but still more than 12, units off the 27 peak. In the medium term, economic expansion and rising employment will underpin healthy population growth, generating fresh housing demand. Starts will keep rising but remain just below 31,2 homes in 214. Starts of multiple units are expected to gain market share, accounting for nearly two-thirds of all starts by 214; in the 2 years to 29, multiples made up 55 per cent of provincial starts. Price growth for both new and existing homes will accelerate this year as the market firms. New homes average value, which fell 6.6 per cent last year, will rise 2.6 per cent this year to $639,. Average resale prices avoided erosion in 29, rising 2. per cent, and a 4.3 per cent rise to $478, is forecast in 21. Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 151, , , , ,96 163,42 167, ,157 (22 $ millions) Total employment (s) 2,267 2,314 2,259 2,297 2,35 2,43 2,436 2, Unemployment rate (%) Personal income per capita ($) 35,48 36,23 35,645 36,371 37,484 38,817 4,2 4, Population (s) 4,33 4,375 4,449 4,59 4,57 4,632 4,695 4, Retail sales ($ millions) 56,365 56,563 53,431 56,433 59,23 62,7 64,538 66, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators f 211f 212f 213f 214f Housing starts 39,195 34,32 16,89 27,128 29,494 3,326 3,663 31, Singles 14,474 1,99 7,897 1,198 11,11 11,346 11,38 11, Multiples 24,721 23,33 8,192 16,93 18,393 18,98 19,355 19, Housing completions 33,283 34,712 25,94 2,761 26,684 28,525 29,277 29, Singles 13,951 11,319 8,582 8,837 1,65 11,214 11,263 11, Multiples 19,332 23,393 17,358 11,924 16,34 17,311 18,15 18, Average price of a new home ($) 653, , , , , , , , Average price of a resale home ($) 439, , , ,46 491,71 52, , , Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 23

26 Québec City A 2.5 per cent increase in Québec City s economy this year will bode well for the resale housing market, as unit sales are expected to rise by 3.9 per cent in 21. Housing starts, however, are expected to decline by 9. per cent this year and keep falling through the medium term, in line with demographic requirements. Meanwhile, after several years of impressive growth, prices in both the new and resale markets will continue to increase but at a much more moderate pace. Economic Outlook Gross domestic product in the Québec census metropolitan area (CMA) shrank.7 per cent in 29, the first dip in 13 years, pulled down by a 1.3 per cent drop in manufacturing output. Even though a strong dollar appears certain in the near term, the recovering U.S. economy will help induce a 2.6 per cent manufacturing gain for the CMA in 21. Stronger personal income growth this year will prompt resumed retail sales growth and, in turn, fuel 2.4 per cent output growth in the overall services sector. All told, real GDP is set to rise by 2.5 per cent this year. Housing Outlook EXISTING HOUSING MARKET The existing home market in Québec City enjoyed impressive growth from the mid-199s until 21, as unit sales were boosted by a strengthening economy as well as pent-up demand. In total, sales rose 9.6 per cent on an average annual basis over this time frame. Despite the strong increase in sales, the market remained in a balanced state until 21, keeping a lid on home price inflation. Indeed, existing home prices fell by.6 per cent in 1997, and then averaged 2.6 per cent growth per year from 1998 to 21. But with pent-up demand largely satisfied, the number of existing homes exchanging hands since 21 has been fairly stable. In fact, annual average sales growth from 22 to 27 was only.6 per cent. Meanwhile, the number of new listings drifted downwards, creating a sellers market and prompting vigorous price growth. Indeed, from 22 to 27, the average price of an existing home grew by 11.1 per cent annually, to reach $18,. Because of the global recession, Québec City s economy was on the downswing in 28, weakening demand in the resale market and pushing unit sales 1.2 per cent lower. But the weakness was short-lived. The resale housing market stabilized in the first quarter of 29, thanks in part to a significant drop in mortgage rates. Stronger population growth in the region may have also played a role. Through 28 and 29, population growth in the CMA was just over 1 per cent per year, nearly double the annual rate seen in the first half of the decade. In total, unit sales rose 3.1 per cent last year. Population growth is expected to remain elevated in 21 as well. This factor, combined with better economic growth, will set the stage for a further 3.9 per cent increase in unit sales this year. Through the medium term (212 to 214), sales growth is forecast to average a much more modest 2 per cent per year, as higher interest rates begin to bite. Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply 6, 5, 4, 3, 2, 1, Singles Multiples 2 year average f 11f 12f 13f 14f 25, 2, 15, 1, 5, Price ($) Months supply f 11f 12f 13f 14f Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 24 The Conference Board of Canada

27 The existing housing market is expected to become more balanced as growth in new listings outpaces the increase in sales. This suggests that resale price growth will moderate in the coming years, decelerating to 3.6 per cent in 21 before slowing to 1.5 per cent next year. Price growth is then expected to average 2.6 per cent annually from 212 to 214. NEW HOUSING MARKET By 2, Québec City s new housing market was also on the upswing. Years of weak price growth, combined with a stronger economy and spillover demand from the resale market, helped to push housing starts up by 29.7 per cent on an average annual basis from 2 to 24. For the first couple of years of this boom, demand outstripped supply. As a result, months supply fell to.4 months in 22, down significantly from its peak of 4 months in the mid-199s and 1.8 months just three years prior. The supply constraints put significant upward pressure on prices. In fact, the average price of a new home jumped 9.1 per cent in 22 and 6.1 per cent the year after. But months supply climbed for five straight years beginning in 23. This forced builders to retreat from the market starting in 25. Housing starts fell by an average of 5.8 per cent per year from 25 to 27, helping to limit the rising months supply. Therefore, price growth remained strong. In fact, price growth came in at 4.5 per cent, on an average annual basis, from 25 to 27. Indeed, by 28, average new home prices topped $2, for the first time. Inventories dropped slightly in 28, prompting builders to return Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio f 11f 12f 13f 14f Sources: The Conference Board of Canada, Canadian Real Estate Association ,8 1,5 1, Chart 4 Affordability P&I payment ($) P&I/income (%) f 11f 12f 13f 14f Note: Principle and interest payments assume average resale price, 1 per cent down payment, 25-year amortization, and 5-year fixed mortgage rate. Series Database. Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 24,26 24,725 24,548 25,161 25,817 26,492 27,13 27,729 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 35,324 36,329 36,436 37,97 38,147 39,56 4,852 42, Population (s) Retail sales ($ millions) 1,779 11,378 11,29 11,71 12,314 12,898 13,43 13, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. The Conference Board of Canada 25

