In-Depth Housing Analysis for Canada, the Provinces, and Nine Metropolitan Areas. Metropolitan Housing Outlook Spring 2012

Transcription

1 Metropolitan Housing Outlook Spring 212 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 MI Canada Inc. Genworth MI Canada Inc., through its subsidiary, Genworth Financial Mortgage Insurance Company Canada, has been the leading Canadian private residential mortgage insurer since Known as Genworth Canada, "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 Canada combines technological and service excellence with risk management expertise to deliver innovation to the mortgage marketplace. As of March 31, 212, Genworth Canada had $5.4 billion total assets and $2.7 billion shareholders' equity. Based in Oakville, Ontario, Genworth Canada employs approximately 26 people across Canada. Find out more 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 twice a year.

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? The Canadian economy is expected to grow by 2.3 per cent in 212 and 2.8 per cent next year, down from the 2.4 per cent and 3.3 per cent forecast in the last Metropolitan Housing Outlook, mainly because of still modest global economic growth and public sector cutbacks. The loonie is forecast to average US$1. this year, down 3 cents from the previous outlook. The Canadian dollar lost some of its luster in the final quarter of 211, although it has picked up once again in recent months thanks to strong commodity prices. The Canadian dollar is forecast to average US$1.2 in 213, just shy of the US$1.3 anticipated last time. Canada s new home market has also been stronger of late. Low interest rates continue to encourage builders. As a result, starts are now expected to reach 193, units this year, an upward revision from 186,2 units last time. But the market is expected to weaken through 212, pushing starts lower in 213. Indeed, the current outlook calls for housing starts of 191,5 units next year, down significantly from 22,1 units in the previous forecast. Despite the stronger housing starts forecast for 212 this time, new home prices are still expected to grow by 2.5 per cent in 212, unchanged from the last outlook. But weaker starts next year will lead to a downward revision in price growth for 213. The latest forecast calls for 2.4 per cent growth in new home prices next year, down from 2.6 per cent growth in the previous exercise. In the resale market, price growth this year is now expected to be weaker than we projected in our previous outlook, but stronger in 213. A softening market will result in resale price growth slipping to just.9 per cent in 212, down from our expectation of 2 per cent growth in the last Metropolitan Housing Outlook. Next year, resale price growth should reach 3.2 per cent, a modest increase from the 3 per cent growth forecast previously. The current forecast calls for a 1.8 per cent increase in total mortgage approvals this year, down from 2.2 per cent in the last outlook. This downgrade is entirely due to a bigger decline in high-ratio mortgages ( 1.8 per cent this time compared with.7 per cent last time). The number of conventional mortgage approvals is expected to grow moderately faster than was expected before rising 4.8 per cent in 212, an increase of.4 percentage points over the previous forecast. 2 The Conference Board of Canada

5 Executive Summary National Overview There are signs of strength in the Canadian economy this year. High prices are boosting investment and production in Canada s resource sector. Employment was also up sharply in March, and consumer confidence has picked up. Combined with continued low interest rates, consumers are expected to keep spending in 212, albeit at a more moderate pace of growth than in 211. However, growth in Canada s economy will be held back by federal and provincial government restraint. With few exceptions, the latest round of provincial budgets has been about frugal spending growth coupled with modest tax measures and user fees. Indeed, the government sector is expected to remove.3 percentage points from real gross domestic product growth this year and contribute very little over the next two years. In total, real GDP is forecast to rise by only 2.3 per cent in 212, with growth improving to 2.8 per cent for 213. High food and gasoline prices pushed headline inflation to above 3 per cent for several months last year. But the inflation rate is expected to average 1.9 per cent this year, as a result of a slowdown in the second half of 212. Core inflation will also be 1.9 per cent in 212. Both are then forecast to be just over 2 per cent in 213. With inflation well within its target range and economic conditions remaining soft, the Bank of Canada should be in a position to hold off on rate hikes for another year, waiting for the U.S. Federal Reserve to increase rates in the United States, and avoiding undue pressure on the Canadian dollar. Already, high commodity prices are expected to keep Canada s dollar at or above parity over 212 and 213. In early 212, competition among major banks led to significant discounts on mortgage rates some institutions offered a five-year fixed rate of just 2.99 per cent. This has helped sustain housing starts and house price gains across Canada so far this year. But with economic growth still modest, builders are expected to lower new construction levels in the coming months. As a result, while housing starts are forecast to reach roughly 193, units this year, they are expected to drop to 191,5 units for 213. Threeyear and five-year mortgage rates are forecast to fall slightly in 212, averaging 4 per cent and 5.2 per cent respectively. By 213, three-year rates are expected to begin to move back up, reaching an average of 4.5 per cent. Five-year rates will fall for one more year though, slipping to 5.1 per cent in 213, before rising in 214 and afterwards, reaching 7.2 per cent in 216. Housing markets are generally balanced at the national level. Accordingly, price growth in the new and resale housing markets will be modest this year and next. New home prices are forecast to grow by an average of 2.5 per cent in 212 and 213. Existing home price growth is expected to be weaker this year, at.9 per cent, rising to 3.2 per cent in 213. Provincial Overview Decent, albeit modestly slower, GDP expansion in all six of this report s provinces or regions this year will accompany moderate interest rates to provide a firm base for housing markets. Growth is expected to accelerate across Canada in 213. Alberta is projected to enjoy the fastest GDP growth both this year and next. Mixed trends in housing starts are forecast to persist. In 211, starts eased in four of our six regions, but only two are expected to see starts drop in 212. Average prices for existing homes are predicted to rise everywhere but B.C. this year and in all six regions next year. While new home prices fell in two regions last year, prices should rise across the board in both 212 and 213. Output is forecast to increase 2.1 per cent this year and 3.6 per cent during 213 in British Columbia, after a 2.6 per cent gain in 211. We expect good economic health to boost employment 2.1 per cent in 212, the strongest growth since 27. Even faster 2.5 per cent job creation is on tap for 213. Housing starts are forecast to rise 7.5 per cent this year and 7.1 per cent next year. New home prices are expected to edge up.8 per cent in 212 and 2 per cent in 213. Dragged down by weakness in Vancouver, existing home prices are slated to drop 2.3 per cent this year but recover by a similar amount in 213. The Conference Board of Canada 3