28 to the new home market in 28 and 29. Starts increased 3.5 per cent in 28 and an additional 1.7 per cent last year, to reach 5,4 units the seventh straight year that starts surpassed 5, units. Unfortunately, housing starts are unsustainable at current levels, given demographic requirements. Demand for new homes is also expected to be hampered by rising mortgage rates in the months to come. As a result, builders will start to back away from the new home market once again this year. Starts are forecast to decline by 9. per cent in 21 and by an average of 5.3 per cent from 211 to 214, falling to 3,9 units by the end of the forecast. Price growth is finally expected to moderate as well. Growth in new home prices is forecast to slow to 2.8 per cent this year and to 1.4 per cent in 211. Over the medium term (212 to 214), new home prices are projected to rise by an average of 2.3 per cent per year. Table 2 New Housing Market Indicators f 211f 212f 213f 214f Housing starts 5,146 5,327 5,416 4,93 4,87 4,61 3,99 3, Singles 2,115 1,993 1,73 1,98 1,914 1,653 1,69 1, Multiples 3,32 3,334 3,686 3,22 2,893 2,47 2,299 2, Under construction 2,19 2,946 2,49 2,721 2,44 2,126 1,983 2, Housing completions 4,442 5,486 5,12 5,342 4,943 4,432 3,912 3, Singles 2,162 1,983 1,757 1,828 1,91 1,774 1,65 1, Multiples 2,28 3,53 3,363 3,514 3,33 2,658 2,37 2, Newly completed and unabsorbed Absorptions 4,724 5,222 5,94 5,458 5,16 4,441 3,94 3, Months supply Average price of a new home ($) 191,176 21, , , , , ,958 24, Series Database. Table 3 Resale Housing Market Indicators f 211f 212f 213f 214f Unit sales 7,94 7,812 8,53 8,367 8,459 8,62 8,792 8, Dollar volume sales ($ millions) 1,421 1,531 1,7 1,831 1,878 1,964 2,55 2, New listings 11,1 12,125 1,634 12,697 13,925 14,55 15,218 15, Sales-to-new-listings ratio (%) Average price of a resale home ($) 179, , , , ,57 227, , , Sources: The Conference Board of Canada; Canadian Real Estate Association. 26 The Conference Board of Canada

29 Montréal A modest recovery in Montréal s economy this year (real GDP is forecast to rise by 2.3 per cent) is helping to foster demand in both the resale and new housing markets. Unit sales of existing homes are expected to grow by 5.3 per cent in 21, while housing starts will rise by 2.3 per cent. However, after several years of relatively strong increases, price growth is forecast to moderate this year. Economic Outlook Montréal s real gross domestic product contracted for the first time in 18 years in 29, slipping 2.1 per cent. The worldwide economic downturn, which began in late 28, hurt the region s manufacturing industry and domestic demand. But as global economies began to recover through the second half of 29, overall conditions also started to improve in Montréal. Manufacturing output grew by 4.6 per cent at an annual rate in the fourth quarter of last year, while growth in the services sector picked up speed. Further improvements this year, both at home and abroad, will help Montréal s economy 2.3 per cent growth. Housing Outlook EXISTING HOUSING MARKET Healthy economic growth in Montréal helped unit sales of existing homes grow by an average of 25.2 per cent per year from 1996 to 22, to reach a record 38, units. However, despite the significant increases in demand, sellers were not quick to jump into the market, pushing the sales-to-new-listings ratio to an astonishing 14 per cent in 22, up from just 23 per cent in the mid- 19s. The move to a sellers market, signifying excess demand, led to resale price growth of an average of 15.6 per cent per year from 22 to 24, when average prices topped $2, for the first time. Prices then continued to grow by an elevated 6.3 per cent in each year from 25 to 27. Accordingly, sellers entered the market in droves. At the same time, the substantial growth in prices, combined with weaker economic growth, resulted in much lower demand. Monthly mortgage payments as a per cent of household income had swollen from a low of 13.5 per cent in 21 to 2.2 per cent by 26. As a result, unit sales rose by only.6 per cent on an average annual basis from 23 to 26, knocking the sales-to-new-listings ratio back down to 54.8 per cent. Demand picked up briefly again in 27, as the city s real GDP growth improved once more, leading to an 11.3 per cent increase in unit sales and bumping the sales-to-new-listings ratio back up 61.6 per cent. As the threat of a global recession became reality in late 28, however, buyers became cautious, reducing unit sales by 8.2 per cent. But the resale market began to turn around in the second quarter of 29, thanks to a recovering economy and enticing mortgage rates. In fact, unit sales increased in each of the final three quarters of last year, ending the year up 6.2 per cent. With sellers caught off guard by the quick recovery, new listings dropped 7.3 per cent. Therefore, the sales-to-new-listings ratio climbed above 6 per cent again, putting upward pressure on prices. With Montréal s economy still recovering, the resale market is expected to see another 5.3 per cent Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply 25, 2, 15, 1, 5, Singles Multiples 2 year average f 11f 12f 13f 14f 35, 3, 25, 2, 15, 1, 27 Price ($) Months supply 8 9 1f 11f 12f 13f 14f Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. The Conference Board of Canada 27