6 Healthy petroleum markets are fuelling continued economic strength in Alberta, where GDP is forecast to rise 3.3 per cent in 212 and 4 per cent in 213. Job creation is poised to hit 3.8 per cent this year, similar to last year s advance, but cool to 2.4 per cent in 213. After last year s 5.1 per cent dip, housing starts are expected to increase 16.2 per cent in 212, but ease by 1.2 per cent next year. The 212 gains will be led by a snap-back in single-detached construction. Average prices for both new and existing dwellings should climb between 3 and 4 per cent this year and slightly faster in 213. Together, Manitoba and Saskatchewan are forecast to enjoy GDP expansion of 2.7 per cent in 212 and 3 per cent in 213. Strong economic performance continues to be fuelled by healthy natural resource and agricultural markets. Employment advanced only.5 per cent in 211, but should increase 1.5 per cent this year and 2.2 per cent in 213. Housing starts hit their highest level since 1987 last year and are forecast to edge up this year before easing in 213. The average new home price is forecast to rise 3 per cent in 212 and 3.5 per cent in 213; growth in average existing home prices should be closer to 5 per cent in each of these two years. Expansion of Ontario s GDP is forecast to slow to 1.9 per cent in 212, but rebound to 2.8 per cent in 213 as the manufacturing recovery continues. Employment gains are predicted to slow to 1.6 per cent in 212, but accelerate to 2.3 per cent in 213. We expect housing starts to increase less than l per cent in 212, but rise 5.6 per cent in 213. Prices for both new and existing homes are predicted to increase roughly 3 per cent in 212. In 213, prices are expected to climb 2.3 per cent for new homes and 3 per cent for resale units. A modest 1.4 per cent GDP expansion is in the cards for Quebec this year, followed by a stronger 2.2 per cent uptick in 213. We expect only fractional employment growth in 212, but a 1.3 per cent gain in 212. Falling multiple-unit construction will cut total housing starts by 13.6 per cent this year, despite a 15.5 per cent expected jump in single-detached starts. In 213, drops in both single and multiple starts will slice total starts a further 11.7 per cent. Nonetheless, new-unit prices will increase 2.2 per cent in both 212 and in 213. Meanwhile, the average existing home value is expected to rise by roughly 3 per cent both years. In Atlantic Canada, output growth is forecast to decelerate to 1.3 per cent in 212 from 1.8 per cent in 211, then pick up to 2 per cent in 213. A slightly better 1.2 per cent employment hike is expected for 212 after four straight years of changes below 1 per cent. Despite a 12 per cent increase in singles starts predicted this year, a 41.5 per cent construction drop in the volatile multiple-unit segment will slice total housing starts 11.9 per cent. In 213, construction declines among both single and multiple units are forecast to cut total starts a further 12.6 per cent. Prices are still expected to be up about 2 per cent this year and next for both new and existing units. Municipal Overview Positive GDP growth is anticipated in all nine cities in this report in 212, with the pace accelerating from that recorded in 211 in five of them. Calgary s 3.5 per cent rise, up from 3.1 per cent in 211, is forecast to lead all cities. Edmonton should follow closely, with a 3.2 per cent GDP expansion on tap this year. Meanwhile, we expect Ottawa and Victoria to jointly post the slowest growth, at 1.6 per cent. This still represents an increase from 1.4 per cent during 211 in both cities. GDP is forecast to rise faster across the board during 213. Calgary s 4.4 per cent predicted expansion will again be the highest, while Ottawa s 1.9 per cent will be the lowest. Indeed, Calgary s 4 per cent average growth between 214 and 216 is forecast to lead all cities; Québec City, at the other end of the spectrum, is forecast to post an average rise of only 2 per cent over the same time frame. Sales of existing homes through the Multiple Listing Service are forecast to rise in all cities except Vancouver this year. Calgary will see the largest increase, at 9.2 per cent. Sales in Toronto, Canada s highestvolume market, should advance nearly as quickly. Vancouver s drop is predicted to be 5.8 per cent. For 213, Victoria and Edmonton are forecast to lead sales hikes with nearly equivalent 3.7 and 3.6 per cent increases respectively. Between 214 and 216, Québec City is set to enjoy the fastest volume growth, at 4.2 per cent, while sales are forecast to ease fractionally in Ottawa. 4 The Conference Board of Canada

7 Mixed results are again expected for total housing starts in 212 following declines in five cities in 211. While starts are forecast to drop in only three areas this year, our forecast calls for starts to fall by at least 2 per cent in both Montréal and Québec City. By contrast, volumes are predicted to rise 25.1 per cent in Calgary. Weakness will be pervasive in 213, with only Vancouver, Victoria, and Winnipeg expected to see higher starts. Victoria s 9.6 per cent rise is forecast to be the largest. Conversely, starts are forecast to drop 9.3 per cent in Calgary. Between 214 and 216, average annual starts are forecast to rise 8 per cent in Winnipeg, the fastest among our report s cities, but drop by an average of 2 per cent per year in Ottawa. Between 212 and 216, multiple units share of total housing starts is forecast to meet or exceed the past decade s average in all cities except Winnipeg, where single starts are expected to grab a higher share than in recent years. The sales-to-new-listings ratio is forecast to rise in seven of our nine cities during 212. This will put all markets in a balanced position, an improvement from 211, when Victoria s market was in a buyers state. Balanced conditions are expected to remain in place across the board in 213 and through the medium term. While local norms and market structure limit the relevance of comparing the sales-to-listings ratio across cities, it is nonetheless interesting that Winnipeg has had very high sales-to-new-listings ratios recently, including levels that would indicate sellers markets elsewhere. Resale price growth is forecast to ease in six of our nine markets in 212; Calgary, Edmonton, and Victoria are the areas where hikes are expected to accelerate. Despite the slowing, this year s average resale price is still predicted to advance everywhere but Vancouver, where a 3.1 per cent decline is forecast. The city s price dip in 212 follows a big average price advance in 211, driven by a larger share of sales of high-end homes. This shift has now subsided, trimming the average price. A 4.9 per cent increase in Toronto will lead this year s gainers, with Winnipeg s 4.7 per cent jump a close second. Average annual price growth of 5.7 per cent in Edmonton is forecast to lead all cities in our report between 213 and 216, although all cities will see price advances. Continued low interest rates and generally moderate price growth limited increases in mortgage carrying costs on the average resale unit in all cities except Vancouver last year. Such costs actually declined in Calgary, Edmonton, and Victoria. In 212, mortgage payments will ease again in Victoria and drop more substantially in Vancouver. This will still leave Vancouver with the highest principle and interest charges among our nine cities, by a wide margin, in 212. Vancouver s payments are expected to be equivalent to 43 per cent of average household incomes in 212. By contrast, carrying costs in Calgary and Edmonton are forecast to require only 15 per cent of average household income. In absolute terms, principle and interest costs are expected to be lower in Vancouver and Victoria this year, while rising elsewhere. The Conference Board of Canada 5