30 increase in unit sales for 21. Prices are forecast to rise by a much smaller 2.3 per cent, though, as the market moves back into balanced territory. Over the medium term, this balanced market will lead to modest average annual growth of 1.6 per cent in unit sales and 2.6 per cent in prices. NEW HOUSING MARKET For much of the second half of the 199s and through to 24, Montréal s new housing market benefited from spillover demand from the resale market, allowing total housing starts to grow by an average of 2 per cent per year from 1997 to 24, to reach a 16-year high of 28,5 units. Growth was somewhat higher in the multiple-unit market at 25 per cent on an average annual basis versus 15.2 per cent for single units partly thanks to increased demand from an aging population, as well as wealthy foreigners and young professionals wishing to live in the downtown core. This significant growth in starts was still not enough to meet growing demand, as months supply slipped from 2 months in 1997 to a low of.9 months in 23. The tighter market then boosted price growth, with new home prices rising by an annual average of 6.1 per cent from 21 to 25, compared with just 1.5 per cent per year from 1997 to 2. By 25, with average new home prices topping $25, for the first time and growth in the economy slowing, demand was beginning to weaken. Indeed, the number of unsold units jumped from 1,5 units in 23 to 4,2 units in 26. In response, builders reduced starts by 11.6 per cent in 25 and by an additional 9.7 per cent in 26. The global financial crisis that erupted in late 28 and early 29, along with persistently high builder inventories, resulted in housing starts Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio f 11f 12f 13f 14f Sources: The Conference Board of Canada, Canadian Real Estate Association ,5 2, 1,5 1, 5 Chart 4 Affordability P&I payment ($) P&I/income (%) f 11f 12f 13f 14f Note: Principle and interest payments assume average resale price, 1 per cent down payment, 25-year amortization, and 5-year fixed mortgage rate. Series Database Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 121, ,93 12, , , , , ,497 (22 $ millions) Total employment (s) 1,92 1,897 1,879 1,911 1,937 1,964 1,983 2, Unemployment rate (%) Personal income per capita ($) 33,799 34,535 34,377 35,57 36,5 37,258 38,432 39, Population (s) 3,721 3,765 3,815 3,861 3,93 3,946 3,99 4, Retail sales ($ millions) 4,859 42,287 42,36 43,831 46,92 48,353 5,36 52, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. 28 The Conference Board of Canada

31 falling by 4.8 per cent in 28 and by an additional 13.4 per cent last year, to reach 19,3 units their lowest level since 22. Surprisingly, price growth remained fairly strong, averaging 4.5 per cent from 26 to 28. However, it finally slowed to 2.3 per cent last year. As in the resale market, better economic conditions in 21 will help to lift new housing demand, boosting starts 2.3 per cent this year to 19,8 units. The number of singlefamily starts is expected to rise, offsetting a dip in new multi-family-unit construction. Nevertheless, builders are expected to break ground on 12,8 multiple units this year high by historical standards and more than double their level at the start of this decade. Price growth will continue to moderate, though, slipping to just 1.1 per cent in 21. Rising mortgage rates will then push down starts over the next couple of years, bringing them down to a still healthy 17,5 units by 212. Table 2 New Housing Market Indicators f 211f 212f 213f 214f Housing starts 23,41 22,285 19,39 19,755 19,549 17,541 17,565 18, Singles 7,989 6,62 5,466 6,99 7,35 7,4 7,37 7, Multiples 15,421 15,682 13,843 12,764 12,243 1,537 1,258 1, Under construction 15,117 15,17 12,861 12,553 12,54 12,497 12,47 12, Housing completions 24,361 23,88 19,486 19,826 19,572 17,551 17,584 18, Singles 7,72 7,364 5,216 7,11 7,312 6,994 7,311 7, Multiples 16,641 16,444 14,27 12,815 12,26 1,557 1,273 1, Newly completed and unabsorbed 4,798 4,648 4,662 4,28 3,526 2,99 2,889 3, Absorptions 24,853 23,49 19,747 2,435 2,163 18, 17,566 18, Months supply Average price of a new home ($) 281, ,491 32,377 35,73 311,26 318, , , Series Database. Table 3 Resale Housing Market Indicators f 211f 212f 213f 214f Unit sales 43,68 4,17 42,52 44,755 45,381 46,153 46,937 47, Dollar volume sales ($ millions) 1,933 1,385 11,562 12,457 12,99 13,483 14,83 14, New listings 7,799 74,794 69,298 75,325 81,778 83,35 84,952 86, Sales-to-new-listings ratio (%) Average price of a resale home ($) 25,72 259, ,21 278, , ,144 3,32 38, Sources: The Conference Board of Canada; Canadian Real Estate Association. The Conference Board of Canada 29

32 Toronto A 3.7 per cent rebound in Toronto s real GDP this year, along with low mortgage rates, will help boost sales of existing homes and housing starts. Average resale prices are expected to rise by 2.7 per cent, while new home prices grow by 1.6 per cent this year. Unfortunately, rising interest rates later this year and the introduction of the HST will weaken demand through the last half of 21 and into 211. Indeed, existing home sales are forecast to fall by 1.3 per cent next year. Economic Outlook A recovery is under way in Toronto s economy, which dipped 2.8 per cent last year, pulled down by the global recession. Manufacturing output increased in the second half of 29, while construction output rose in the final quarter, thanks to a big jump in new home construction. As worldwide demand picks up through 21, conditions in both industries are expected to keep improving. The services sector will also enjoy better days, following mediocre growth of.1 per cent in 29. Accordingly, Toronto s real gross domestic product is forecast to rebound this year, rising by a solid 3.7 per cent. Housing Outlook EXISTING HOUSING MARKET Pent-up demand combined with lower interest rates to boost demand in Toronto s resale housing market from 21 to 24, with sale growing by 1.2 per cent on an average annual basis. And with a sales-to-new-listings ratio of 66.1 per cent in 21, indicating a sellers market, prices grew by 6.6 per cent per year on average. But the housing market finally started to cool off in 25, as unit sales increased by just 1.8 per cent that year and fell by 1.4 per cent in 26. Although sales grew strongly in 27, the global recession in 28 reduced housing affordability, and a new city land transfer tax led to a 2.3 per cent drop in sales to 67,7 units in 28 the lowest in six years. The market hovered between sellers and balanced states over 25 to 27, allowing average prices to grow a solid 6.2 per cent per year and reach $39, with mortgage payments reaching 24.1 per cent as a share of household incomes. But weak price growth in 28, record low interest rates, and improving consumer confidence led to an 18. per cent increase in sales in 29. Demand for resale homes is expected to remain strong in the first half of 21, especially as some future demand is being pulled forward by buyers hoping to purchase homes while interest rates remain low and before the July 1 introduction of the harmonized sales tax, which will apply to closing costs. Resale sales are expected to increase by 12.5 per cent this year and then fall by 1.3 per cent next year. Over the rest of the forecast period, sales are expected to climb by a modest 1.9 per cent per year. Meanwhile, price growth in the resale market was a respectable 4. per cent in 29. Lower salesto-new-listings ratios will result in average price growth decelerating to 2.7 per cent this year and 2.1 per cent in 211. Over 212 to 214, resale price growth is expected to average 2.4 per cent per year. Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply 5, 4, 3, 2, 1, Singles Multiples 2 year average f 11f 12f 13f 14f 6, 5, 4, 3, 2, Price ($) Months supply f 11f 12f 13f 14f Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 3 The Conference Board of Canada