8 Economic Indicators GDP (22 $ millions) Employment (s) Unemployment Rate Personal Income per Capita Retail Sales ($ millions) f 213f f 213f f 213f f 213f f 213f Canada 1,357,581 1,388,56 1,426,871 17,39 17,521 17, ,666 39,658 4, ,64 476, , Atlantic Provinces 71,768 72,669 74,146 1,12 1,116 1, ,627 35,726 36,953 33,864 35,26 36, Quebec 256,936 26, ,163 3,957 3,971 4, ,171 35,84 36,877 11,468 15,93 11, Québec City 26,37 26,863 27, ,124 41,4 42,24 12,789 13,411 14, Montréal 127,39 129, ,429 1,952 1,953 1, ,8 36,451 37,572 44,771 46,861 48, Ontario 497,365 56,665 52,84 6,731 6,836 6, ,627 39,388 4,764 16, , , Ottawa 47,779 48,546 49, ,595 44,263 45,421 16,482 16,952 17, Toronto 226,99 232,131 24,362 2,96 3,4 3, ,46 4,715 42,195 65,88 67,816 71, Prairies 82,255 84,441 86,996 1,15 1,168 1, ,41 38,156 39,227 32,836 35, 36, Winnipeg 26,463 27,1 27, ,473 38,19 39,128 1,51 1,588 11, Alberta 184,213 19, ,835 2,94 2,174 2, ,12 51,811 53,724 64,142 7,26 74, Calgary 64,59 66,736 69, ,227 56,635 58,397 23,131 25,336 26, Edmonton 53,947 55,696 57, ,998 5,126 51,571 21,578 23,41 24, British Columbia 157,98 16,43 166,183 2,275 2,322 2, ,29 38,135 39,38 59,542 62,891 65, Vancouver 85,118 87,24 9,48 1,251 1,276 1, ,261 39,88 4,253 27,149 28,371 29, Victoria 12,62 12,258 12, ,815 4,581 41,995 4,96 4,35 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 f 213f f 213f f 213f f 213f f 213f Canada 34,437 34,864 35, ,95 192, , ,52 192,293 19, , , ,362 44, , , Atlantic Provinces 4,516 4,553 4,59 12,523 11,27 9,632 11,562 11,816 1,174 2,795 25,12 29, , , , Quebec 7,969 8,41 8,116 48,384 41,783 36,88 45,495 46,111 4, , , ,32 299,518 35, , Québec City ,56 4,442 4,127 5,667 5,37 4, , , , ,576 23, , Montréal 3,98 3,957 4,6 22,643 17,64 16,73 19,866 2,71 18,8 38, 318, ,98 321,21 327, , Ontario 13,356 13,497 13,661 67,82 68,397 72,241 62,566 65,35 69, , ,818 39,45 494,644 59, , Ottawa 1,256 1,267 1,277 8,31 8,623 7,898 8,356 8,696 8, ,15 33, ,41 393,812 42,83 411, Toronto 5,853 5,949 6,49 39,678 43,196 43,195 33,831 43,125 43,94 484,128 57,74 519, ,94 594,99 67, Prairies 2,34 2,337 2,37 13,115 13,548 12,869 11,92 13,438 12, , , , , ,421 41, Winnipeg ,294 3,756 3,899 3,179 3,718 4,1 241,49 252, , , , , Alberta 3,77 3,844 3,915 25,78 29,863 29,52 23,836 27,185 28, ,49 366, , , ,36 459, Calgary 1,268 1,3 1,329 9,185 11,495 1,425 7,689 11,142 1,435 42, , , ,91 496, , Edmonton 1,196 1,218 1,24 9,232 9,822 9,415 8,941 9,71 9, ,614 34, , ,327 39,76 46, British Columbia 4,57 4,628 4,693 26,4 28,378 3,46 22,542 25,845 28,497 56, ,4 561,89 637,59 642,85 655, Vancouver 2,436 2,476 2,519 17,99 17,917 18,735 12,919 17,994 17, , , , , ,2 684, Victoria ,63 1,542 1,689 1,642 1,629 1, ,473 54, , ,4 414, , Financial Indicators (Canada only) f 213f f 213f f 213f Exchange rate (U.S./Can.) 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 The Canadian economic recovery remains on track for steady but relatively modest growth. Real GDP is forecast to advance by 2.3 per cent in 212 and 2.8 per cent next year. For the first time since 1997, government restraint will take a bite out of growth this year as real public sector activity declines by 1.1 per cent. The housing market is expected to soften in 212, but a solid first quarter will hold the decline in housing starts to just.5 per cent for the year as a whole. Economic Outlook Risks to Canada s near-term outlook have eased somewhat. Europe s sovereign debt issues remain a problem but have been largely contained so far. U.S. consumers are also starting to spend again, thereby helping to propel global demand. Japan s economy is also looking like it will post moderate growth in 212, and growth in most developing nations will either be steady or, as is the case for China, moderate slightly this year. Within the domestic economy, strong commodity prices will continue to drive investment and production in the resource sector. Employment also rebounded sharply in March following months of anemic gains, and consumer confidence is picking up, albeit slowly and from still depressed levels, suggesting that consumers in Canada, prompted by continued record-low lending rates, will continue to forge ahead with their spending, although at a somewhat weaker pace of growth. But despite all of this, Canada s economic performance will be modest in 212. Public sector cutbacks and cautious household spending suggest that real gross domestic product will expand by only 2.3 per cent this year, down from 2.5 per cent growth last year. With few exceptions, the latest round of provincial budgets has been about frugal spending growth coupled with modest tax measures and user fees. The effects of fiscal restraint will be less evident in 213, and this, coupled with stronger U.S. demand for exports, will lift Canada s economy by 2.8 per cent next year. Financial Markets Outlook Inflationary pressures moderated significantly through the second half of 211. As a result, despite this year s surge in gasoline prices, overall inflation is forecast to ease to 1.9 per cent in 212. Core inflation, which excludes volatile items such as food and gasoline and the effect of indirect tax increases, will remain moderate, rising 1.9 per cent this year as well. Overall and core inflation are expected to be just over 2 per cent in 213. Over the next few years, Canadian central bankers are likely to have their nerves tested again. With inflation moving upward, Canada s economy running closer to capacity, and labour markets tightening quickly, sooner or later the Bank of Canada will have to respond by raising rates. However, any attempt to raise rates in Canada before the U.S. Federal Reserve moves to do so south of the border will put upward pressure on the Canadian dollar a development the Bank wants to avoid. Overall, we expect economic conditions will remain soft enough that the Bank will hold off on rate hikes for another year an expectation bolstered by the Fed s position that it will keep monetary policy exceptionally loose until late in 214. Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) Singles Multiples 2-year average Series Database New Resale Series Database; Canadian Real Estate Association. 8 The Conference Board of Canada

11 Still, strong commodity prices and the prospects of rate hikes here at home will maintain pressure on the value of the loonie. The loonie is forecast to average US$1. this year before climbing to an average of US$1.2 in 213. Housing Outlook After falling to a 1-year low during the 28 9 recession, Canada s housing starts increased sharply in the last half of 29 and through the first half of 21, rising by more than 27 per cent in total for 21. Builders were being encouraged by the economic recovery, spillover demand from the resale market, and extremely low interest rates. Higher demand also led to the return of price growth new home prices rose by 2.2 per cent after declining by 2.3 per cent in 29. Resale price growth was even stronger in 21, at 6.8 per cent. While the resale market continued to be healthy in 211, slowing real GDP growth and tighter mortgage rules sent a cautionary note to builders. On an annual level, starts did rise again last year, but the increase was much more modest, at 2.1 per cent. Price growth in both the new and resale markets kept pace nonetheless. Canada s new housing market picked up in the first quarter of this year as cutthroat competition among chartered banks for mortgage customers led to sizable discounts on rates, with five-year fixed rates of just 2.99 per cent being offered by some. But, with modest economic growth forecast again in 212, it is expected that new construction levels will ease in the coming months, with housing starts forecast to average roughly 193, units for the year as a whole and 192, next year a.5 per cent and.8 per cent decline respectively. Prices have softened in the resale market, pushing our forecast down to a modest rise of.9 per cent for 212, but are expected to remain in line with the 211 pace in the new home market, at 2.5 per cent. As the economy improves in 213 so too will demand for housing. By 214, starts are anticipated to grow by 4.5 per cent, topping 2, units on an annual basis for the first time since 28. Housing starts will then average growth of 3.1 per cent per year through , keeping the market aligned with demographic requirements. At the national level, sales and new listings data (up to March) suggest that resale markets generally remain balanced overall as well. As a result, price growth in both the new and resale home markets will be modest over the medium term. From 213 to 216, new home prices are forecast to average 2.4 per cent growth per year, and resale prices, 3.5 per cent per year. Mortgage Outlook The five-year conventional mortgage rate fell for the fourth year in a row in 211, down to 5.4 per cent. Soft economic conditions this year are expected to keep the Bank of Canada from raising interest rates through 212 as well. As a result, the five-year conventional rate is forecast remain historically low, at an average of 5.2 per cent in 212 and 5.1 per cent in 213. Mortgage rates will then begin to move up again over the medium term, reaching 7.2 per cent by 216. With mortgage rates relatively low last year, a decision by the Department of Finance to reduce the maximum mortgage amortization period from 35 years to 3 years did not dissuade buyers. The number of mortgages approved in 211 increased by 4 per cent. Meanwhile, price increases boosted the dollar volume of mortgages by even more. The new mortgage rules did have an impact on the types of mortgages 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 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 that were approved, however, as the shorter amortization made it harder for those in the high-ratio category to get a mortgage. The number of highratio mortgage approvals declined in 211, down 3.1 per cent, while conventional mortgage approvals grew by 11.1 per cent. A similar situation is expected this year. The number of conventional mortgage approvals is forecast to rise by 4.8 per cent, and the number of high-ratio mortgage approvals is forecast to decline further, by 1.8 per cent, still affected by the new rules. Modest price increases will keep the dollar volumes of the two types on the upswing though. Next year, both types of mortgages are expected to see increases in the number of approvals, thanks to still low mortgage rates and a stronger economy. Chart 5 Consumer Finances: Atlantic Provinces Chart 6 Consumer Finances: Quebec Mort. in arrears (%) Bankruptcies per 1 mil. persons Mort. in arrears (%) 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 (%) Bankruptcies per 1 mil. persons Mort. in arrears (%) 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 (%) Bankruptcies per 1 mil. persons Mort. in arrears (%) 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 Real GDP at market prices 1,283,722 1,324,993 1,357,581 1,388,56 1,426,871 1,465,841 1,5,358 1,532,489 (22 $ millions) Total employment (s) 16,816 17,46 17,39 17,521 17,921 18,242 18,498 18, Unemployment rate (%) Personal income per capita ($) 36,486 37,562 38,666 39,658 4,998 42,36 43,672 44, Population (s) 33,676 34,74 34,437 34,864 35,279 35,698 36,121 36, Retail sales ($ millions) 415, ,41 454,64 476, ,469 52,232 54,677 56, 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 149,81 189,93 193,95 192, ,532 2,8 26, , Singles 75,659 92,554 82,392 96,57 97,224 1,914 13,885 16, Multiples 73,422 97, ,558 96,489 94,37 99,165 12,926 16, Housing completions 176, , ,52 192,293 19, ,14 197,356 23, Singles 78,285 9,56 79,997 9,144 94,815 98,44 11,116 13, Multiples 98,552 95,79 95,523 12,149 95,971 93,97 96,24 1, Average price of a new home ($) 387,36 395,561 44, , ,31 435,51 445, , Average price of a resale home ($) 316, , , , , ,297 43, , 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 Atlantic Canada s real GDP is expected to grow by just 1.3 per cent this year, with growth being pulled down by weakness in all four provinces. Housing starts are forecast to fall by 11.9 per cent in 212 and a further 12.6 per cent next year, as they align with demographic fundamentals following a decade of strong growth in housing demand, which builders rushed to meet. Price growth in the new and resale home markets will be slower as well, hovering around 2 per cent for both in 212 and 213. Economic Outlook Growth in Atlantic Canada s economy is expected to slip to 1.3 per cent in 212, down from an already modest 1.8 per cent last year. This weakness will be felt in all four provinces. Indeed, real GDP in Newfoundland and Labrador is forecast to grow by just.7 per cent in 212, as its oil and gas industry reached its peak production level in 211. Meanwhile, cuts to public infrastructure spending will limit economic growth in Prince Edward Island to 1.4 per cent in 212, in spite of an improvement in manufacturing and in the primary sectors. In Nova Scotia, limited private and public investment, government austerity measures, and weakness in the forestry sector are expected to limit real GDP growth to 1.5 per cent in 212. New Brunswick is also anticipated to post economic growth of 1.5 per cent this year but this will be an improvement over its meagre.9 per cent increase in 211, as the province s job market is recovering, lifting domestic demand. Housing Outlook As the global recession reduced consumer confidence and weakened economic growth, builders in Atlantic Canada reduced housing starts by 1.9 per cent in 29. Price growth which had been strong for a number of years also slowed, falling to 3 per cent for new homes and 6.3 per cent for existing homes. By 21, an improving economy, low interest rates, and a sales tax rebate of up to $7, on new home purchases in Nova Scotia combined to induce builders to increase housing starts by 17.3 per cent, to 12,8 units. However, price growth continued to decelerate, slipping to 2.4 per cent in the new market and 6 per cent in the resale market. Slowing price growth was an indication that supply was now outstripping demand. Indeed, even with the sharp decline in starts in 29, housing starts in the Atlantic region topped 1, for 1 straight years from 21 to 21, a level unsustainable over the long term given the level of household formation. Accordingly, builders in Newfoundland and Labrador and in New Brunswick began to pull back from the market in 211. But starts continued to rise in Nova Scotia and Prince Edward Island through last year. P.E.I. s new home market was particularly strong in 211, boosted by the Provincial Nominee Program, which increased international immigration. In total, Atlantic Canada s starts fell 1.9 per cent last year. Price growth remained modest as well, at 2.9 per cent for the new home market and 3.9 per cent for the resale market. With modest economic growth in the cards for this year, builders in all four Atlantic provinces are Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) Singles Multiples 2-year average New Resale Series Database. Series Database; Canadian Real Estate Association. 12 The Conference Board of Canada

15 expected to reduce housing starts, down a total of 11.9 per cent, continuing to move them back more in line with demographic requirements. Changes to P.E.I. s Provincial Nominee Program will bring international migration down from the exceptionally high levels seen in the last few years, further lowering housing demand in that province. The market will continue to cool in 213 as well, with starts forecast to fall another 12.6 per cent, finally bringing them below 1, units a level more in line with the demographic requirements of the Atlantic provinces. New and resale home price growth will remain modest throughout our forecast horizon, averaging near 2 per cent per year over the next five years. Table 1 Economic Indicators Real GDP at basic prices 68,374 7,512 71,768 72,669 74,146 75,655 76,693 77,183 (22 $ millions) Total employment (s) 1,92 1,99 1,12 1,116 1,131 1,144 1,151 1, Unemployment rate Personal income per capita 32,522 33,584 34,627 35,726 36,953 38,227 39,47 4, Population (s) 4,443 4,483 4,516 4,553 4,59 4,629 4,668 4, Retail sales ($ millions) 3,996 32,466 33,864 35,26 36,521 37,81 39,2 4, Inflation rate Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators Housing starts 1,893 12,772 12,523 11,27 9,632 9,22 9,45 9, Singles 7,383 7,817 6,911 7,741 6,942 6,635 6,55 6, Multiples 3,51 4,955 5,612 3,286 2,69 2,585 2,54 2, Housing completions 11,231 11,589 11,562 11,816 1,174 9,573 9,353 9, Singles 7,447 7,728 7,349 7,62 7,21 6,882 6,733 6, Multiples 3,784 3,86 4,213 4,213 2,973 2,691 2,62 2, Average price of a new home ($) 314,48 322,49 331, , , , , , Average price of a resale home ($) 182, ,32 2,795 25,12 29, ,54 217, , Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 13