33 NEW HOUSING MARKET Housing starts increased by a torrid 19.4 per cent per year from 1996 to 2, several years earlier than the boom in Toronto s resale market, driven by pent-up demand from the early 199s and strong economic growth. Starts then grew by an average of 5.5 per cent per year over the first three years of last decade, thanks to spillover demand from the resale market and low interest rates. Despite this strong growth, most of these new units were absorbed by vigorous demand. Accordingly, months supply remained between.4 and.6 months, signifying a tight market. As a result, prices picked up, rising by an average of 5 per cent per year from 23 to 25. But housing starts peaked in 23 at 45,5 units, one year after the peak in absorptions. Builders retreated from the market in the face of weakening demand, with starts falling by an average of 7.6 per cent annually from 24 to 27. While price growth was beginning to ease in 26 and 27, in level terms, average new home prices had surpassed $5, $1, more than they were in 2. A significant jump in multiple starts in the first quarter of 28 helped to push housing starts up by 28.9 per cent in 28. But this growth was largely based on pre-sales of units in several large new high-rise condos in the downtown core. Once the recession hit in late 28, demand and subsequently housing starts tumbled rapidly. For 29 as a whole, starts fell by 38.5 per cent, slipping below 3, for the first time in 11 years. Prices slipped.1 per cent last year, the first decline in Toronto s new home prices since Fortunately, housing demand picked up quickly at the first sign of an economic recovery, thanks in particular to attractive mortgage rates. Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Chart 4 Affordability 8 Price growth Sales/new listings ratio 7 3,5 3, P&I payment ($) P&I/income (%) ,5 2, 1, f 11f 12f 13f 14f f 11f 12f 13f 14f Sources: The Conference Board of Canada, Canadian Real Estate Association. 3 Note: Principle and interest payments assume average resale price, 1 per cent down payment, 25-year amortization, and 5-year fixed mortgage rate. Series Database. Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 222, , , , , , , ,75 (22 $ millions) Total employment (s) 2,865 2,92 2,89 2,942 3,29 3,135 3,232 3, Unemployment rate (%) Personal income per capita ($) 38,282 39,262 38,58 39,39 4,736 42,24 43,772 45, Population (s) 5,433 5,531 5,623 5,717 5,82 5,931 6,51 6, Retail sales ($ millions) 57,976 6,415 58,22 6,81 64,739 68,471 72,17 75, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. The Conference Board of Canada 31

34 Indeed, starts in both the single and multiple markets rose strongly in the second half of last year. With economic conditions continuing to improve in 21, starts are expected to post growth of 22.1 per cent this year. Growth will be particularly strong in the first half of the year as new home buyers try to avoid paying higher interest rates and the HST, although the impact of the HST will be mitigated by the Ontario government s enhanced new housing rebate, which ensures that new homes priced up to $4, will not be subject to the additional 8 per cent tax. Indeed, housing starts are expected to climb throughout the forecast, thanks largely to favourable demographic factors, as population growth is projected to average a robust 2 per cent per year from 211 to 214. In spite of the renewed strength in the new home market, price growth will remain modest in 21 and 211, at 1.6 per cent and 2. per cent, respectively. New home price growth is the forecast to average 2.4 per cent per year from 212 to 214. Table 2 New Housing Market Indicators f 211f 212f 213f 214f Housing starts 33,78 42,637 26,237 32,46 38,37 43,283 46,349 48, Singles 14,76 11,61 7,95 11,943 14,493 16,295 17,427 18, Multiples 18,372 31,36 18,287 2,13 23,877 26,988 28,921 3, Under construction 43,227 48,337 47,937 47,564 47,581 47,613 47,614 47, Housing completions 3,357 36,258 28,356 32,4 38,362 43,268 46,339 48, Singles 14,82 13,882 8,852 11,933 14,516 16,35 17,421 18, Multiples 16,275 22,376 19,54 2,71 23,846 26,964 28,918 3, Newly completed and unabsorbed 1,213 1,22 1,169 1,311 1,515 1,735 1,889 2, Absorptions 3,841 36,5 28,41 31,795 38,12 43,82 46,25 48, Months supply Average price of a new home ($) 518, ,1 536, ,15 555, , , , Series Database. Table 3 Resale Housing Market Indicators f 211f 212f 213f 214f Unit sales 84,973 67,72 79,899 89,854 8,641 82,84 83,629 85, Dollar volume sales ($ millions) 33,151 26,671 32,739 37,81 34,652 36,122 37,723 39, New listings 137, , , ,23 144, ,88 151, , Sales-to-new-listings ratio (%) Average price of a resale home ($) 39, ,841 49,759 42, ,79 44,68 451,7 461, Sources: The Conference Board of Canada; Canadian Real Estate Association. 32 The Conference Board of Canada