16 Quebec Quebec s gross domestic product is expected to grow just 1.4 per cent in 212 following a lacklustre 1.7 per cent advance in 211. While exports will finally recover, thanks to advances in the aerospace and mining industries, declining public investment and residential construction activity and slower growth in consumer spending will limit overall economic growth this year. Indeed, housing starts are forecast to decline 13.6 per cent in 212, as they fall back in line with weaker demand and demographic requirements. Economic Outlook Quebec s exports are set to begin a long-awaited recovery, increasing by 4.2 per cent this year and 5 per cent in 213. A key driver of this rebound will be double-digit growth in mining production in both years. But real public investment is forecast to fall by more than 6 per cent in each year as a result of the decline in federal and provincial infrastructure spending. At the same time, falling housing starts will dampen the private sector. Growth in total consumer spending is forecast to post only a weak 1.5 per cent increase this year. Consumer confidence has been falling steadily since March 211, as soft employment, unsettled global stock markets, and the European debt crisis have rattled consumers. Consumer spending is expected to rise by 2.5 per cent next year as the global economic recovery gathers speed and personal disposable income grows strongly. All in all, Quebec s economy is expected to grow by 1.4 per cent in 212, before rising by a still modest 2.2 per cent in 213. Housing Outlook The global recession in late 28 lowered consumer confidence in Quebec, trimming demand for bigticket items such as housing. Builders reduced housing starts by more than 23 per cent (seasonally adjusted at annual rates) over the final quarter of 28 and through the first quarter of 29, bringing them down to 38,3 annualized units. By the second quarter of 29, the economy was already in recovery mode. Both employment and income growth were improving. Interest rates were also very low, and the province was enjoying its strongest population growth since the early 199s. These factors enticed builders back to the market, and so they increased starts by 18.3 per cent in 21, to 51,4 units. Growth was much stronger in the multiples market during this time, because of a number of new condominium projects, especially in Montréal and Québec City. However, at this level, total starts were well above demographic requirements. A resulting rise in inventories, therefore, kept new home price growth to a modest 2.4 per cent in 21, down from 5 per cent just two years prior. With inventories up and demand being further hurt by increased taxes and weaker economic growth, builders retreated from the market once again last year. Indeed, starts have decreased in five of the past seven quarters, falling by 5.8 per cent for 211 as a whole. Despite this decline, starts remain above demographic needs, even with continued healthy population Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) Singles Multiples 2-year average New Resale Series Database. Series Database; Canadian Real Estate Association. 14 The Conference Board of Canada

17 increases in recent years. Accordingly, when combined with further tax increases this year and reduced consumer confidence, Quebec s housing starts are forecast to remain on a downward trend through 212 and 213 as well, dropping by 13.6 per cent in 212 and 11.7 per cent in 213. Consumer confidence has been falling steadily since reaching a post-recession peak in March 211. In January of this year, the consumer confidence index for Quebec fell below 6 a level last seen almost three years ago in the midst of the recession and far below the national average. Lower demand will keep price growth in the new home market modest for the next two years also, at an average of 2.2 per cent per year. Average prices in the resale market are forecast to rise by a slightly stronger 3.1 per cent in 212 and 2.9 per cent in 213, but remain well below average prices for new homes. Table 1 Economic Indicators Real GDP at basic prices 246, , ,936 26, , ,53 276, ,595 (22 $ millions) Total employment (s) 3,847 3,917 3,957 3,971 4,24 4,81 4,128 4, Unemployment rate Personal income per capita 33,53 34,483 35,171 35,84 36,877 38,37 39,178 4, Population (s) 7,816 7,895 7,969 8,41 8,116 8,189 8,259 8, Retail sales ($ millions) 93,74 99,631 11,468 15,93 11, , , , Inflation rate Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators Housing starts 43,43 51,362 48,384 41,783 36,88 36,92 37,713 38, Singles 17,535 19,533 16,55 19,123 17,415 17,352 17,669 17, Multiples 25,868 31,83 31,833 22,659 19,466 19,568 2,43 2, Housing completions 43,278 45,731 45,495 46,111 4,377 37,356 37,691 38, Singles 16,757 18,722 16,428 17,499 17,549 17,161 17,365 17, Multiples 26,521 27,9 29,68 28,613 22,828 2,195 2,326 2, Average price of a new home ($) 286, , ,518 35, ,736 32, , , Average price of a resale home ($) 23, , , , ,32 286, ,24 35, Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 15

18 Ontario Softer economic growth as a result of the volatile global environment and government fiscal restraint will lead to a real GDP gain of only 1.9 per cent for Ontario in 212. The outlook will improve in 213, when real GDP is expected to advance by 2.8 per cent. After increasing significantly over the past two years, the province s housing starts are set to grow by just.9 per cent this year, but will pick up again next year in line with the stronger economy. Economic Outlook Ontario s exports are expected to benefit this year from increased demand for autos and parts south of the border. However, modest employment and wage gains at home will limit Ontario consumption growth to 1.9 per cent for 212. Real disposable income will grow by a mere.5 per cent, as tax credits introduced during the recession and the HST transitional payments come to an end. Real income growth will rebound in 213, advancing by 2.5 per cent, helping consumption advance by 3.1 per cent. But public infrastructure spending will take a big hit both years, declining 12.5 per cent in 212 and 7.4 per cent in 213, as the Ontario government exercises fiscal restraint to eliminate the deficit by Although business investment will fully offset contracting public infrastructure spending, total capital investment will expand by only 1.2 per cent in 212 a big decline from last year s 9.1 per cent increase. Overall, Ontario s real GDP will grow by 1.9 per cent in 212 and 2.8 per cent next year. Housing Outlook In the second half of 28, the beginnings of the global recession had lowered consumer confidence in Ontario, slowing demand in the new home market. Builders retreated, reducing starts by 32.9 per cent in 29, while new home prices registered no growth for the first time in 14 years. A recovering economy and low interest rates renewed demand in 21. This prompted builders to increase housing starts by 2 per cent, while prices rose a modest 2.5 per cent for 21. Despite renewed global economic uncertainty and weaker GDP growth in Ontario last year, builders increased housing starts 12.2 per cent, encouraged by stronger consumer spending, which was lifted by a small gain in employment and the last of the three HST transition rebate cheques. Demand was also driven by still low interest rates and healthy population growth, especially in Toronto. Indeed, new home growth last year came entirely from the multiples market, driven by construction on high-rise buildings, including several large-scale residential hotels in downtown Toronto. Multiple starts rose 26.7 per cent in 211, compared with a 4.4 per cent decline in single starts. New home price growth gained some momentum as a result of the increased in overall activity, rising to 4.1 per cent. With many of the bigger projects still under construction and the economy still relatively weak, the past two quarters have seen some slowdown in Ontario s housing starts. Starts are expected to make only modest gains over the rest of the year, leaving them up just.9 per cent in total for 212. Price growth Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) Singles Multiples 2-year average New Resale Series Database. Series Database; Canadian Real Estate Association. 16 The Conference Board of Canada

19 is also forecast to be slower this year, at 3 per cent, although average prices will top $5, for the first time. But the weakness in the market will be temporary, as provincial economic growth is forecast to accelerate in 213, allowing for stronger income gains and, in turn, a sharper rise in consumer spending. As a result, builders are expected to increase housing starts by 5.6 per cent next year. Through the medium term, solid population growth will also help to boost residential construction activity. While Ontario s share of international migration to Canada has been shrinking, the province still receives about 42 per cent of immigrants. Still, price growth is forecast to remain modest, rising by an average of 2.2 per cent annually from 213 to 216 for new homes and 3.2 per cent for resale homes. Table 1 Economic Indicators Real GDP at basic prices 471, , ,365 56,665 52,84 534, , ,658 (22 $ millions) Total employment (s) 6,53 6,61 6,731 6,836 6,995 7,115 7,223 7, Unemployment rate Personal income per capita 36,775 37,862 38,627 39,388 4,764 42,11 43,46 44, Population (s) 13,54 13,27 13,356 13,497 13,661 13,83 14,4 14, Retail sales ($ millions) 147,92 155,889 16, , , , , , Inflation rate Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators Housing starts 5,37 6,433 67,82 68,397 72,241 77,768 82,774 88, Singles 22,634 28,111 26,882 31,793 34,48 36,487 38,792 41, Multiples 27,736 32,323 4,938 36,64 38,193 41,281 43,981 47, Housing completions 55,124 61,349 62,566 65,35 69,221 72,973 77,72 82, Singles 24,748 27,466 25,493 29,733 32,821 35,38 37,696 4, Multiples 3,375 33,883 37,73 35,617 36,41 37,593 4,6 42, Average price of a new home ($) 463, ,32 494,644 59, , , , , Average price of a resale home ($) 315, , , ,818 39,45 42, , , Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 17

20 Prairies Healthy economic growth in Manitoba and Saskatchewan will continue to underpin strong housing markets. Although job creation largely stalled last year, moderately faster employment gains are predicted over the next few years. This will support continued rapid population hikes and spur housing demand. Starts, which hit a multi-decade high in 211, are forecast to inch up this year, then remain elevated. Prices for both new and existing homes will continue to rise, although at a pace well off the double-digit advances of 27 and 28. Economic Outlook The Prairie provinces of Manitoba and Saskatchewan combined to deliver 3.4 per cent GDP growth in 211. An easing to 2.7 per cent growth is expected for 212, followed by advances averaging 2.8 per cent per year between 213 and 216. Last year s.5 per cent regional employment uptick did little to change the unemployment rate, but a 1.5 per cent job gain this year is forecast to trim the unemployment rate to 4.9 per cent. Ongoing job gains are predicted to cut the unemployment rate to 4.6 per cent by 216. In Manitoba, the agriculture sector is poised to rebound strongly following two years of flooding that reduced seeded areas and lowered yields. Despite continuing strength in the Canadian dollar, provincial manufacturing is set to expand at a stronger pace in 212 and 213, led by food processing and by the aerospace industry. Saskatchewan s growth is expected to be led by manufacturing and mining particularly the mineral fuels sector, since the outlook for potash is clouded by potentially weaker agricultural prices. Housing Outlook Housing starts in Manitoba and Saskatchewan have been sizzling over the past couple of years. Last year ended with annualized volumes averaging over 14,4 units in the second half, the highest since Indeed, growth has been ramping up for two years, with starts posting double-digit year-on-year gains in seven of eight quarters through 21 and 211. Starts clocked in at 13,115 units for all of 211, up 11 per cent from 21. Although single-family homes dominate Prairie construction, accounting for more than two-thirds of all starts over the past decade, last year s new construction uptick was mainly fuelled by a big jump in multiple starts. The advance in singles was more subdued. We expect the roles to be reversed in 212 as a healthy jump in single-detached starts outweighs a pullback in multiples. Total starts are predicted to climb above 13,5 units this year, the most since at least Medium-term housing prospects appear healthy for this region. We expect employment growth to average a strong 1.6 per cent annually between 213 and 216. This will fuel population hikes of 1.4 per cent per year between 214 and 216, more than triple the average rate of the past 2 years. Moreover, the ratio of starts to population growth has been weak in recent years, suggesting at least some pent-up housing demand. Accordingly, starts are forecast to hover in a range of roughly 13, to 14, units between 213 and 216, with little change in the mix of single and multiple units. Such volumes will be nearly double the 2-year average of 7,3 starts. Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) Singles Multiples 2-year average New Resale Series Database. Series Database; Canadian Real Estate Association. 18 The Conference Board of Canada

21 House price growth remains solid. The average price of an existing home has increased tremendously over the past decade, with annual growth averaging 1 per cent between 21 and 21. Existing-home price growth continued unabated in 211, coming in at 6.1 per cent, only slightly behind the 6.9 per cent gain in 21. We expect a further modest cooling to still decent growth of 4.5 per cent in 212, then increases near 5 per cent between 213 and 216. New home price increases have also slowed, with average growth of 3.5 per cent in 211, down from 3.9 per cent in 21. Further easing to a 3 per cent pace is on tap for 212, then mediumterm hikes near 3.5 per cent. Table 1 Economic Indicators Real GDP at basic prices 77,129 79,557 82,255 84,441 86,996 89,727 92,221 94,185 (22 $ millions) Total employment (s) 1,128 1,144 1,15 1,168 1,193 1,214 1,231 1, Unemployment rate Personal income per capita 35,19 35,989 37,41 38,156 39,227 4,438 41,577 42, Population (s) 2,244 2,274 2,34 2,337 2,37 2,42 2,435 2, Retail sales ($ millions) 29,513 3,81 32,836 35, 36,459 38,15 39,483 4, Inflation rate Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators Housing starts 8,4 11,795 13,115 13,548 12,869 13,266 13,973 14, Singles 5,871 7,799 7,984 9,397 9,23 9,574 1,92 1, Multiples 2,169 3,997 5,131 4,151 3,639 3,692 3,881 3, Housing completions 1,36 1,394 11,92 13,438 12,732 12,668 13,232 13, Singles 6,49 7,816 7,615 8,969 8,858 8,996 9,49 9, Multiples 3,546 2,579 4,35 4,469 3,874 3,672 3,823 3, Average price of a new home ($) 358,71 371, , ,421 41, , ,95 453, Average price of a resale home ($) 216, , , , , ,25 297,82 311, Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 19