35 Ottawa Gatineau Real GDP in Ottawa Gatineau is forecast to rise by 2.8 per cent this year, following a 1.2 per cent decline in 29. But in spite of the stronger economic growth, demand in the region s housing markets is expected to slow through 21, because rising interest rates, the introduction of the HST, and concern over federal government spending restraint will result in a modest 1.5 per cent increase in unit sales of existing homes and a.9 per cent decline in housing starts. Price growth in both markets will be modest as well. Economic Outlook In an effort to reduce the ballooning deficit, the federal government announced a departmental spending freeze in its most recent budget. Given that the local public administration sector accounts for one-quarter of Ottawa Gatineau s total output, any downturn in public administration will have a significant impact on the overall local economy. Real gross domestic product growth is expected to come in at a solid 2.8 per cent this year, but then slow to 2.1 per cent in 211 and average just 2.4 per cent per year from 212 to 214. Housing Outlook EXISTING HOUSING MARKET Strong economic growth in the last half of the 199s, thanks to the high-tech boom and to renewed hiring by the federal government near the decade s end, spurred growth in existing housing sales of an impressive 16 per cent per year from 1996 to 2, to reach a record 15,9 transactions. New listings failed to keep pace, so the sales-to-new-listings ratio jumped to 7 per cent by 2, in sellers territory, pushing prices up by 5.1 per cent that year, the fastest pace in 11 years. The resale market has remained fairly tight since then, as the bursting of the high-tech bubble was offset by steady hiring in the federal government, fostering annual average price growth of 1.5 per cent from 21 to 24 and of 4.8 per cent from 25 to 27. In 28, the start of the global recession led consumers to pull back from the resale market, driving down unit sales by 6.8 per cent. But, by early 29, when it appeared the worst of the economic slowdown had passed, consumers flocked back to the market, taking advantage of low interest rates and pushing up unit sales by 7.1 per cent. The market hovered between a strong balanced position and a sellers market over these two years, maintaining pressure on prices, which rose by 6.5 per cent in 28 and 5.1 per cent in 29. The average price of an existing home in Ottawa Gatineau reached $282, in 29, nearly double its level at the start of the decade. For 21, unit sales are forecast to increase by a much more modest 1.5 per cent. While sales have still been hot lately, higher interest rates later this year will help to cool off the market. Unit sales will also be hampered by the July 1 introduction of the HST, which will subject closing costs to the 15 per cent tax. Furthermore, the housing market will have to contend with a departmental spending freeze by the federal government, which will likely result in some cutbacks in the public service. Unit sales are expected to decline by 2. per cent in 211, before Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply 12, 1, 8, 6, 4, 2, Singles Multiples 2 year average f 11f 12f 13f 14f 5, 4, 3, 2, 1, 27 Price ($) Months supply 8 9 1f 11f 12f 13f 14f Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. The Conference Board of Canada 33

36 rising by a modest.8 per cent per year through the medium term. As the market finally moves into a balanced position, price growth is expected to moderate to 3.4 per cent this year and 2. per cent in 211. From 212 to 214, the average price of an existing home is projected to increase by 2.5 per cent per year. NEW HOUSING MARKET The strong economy, along with spillover demand from the resale market, also helped to boost Ottawa Gatineau s new home market from 1996 to 22. In fact, even though housing starts increased 17.7 per cent on an average annual basis, demand still outstripped supply. Months supply in the new home market dropped from 2.1 months in 1996 to just.6 months by 22. As the market tightened, price growth began to accelerate, rising by an average annual rate of 8.9 per cent from 2 to 22. Over the next five years (23 to 27), demand for new homes cooled slightly and months supply edged up. Builders reacted accordingly, reducing housing starts by an average of 2.2 per cent per year. By 27, starts were at 9,2 units lower than in 22, but still relatively high by historical standards. Looser market conditions dampened new home price growth from 6.6 per cent in 24 to 1.8 per cent in 27. Even so, average new home prices managed to reach nearly $35, by 27 $11, more than at the start of the decade. Although the recession dampened demand in the new home market in late 28, a significant increase in housing starts in the first quarter of the year was enough to boost them by 12.8 per cent for the year overall. But in 29, starts tumbled by 14. per cent. At the same time, price growth in the new home market Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio f 11f 12f 13f 14f Sources: The Conference Board of Canada, Canadian Real Estate Association ,5 2, 1,5 1, 5 Chart 4 Affordability P&I payment ($) P&I/income (%) f 11f 12f 13f 14f Note: Principle and interest payments assume average resale price, 1 per cent down payment, 25-year amortization, and 5-year fixed mortgage rate. Series Database Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 45,394 45,966 45,46 46,678 47,661 48,767 49,992 51,243 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 39,9 41,126 4,954 41,764 42,713 43,99 45,453 46, Population (s) 1,183 1,21 1,221 1,235 1,244 1,253 1,263 1, Retail sales ($ millions) 14,239 14,864 14,71 15,278 15,963 16,588 17,248 17, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. 34 The Conference Board of Canada

37 slowed to 1.5 per cent last year, as months supply jumped to an 11-year high of 1.5 months. The new home market showed some renewed strength in the final quarter of 29. But with starts still at relatively high levels, and with interest rates moving up this year, builders are expected to retreat from the market again in 21 and 211, moving housing starts back toward demographic requirements. The new home market is also expected to feel the pinch of Ontario s sales tax harmonization, as well as cooler economic activity stemming from expected cutbacks in the federal public service. Months supply is expected to average 1.4 months over 21 to 214, helping to keep new home price inflation well contained. Average annual price growth is forecast to come in at 1.8 per cent over the next two years, before accelerating slightly to 2.6 per cent from 212 to 214. Table 2 New Housing Market Indicators f 211f 212f 213f 214f Housing starts 9,193 1,374 8,916 8,835 6,525 6,754 6,988 6, Singles 3,973 4,98 3,527 3,724 2,745 2,94 2,975 2, Multiples 5,22 6,275 5,389 5,111 3,78 3,85 4,13 3, Under construction 5,682 6,76 6,92 5,79 4,737 4,499 4,845 5, Housing completions 8,31 9,539 9,44 9,135 7,745 6,499 6,661 6, Singles 3,566 4,49 3,76 3,696 3,15 2,737 2,885 2, Multiples 4,744 5,49 5,68 5,438 4,595 3,762 3,776 3, Newly completed and unabsorbed ,16 1, Absorptions 8,98 9,698 8,818 9,215 8,15 6,568 6,65 6, Months supply Average price of a new home ($) 349, , , , ,91 39,618 4, , Series Database. Table 3 Resale Housing Market Indicators f 211f 212f 213f 214f Unit sales 19,344 18,27 19,36 19,588 19,194 19,35 19,487 19, Dollar volume sales ($ millions) 4,874 4,837 5,444 5,71 5,79 5,899 6,9 6, New listings 3,27 32,173 29,822 32,966 34,214 34,528 34,893 35, Sales-to-new-listings ratio (%) Average price of a resale home ($) 251, , , ,52 297,429 34, , , Sources: The Conference Board of Canada; Canadian Real Estate Association. The Conference Board of Canada 35