22 Alberta A decent outlook for the province s oil industry is expected to produce solid economic and employment growth in Alberta, both this year and through the medium term. This will fuel steady population growth and sustain housing s demographic underpinnings. Housing starts are predicted to hit their highest level since 27 this year and hover near this level over the next few years. Growth in both new and existing house prices is expected to accelerate in 212, with additional price increases forecast through the medium term. Economic Outlook Strong oil prices continue to fuel brisk economic growth in Alberta, with provincial GDP expected to rise 3.3 per cent in 212, little changed from last year s 3.6 per cent gain, before hitting 4 per cent in 213 and remaining above 3 per cent through 216. Employment expanded a similarly robust 3.8 per cent in 211 and is expected to maintain the pace this year, before tapering off to 1.3 per cent growth by 216. This will cut the unemployment rate from 5.5 per cent in 211 to 4.6 per cent this year and to 3.9 per cent by 216. A longterm ascent in oil prices is expected to begin next year. Accordingly, energy investment will drive growth over the forecast, generating significant spinoffs. Output of mineral fuels and mining services should expand rapidly as fresh capacity is added. Increased refining of petroleum products and chemicals will spur growth in manufacturing. And spinoff sectors like professional services, transportation and warehousing, wholesaling, and business services will also benefit. Housing Outlook Solid employment growth, robust personal income advances, and moderate interest rates continue to fuel a recovery in Alberta housing markets from their collapse in 28 and 29. Although housing starts softened and house price growth weakened in 211, this year is expected to show better performance. Housing starts are expected to rebound 16.2 per cent in 212 to almost 3, units, following a 5.1 per cent drop in 211. These gains will be driven by a 2 per cent jump in single-detached starts, while multi-family construction is forecast to increase 1 per cent. Healthy personal income levels keep singles affordable for a high proportion of Alberta households. Accordingly, single-detached units have totalled nearly two-thirds of all housing starts over the past 2 years, and this share is expected to slip only slightly through our forecast. The new construction industry enjoys solid demographic underpinnings in Alberta. Population growth is expected to post a sound 2 per cent pace this year and then average 1.8 per cent annually between 213 and 216. Although such advances trail boom-era growth, they are healthy by historical standards. There is also some evidence of pent-up housing demand, as the ratio of housing starts to the change in population trailed its 2-year average for the last three years. These indicators underpin our expectation of relatively strong housing starts through the medium term. Volumes in 214 will approach 31, units, the most since the boom s last year in 27. Still, even such hikes will leave the Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) Singles Multiples 2-year average New Resale Series Database. Series Database; Canadian Real Estate Association. 2 The Conference Board of Canada

23 ratio of starts to the change in the population below historical averages, so starts have potential to surprise on the upside. Home values took a hit in 28 and 29 following very healthy increases in the few years before that. Prices then began to recover in 21. Progress softened last year, though, as average prices for both new and existing homes stagnated. We expect stronger value gains beginning this year. The average existing home price is forecast to rise 3.6 per cent in 212, putting it above its boom-era peak, with growth accelerating to average nearly 6 per cent per year between 213 and 216. New home prices are predicted to increase 3 per cent in 212 and average 3.6 per cent yearly growth between 213 and 216. Table 1 Economic Indicators Real GDP at basic prices 172, , ,213 19, ,835 24, ,68 218,35 (22 $ millions) Total employment (s) 2,25 2,18 2,94 2,174 2,226 2,268 2,38 2, Unemployment rate Personal income per capita 46,22 47,665 5,12 51,811 53,724 55,462 57,265 58, Population (s) 3,66 3,713 3,77 3,844 3,915 3,986 4,56 4, Retail sales ($ millions) 56,478 59,856 64,142 7,26 74,167 77,846 81,6 85, Inflation rate Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators Housing starts 2,298 27,88 25,78 29,863 29,52 3,699 3,345 29, Singles 14,344 17,84 15,198 18,284 18,444 19,127 18,848 18, Multiples 5,954 9,247 1,51 11,579 11,58 11,572 11,497 11, Housing completions 27,672 29,456 23,836 27,185 28,161 29,114 29,531 28, Singles 13,956 18,86 15,156 16,998 17,735 18,572 18,843 18, Multiples 13,716 11,371 8,68 1,187 1,426 1,542 1,688 1, Average price of a new home ($) 429, , , ,36 459, , ,323 51, Average price of a resale home ($) 34, , ,49 366, ,635 45, , , Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 21

24 British Columbia Moderate economic growth and a cooling resale market in Vancouver underpin our expectation of a small drop in average resale prices in British Columbia this year. Still, housing starts are expected to rise briskly, driven by gains in single-detached construction, and a small price gain is expected among new homes. Solid population growth and evidence of slight pent-up demand provide favourable conditions for new construction. Starts are forecast to rise steadily through 215, with multiples continuing to grab an outsized share. Economic Outlook A risky global climate and falling government investment spending is forecast to limit B.C. s real GDP growth to 2.1 per cent in 212. Stronger forestry and manufacturing output will help boost GDP growth to 3.6 per cent next year, with annual advances averaging 2.8 per cent between 214 and 216. Employment is forecast to rise 2.1 per cent in 212, 2.5 per cent in 213 and a yearly average of 1.6 per cent thereafter, cutting the unemployment rate from 7.5 per cent in 211 to 6.3 per cent in 212 and to 5.1 per cent by 216. The province s critical forest products industry is struggling with ongoing weakness in the U.S. housing market and recent moderation in Chinese economic growth, but it should improve next year as U.S. housing starts strengthen. Mining will be strong over the next few years as new mines open and shale gas production increases. Manufacturing output will be boosted by a recovering forestry sector and by the $8-billion federal contract awarded to Seaspan Marine last fall to build non-combat ships. Housing Outlook Housing conditions in Vancouver, B.C. s largest city, generally weigh heavily on provincial statistics. A correction under way in that city s resale market will trim the province s average existing home price, despite rising values in Victoria. Still, rebounding population growth points to stronger pricing ahead and to rising new-unit construction. B.C. housing starts started 211 slowly, firmed at mid-year, and then eased in the fourth quarter. For 211 as a whole, singles starts declined by a whopping 23 per cent. Given the sharp reduction in singles, the 17 per cent increase in multiple starts was particularly welcome, since they make up a relatively large proportion of total starts. All told, provincial housing starts in 211 were little changed from 21, at 26,4 units. This level slightly trails the 2-year average near 28,5 units. For 212, we expect housing starts to rise 7.5 per cent to almost 28,4 units. Singles starts are forecast to rise 15 per cent to roughly 1,17 units, while multiple starts are primed for a more modest 4 per cent advance to 18,2 units. In the medium term, a bump-up in population growth to 1.4 per cent in 213 will support higher housing starts. Additional lift will come from pent-up demand for housing; indeed, the ratio of housing starts to the change in the population was below the 2-year average in each of the last three years. As a result, we expect construction to rise steadily. By 216, starts are forecast to hit almost 32,7 units still below the 27 peak of 39,195 units. An Chart 1 Housing Starts (s) Chart 2 House Price Growth (% change) Singles Multiples 2-year average New Resale Series Database. Series Database; Canadian Real Estate Association. 22 The Conference Board of Canada

25 aging population and affordability concerns will continue to increase the share of multi-family starts. B.C. s average existing home price rose 11 per cent during 211, the second straight year of doubledigit price increases. This largely reflected outsized value gains in Vancouver, since markets elsewhere, like Victoria, registered price declines. Such gains are unsustainable, however, and the province s average existing house price is forecast to drop modestly in 212, drawn down by weakness in Vancouver. The medium term features gains averaging 2.6 per cent between 213 and 216. New home prices are expected to rise this year, after a fractional dip in 211. This year s forecast of a modest.8 per cent advance is expected to be followed by hikes near 2 per cent between 213 and 215. Table 1 Economic Indicators Real GDP at basic prices 148,3 153,85 157,98 16,43 166, , ,72 18,35 (22 $ millions) Total employment (s) 2,218 2,257 2,275 2,322 2,38 2,434 2,471 2, Unemployment rate Personal income per capita 35,417 36,251 37,29 38,135 39,38 4,685 41,858 42, Population (s) 4,452 4,523 4,57 4,628 4,693 4,758 4,825 4, Retail sales ($ millions) 55,222 58,145 59,542 62,891 65,856 68,8 71,446 73, Inflation rate Sources: The Conference Board of Canada; Statistics Canada. Table 2 Housing Indicators Housing starts 16,77 26,479 26,4 28,378 3,46 32,27 32,962 32, Singles 7,892 11,455 8,867 1,169 11,145 11,74 11,978 11, Multiples 8,185 15,25 17,534 18,29 19,261 2,467 2,984 2, Housing completions 29,498 27,749 22,542 25,845 28,497 3,155 31,275 31, Singles 8,879 1,734 9,542 9,686 1,598 11,434 11,892 11, Multiples 2,619 17,15 13, 16,159 17,899 18,721 19,383 19, Average price of a new home ($) 622,931 64, ,59 642,85 655, ,258 68, , Average price of a resale home ($) 458,487 55,3 56, ,4 561,89 576,88 595,815 68, Series Database; Canadian Real Estate Association; Statistics Canada. The Conference Board of Canada 23