38 Winnipeg Winnipeg s economy, generally lacklustre during the late 198s and early 199s, shook off this lethargy to post robust GDP, employment, and population growth beginning in the mid-199s. Housing markets responded accordingly, with starts and resale market indicators flashing improvement. Last year s relatively mild economic and housing market setback did not erase these gains. Palpable economic recovery in 21 will boost housing starts and keep the resale market balanced. Expectations of healthy population growth and steady employment advances point to generally decent markets for new and existing homes in Economic Outlook Although Winnipeg s gross domestic product contracted.5 per cent in 29, this was still a stronger result than Canada s 2.6 per cent decline. Improving prospects in most industries underpin our expectation of a 2.2 per cent GDP increase in 21. Ensuing years are forecast to see growth averaging 2.7 per cent, comfortably above the 1.8 per cent average in the past two decades. But employment growth, only.1 per cent in 29, will remain muted, with only a.9 per cent uptick expected in 21. Still, decent economic performance will continue to prompt population growth above the 2-year average. Housing Outlook EXISTING HOUSING MARKET Winnipeg has historically enjoyed stable resale volumes; during the 2s, the normalized standard deviation of annual sales, which shows how much variation there is from the average, was lower in only Québec City and Ottawa among this report s nine cities. Moreover, Winnipeg s downturn lasted only one quarter 28 s fourth and, even then, sales were only fractionally below the previous decade s quarterly average. Sales did accelerate moderately in 29 s fourth quarter, but remained unexceptional. Indeed, this market s peak sales came in 28 s second quarter, a period of struggle elsewhere. And, while 2.9 per cent fewer units were traded in Winnipeg during 29, the second straight annual decline, volumes significantly exceeded their 2-year average. A 3.9 per cent sales hike is in the cards for 21, with modest increases to follow. This market also benefits from a steady supply. Winnipeg s normalized standard deviation of new listings was the lowest among this report s nine cities during the 2s. Looking back farther, however, reveals a longer-term decline in listings. Annual listings had frequently exceeded 25, units in the late 198s and early 199s. But this period of buyers markets then shifted: 16, units was the past decade s maximum annual listings. By 23, the decline in listings and the hike in sales had put Winnipeg in a sellers market. The area has since bounced between a strong balanced and sellers stance. Winnipeg, somewhat unusually among our nine markets, saw annualized listings peak in the first quarter last year and trough in the third. And, although listings eased in 29 from the decade s peak a year earlier, Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply 4, 3, 2, 1, Singles Multiples 2 year average 5, 4, 3, 2, Price ($) Months supply , f 11f 12f 13f 14f f 11f 12f 13f 14f Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 36 The Conference Board of Canada

39 potential homebuyers still could pick from supply well above the 1-year average. Easing listings and the modest sales uptick through 29 left Winnipeg s sales-to-newlistings ratio just below its sellers market threshold by year-end. The full-year ratio, 74.4 per cent, was little changed from 28. Although sales are forecast to rise again in 21, much faster listings growth will cut the ratio to a 12-year low just under 6 per cent still a balanced market. The ratio is forecast to hover in balanced market territory near 55 per cent between 211 and 214. The ongoing string of strong balanced markets and sellers markets during the past decade propelled price growth to double-digit percentage annual advances between 23 and 28. Winnipeg s average resale price more than doubled between 22 and 29. Last year s 5.3 per cent price growth clearly represented slowing momentum. Cooling will persist in 21, with price growth set to throttle back to 2.3 per cent, and thereafter, when prices are expected to advance 1.7 per cent annually. NEW HOUSING MARKET An energetic resale market, decent economy, and higher population growth all encouraged slight overbuilding, and so Winnipeg s new construction market paused to absorb this outburst in housing starts. After rising sharply during 28, new home take-up sagged last year in a soft economy. Absorptions fell 13 per cent in 29, although, at over 2,8 units, they remained historically solid. Earlyyear weakness depressed annual counts, since absorptions were running at nearly 3, units at an annual rate by the fourth quarter. Accordingly, the number of completed and unoccupied homes hit a record high above 6 units during the first and second quarters. While absorptions will fall further to roughly 2,5 units in Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio f 11f 12f 13f 14f Sources: The Conference Board of Canada, Canadian Real Estate Association ,6 1,2 8 4 Chart 4 Affordability P&I payment ($) P&I/income (%) f 11f 12f 13f 14f Note: Principle and interest payments assume average resale price, 1 per cent down payment, 25-year amortization, and 5-year fixed mortgage rate. Series Database Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 24,678 25,158 25,31 25,578 26,183 27,38 27,733 28,363 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 35,3 36,379 36,43 37,2 38,176 39,641 41,23 42, Population (s) Retail sales ($ millions) 8,83 9,396 9,319 9,67 1,12 1,516 1,928 11, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. The Conference Board of Canada 37

40 21, falling completions will trim unabsorbed inventories. Subsequent years gains will ultimately prompt a record of above 3,6 absorptions by 213. Slowing sales and rising inventories foreshadow production slowdowns in any industry. Here, housing starts fell by a third, to just over 2, units, in 29. This included a fall to below 1,5 units annualized, the fewest since 21, during last year s second quarter. But despite this second straight year of decline, 29 s volume remained fractionally above the 2-year average. Builders, encouraged by falling inventories, will boost starts to almost 2,8 units in 21. Continued healthy population growth thereafter is expected to generate nearly 3,8 starts by 214. In this soft market, new home price growth sagged to only 2.5 per cent in 29 after rising over 1 per cent in each of 27 and 28. Further price growth deceleration, to 1.2 per cent, is foreseen for 21, with similar price hikes expected in Table 2 New Housing Market Indicators f 211f 212f 213f 214f Housing starts 3,53 3,57 2,31 2,522 2,798 3,482 3,649 3, Singles 1,87 1,921 1,51 1,976 2,169 2,662 2,779 2, Multiples 1,633 1, Under construction 2,231 2,421 1,622 1,42 1,444 1,636 1,686 1, Housing completions 2,59 3,543 2,67 2,468 2,767 3,248 3,689 3, Singles 1,77 1,927 1,62 1,875 2,181 2,543 2,852 2, Multiples 883 1,616 1, Newly completed and unabsorbed Absorptions 2,595 3,24 2,87 2,522 2,79 3,149 3,628 3, Months supply Average price of a new home ($) 334, , ,52 383, ,99 393, ,79 45, Series Database. Table 3 Resale Housing Market Indicators f 211f 212f 213f 214f Unit sales 12,32 11,854 11,59 11,958 12,11 12,355 12,63 12, Dollar volume sales ($ millions) 2,146 2,335 2,386 2,535 2,62 2,74 2,81 2, New listings 14,491 16,5 15,479 2,157 21,698 22,216 22,697 23, Sales-to-new-listings ratio (%) Average price of a resale home ($) 174, ,94 27, ,13 214, ,85 223,8 227, Sources: The Conference Board of Canada; Canadian Real Estate Association. 38 The Conference Board of Canada

41 Calgary Economic recovery should boost Calgary housing markets in 21. GDP growth will foster rebounding employment and healthy population gains, despite a rising unemployment rate. The resale market has swung rapidly from a buyers stance to near-sellers conditions as buyers have scoured depleted listings inventories, ending recent price declines. Our forecast features balanced markets and moderate price increases. But new home markets remain burdened by slow absorptions and high builder stocks. Starts are forecast to recover only slowly and to remain below mid-decade peaks through 214, despite ongoing population growth. Economic Outlook Calgary s economy is forecast to expand 2.8 per cent in 21, underpinned by rebounding non-residential construction, robust growth among most services-producing industries, and stronger energy markets. Employment is forecast to more than recapture ground lost during the 29 downturn, although even faster expansion in the labour force will boost the unemployment rate. Modestly accelerating household income increases should buoy consumer attitudes. The medium term holds promise, with output growth forecast to exceed 4 per cent each year in , accompanied by healthy employment and population gains. Housing Outlook EXISTING HOUSING MARKET A recovery is well entrenched in Calgary s resale market. Stronger sales demand and depleted listings supply prompted conditions approaching a sellers market in last year s second half, a dramatic change from the buyers stance during the previous year. Balanced markets should take hold in 21. Existing housing sales leapt in second quarter of 29 and remained at healthy levels through year-end. This pickup lifted overall sales by 7.5 per cent to nearly 24,9 units in 29, but still left them well off boom-era volumes. While the quarterly pattern is forecast to flatten in 21, year-on-year comparisons will benefit from 29 s early weakness, at least through the spring. For the year as a whole, sales are forecast to climb by 6.2 per cent to 26,4 units. Sales are projected to increase modestly over the rest of the forecast period. As a result, our forecast of near 29,35 unit sales in 214 remains 11 per cent behind 26 s peak of 33, transactions. The supply of new listings also edged higher in last year s second half, as vendors, made wary by the previously soft market, cautiously tested their homes market prospects. Listings were up 2 per cent in the third quarter and another 4 per cent in the fourth but, at 42,5 units annualized, remained one-third off the peak of 64, new listings in first quarter of 28. And full-year 29 listings were off 26 per cent. But continued market firming is expected to boost new listings by 1 per cent to almost 46, units this year, with further, albeit smaller, increases thereafter. The pairing of eager buyers and nervous sellers rapidly lifted Calgary s sales-to-new-listings ratio from buyers market readings below 4 per cent in late 28 and early 29 to 7 per cent in the third quarter, indicating strong balance. As a result, Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply 14, 12, 1, 8, 6, 4, 2, Singles Multiples 2 year average f 11f 12f 13f 14f 6, 5, 4, 3, 2, 27 Price ($) Months supply 8 9 1f 11f 12f 13f 14f Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. The Conference Board of Canada 39

42 29 s full-year ratio rose to almost 6 per cent, significantly improved from 41.2 per cent in 28. Our expectation of steady sales and ongoing listings increases will further reduce the ratio to 56 per cent by the fourth quarter of 21. This will shave 21 s full-year ratio to 57 per cent, near the centre of Calgary s balanced market range. Slightly faster expected growth in listings than in sales will shave the ratio to roughly 55 per cent by 214. The rapid move to strong balanced conditions in the second quarter of 29 underpinned a 1.1 per cent quarterly price rise, abruptly halting a string of four quarterly declines. These drops included a 4.4 per cent first quarter plunge, the worst in nearly 19 years. A 4 per cent thirdquarter price advance largely reversed this drop, but was unable to prevent a second consecutive annual fall in Calgary s average resale price. This year s balanced market conditions are expected to fuel a 3.3 per cent price advance, to an average near $398,46. Annual price growth in the mid-2 per cent range is in the cards for as balanced markets persist. Calgary s 27 peak resale price, $414,, is forecast to be eclipsed in 212. NEW HOUSING MARKET Clearing builder inventories remains an obstacle to a full recovery in Calgary s new home market, despite a firmer resale market, decent population growth, and low interest rates. New unit take-up remains tepid and is forecast to recover only gradually. In this environment, new construction will remain subdued, although the market s weakest point is over. Evidence of firmer demand, an essential precursor to higher starts, remains elusive. New unit absorption fell below 7,5 units annualized in fourth quarter of 29, the least in 14 years. For all of 29, Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio f 11f 12f 13f 14f Sources: The Conference Board of Canada, Canadian Real Estate Association , 2,5 2, 1,5 Chart 4 Affordability P&I payment ($) P&I/income (%) f 11f 12f 13f 14f Note: Principle and interest payments assume average resale price, 1 per cent down payment, 25-year amortization, and 5-year fixed mortgage rate. Series Database Table 1 Economic Indicators f 211f 212f 213f 214f Real GDP at basic prices 63,144 63,84 61,888 63,61 66,364 69,381 72,46 75,451 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 51,94 54,712 54,422 54,586 56,248 58,88 6,55 61, Population (s) 1,157 1,192 1,23 1,263 1,29 1,317 1,342 1, Retail sales ($ millions) 22,123 22,138 2,223 2,524 21,866 23,379 24,835 26, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. 4 The Conference Board of Canada

43 absorptions totalled only 8,35 units, the fewest since This left builder inventories of completed and unoccupied homes above 1, units on average during 29, although such stocks did ease by year-end. Only a modest drawdown in stocks is expected this year, keeping builders edgy. As a result, a recovery from the 14-year low of 6,192 housing starts in 29 will be muted. Although quarterly starts have rebounded from their very low annualized pace of 3,7 units in the first quarter of 29, the 8,8-unit fourth-quarter pace was unexceptional. Starts are forecast to perform only slightly better in 21, creeping up to an annual total near 8,7 units. This is only about half the nearly 17, units started at the market s 26 peak, and also trails the annual average of 1,32 starts in the prior 2 years. Further gains expected in 211 through 214 will leave starts under 11,3 units. Table 2 New Housing Market Indicators f 211f 212f 213f 214f Housing starts 13,46 12,5 6,192 8,689 9,957 1,671 1,878 11, Singles 7,771 4,436 4,679 6,181 6,85 7,2 6,913 7, Multiples 5,689 7,614 1,513 2,58 3,153 3,651 3,965 4, Under construction 14,615 13,788 9,363 8,82 9,763 1,411 1,759 11, Housing completions 13,112 14,195 8,238 8,431 9,25 1,162 1,594 1, Singles 9,149 6,98 4,291 6,113 6,523 6,975 6,931 6, Multiples 3,963 7,287 3,947 2,318 2,52 3,187 3,663 4, Newly completed and unabsorbed , Absorptions 13,136 13,738 8,35 8,537 9, 1,118 1,571 1, Months supply Average price of a new home ($) 55,55 58, , ,58 487, ,838 58, , Series Database. Table 3 Resale Housing Market Indicators f 211f 212f 213f 214f Unit sales 32,177 23,135 24,881 26,422 26,824 27,668 28,566 29, Dollar volume sales ($ millions) 13,323 9,376 9,61 1,528 1,966 11,65 12,293 12, New listings 54,23 56,189 41,641 45,986 48,425 5,122 51,855 53, Sales-to-new-listings ratio (%) Average price of a resale home ($) 414,54 45, , ,459 48, ,43 43, , Sources: The Conference Board of Canada; Canadian Real Estate Association. The Conference Board of Canada 41

44 Edmonton An improving economy and resumed employment growth are forecast to buoy Edmonton housing markets in 21. On the resale side, last spring s pickup in demand produced a balanced market, which will firm, but not electrify, house prices this year. The market is forecast to remain balanced, and so prices will increase moderately. A new home market featuring choppy absorptions and significant inventory overhang is limiting prospects for housing starts, although some improvement is in the cards. Ongoing population growth will fuel additional new construction gains, but not to peak levels reached in 26 and 27. Economic Outlook Edmonton s gross domestic product is forecast to rebound by 2.9 per cent this year, as a recuperating energy sector stabilizes the area s oil-centred manufacturing cluster and as services sector expansion resumes. GDP growth is expected to jump above 4 per cent in 211. Local employment will fully recoup 29 s.6 per cent dip in 21, but robust hikes are a year off. Moreover, faster labour force expansion will push the unemployment rate to a 14-year high of 7.3 per cent in 21. The waning attraction of a loosening labour market is forecast to shave population growth to a five-year low in 21. Housing Outlook EXISTING HOUSING MARKET Sales of existing Edmonton houses are picking up. Transactions averaged fewer than 17, units annualized during the seven quarters ending in the first quarter of 29, well off the more than 22,35-unit average during the prior seven quarters. But sales rose above 21, units in the spring and slightly further in the third quarter, before dipping in the fourth. For 29 as a whole, sales increased by 1.2 per cent to nearly 19,14 units, low compared with 26 s peak of almost 22,, but significantly above the 2-year average. A slight uptick to over 19,6 sales is forecast in 21, with further modest gains expected over the rest of the forecast. By 214, volumes are expected to approach the 26 peak. Meanwhile, the soggy market kept potential home sellers on the sidelines. The supply of new listings fell sharply in late 28, then eased to a three-year low under 3, units in the fourth quarter of 29. For all of 29, listings averaged only 3,696 units, well off volumes just above 4, units in both 27 and 28. A firming market should encourage potential vendors in 21, drawing 9 per cent more supply into the market. Although new listings are forecast to rise gradually through 214, the 4,-unit ceiling will not be surmounted. As in other cities, Edmonton s resale market tightened significantly in the second quarter of 29, but only to a strong balanced position. The sales-to-new-listings ratio, which had dipped below 4 per cent in the fourth quarter of 28, soared to the upper 6 per cent range and remained there. This lifted 29 s average ratio to 62 per cent, the highest since 26. Faster increases in listings supply than in sales demand during 21 are forecast to cut the sales-to-newlistings ratio below 6 per cent still signalling a balanced market. The Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply 16, 12, 8, 4, Singles Multiples 2 year average 5, 4, 3, 2, Price ($) Months supply , f 11f 12f 13f 14f f 11f 12f 13f 14f Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 42 The Conference Board of Canada