26 Québec City Québec City s GDP growth is forecast to slow to 1.9 per cent in 212, but the dip should be temporary, and a 2.6 per cent expansion is on tap for 213. Ongoing employment growth continues to attract newcomers, boosting population and labour force growth. Stronger employment and population growth has also kept existing home sales moving upward in recent years, though sales growth is expected to slow through 212 as consumers feel the pinch of higher taxes. Housing starts have also cooled, with multiple-unit starts dipping after a sharp run-up in recent years. Economic Outlook Although Québec City s GDP growth is poised to slow to1.9 per cent this year, economic prospects remain generally positive. While major local employers like the Davie shipyard and the White Birch paper mill face challenges, hopes remain high that, with work set to begin on a new NHL-sized arena in September, a team will follow shortly. The unemployment rate is expected to tick up in 212, but the rate remains historically modest, and the rise is due to rapid labour force growth an indicator of job-hunter optimism. Net in-migration also remains brisk. Housing Outlook EXISTING HOUSING MARKET After the onset of the recession resulted in a 1.2 per cent drop in existing home sales in 28, signs of an economic recovery and low interest rates in 29 then fuelled demand once more, leading to a 2.7 per cent increase in sales, to a record 8, units. However, sellers remained guarded, reducing new listings by more than 1 per cent, pushing up the sales-to-new-listings ratio and resulting in house prices rising 8.9 per cent in 28 and 7.7 per cent in 29, to top $2, for the first time ever. As the recovery slowed, demand in Québec City s resale market fell again in the first half of 21, pulling sales down by 12.1 per cent that year. With sellers finally coming back to the market and sales declining, the sales-tonew-listings ratio slipped to 63 per cent still high enough for price growth of 11.4 per cent in 21. By the middle of 21, accelerating economic, employment, and population growth brought buyers back. And in 211, even as the government raised personal taxes, and employment and real GDP growth weakened, population growth helped existing home sales rise by 2.4 per cent. But, with even more sellers entering the market, the sales-tonew-listings ratio moved back into balanced territory, and so resale price growth slowed to 3.9 per cent. This year, still modest economic growth, tighter mortgage rules, and further tax hikes are expected to slow demand in the resale housing market, despite healthy population gains. Existing home sales slipped in the first quarter of 212 and are forecast to fall off again in the second half of the year. Nonetheless, a strong fourth quarter in 211 provided a strong enough starting point to allow existing home sales to grow by an additional 2.3 per cent in 212. By 213, a more stable economy should help to offset waning employment, encouraging more buyers back to the market. Sales are expected to increase by 2.7 per cent next year. Growth will then pick up Chart 1 Housing Starts (s) Singles Multiples 2-year average Series Database. 3, 25, 2, 15, 1, Chart 2 New Housing Price and Months Supply Price ($) Months supply Sources: The Conference Board of Canada; CMHC Housing Time Series Database The Conference Board of Canada

27 to an average of 4.2 per cent per year over 214 to 216, in line with continued improvements in the economy and population growth. Like sales, new listings are expected to decline through most of 212 as well, keeping the salesto-new-listings ratio steady this year. Resale price growth is forecast to slip to 2.4 per cent for 212 the smallest gain since 2. Growth in new listings is forecast to be more aligned with sales through the medium term, keeping the sales-tonew-listings ratio steady. Prices in the resale market are expected to remain modest as a result, increasing by 3 per cent in 213 and an annual average of 3.4 per cent from 214 to 216. NEW HOUSING MARKET While the resale market was slowing in 28, Québec City s new home market was expanding. Builders broke ground on 5,3 units that year, an increase of 3.6 per cent, encouraged by strong growth in absorptions thanks to increasing population growth. Starts rose an additional.9 per cent in 29, as the economic recovery got under way. New home price growth was healthy over 28 and 29 as well, at 5.3 per cent and 7 per cent, respectively. Population growth continued to drive starts through 21, pushing them up by more than 2 per cent to 6,7 a level not seen since the mid-198s. Much of this growth was due to the multiples market (driven by condominium starts), as singlefamily starts fell in 28 and 29, and increased by just 1.7 per cent in 21. At their 21 level, housing starts were above demographic requirements. Months supply in the new home market rose to 2.7 months Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio Sources: The Conference Board of Canada, Canadian Real Estate Association , 1,5 1, 5 Chart 4 Affordability P&I payment ($) P&I/income (%) 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 Real GDP at basic prices 24,925 25,757 26,37 26,863 27,562 28,171 28,736 29,27 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 37,568 39,3 4,124 41,4 42,24 43,543 44,85 45, Population (s) Retail sales ($ millions) 11,521 12,389 12,789 13,411 14,13 14,67 15,153 15, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. The Conference Board of Canada 25

28 in 211, its highest since 1996, prompting builders to reduce starts by 16.8 per cent, with the decline split between the single and multiple markets. In turn, price growth slowed to 1.4 per cent. Housing starts are forecast to fall an additional 2.1 per cent in 212 because of a large drop in multiple starts, as builders remain occupied with the large number of condominium units already under construction. Next year, builders are expected to reduce starts by another 7.1 per cent. Once months supply finally reaches a comfortable level by the end of 213, housing starts will begin to rise again in 214. New home price growth is expected to be only slightly higher than last year in both 212 and 213, at 2.1 per cent per year. Table 2 New Housing Market Indicators Housing starts 5,374 6,683 5,56 4,442 4,127 4,159 4,257 4, Singles 1,743 1,773 1,347 1,416 1,512 1,519 1,552 1, Multiples 3,631 4,91 4,212 3,26 2,615 2,64 2,74 2, Under construction 2,485 3,156 3,81 2,454 1,995 1,96 1,969 2, Housing completions 5,12 6,419 5,667 5,37 4,483 4,136 4,189 4, Singles 1,757 1,959 1,354 1,14 1,584 1,54 1,527 1, Multiples 3,363 4,46 4,313 3,897 2,899 2,632 2,661 2, Newly completed and unabsorbed ,22 1, Absorptions 5,97 6,26 5,346 5,455 4,727 4,194 4,137 4, Months supply Average price of a new home ($) 215,47 222, ,576 23, ,15 24, , , Series Database. Table 3 Resale Housing Market Indicators Unit sales 8,8 7,41 7,28 7,371 7,574 7,95 8,235 8, Dollar volume sales ($ millions) 1,688 1,654 1,76 1,843 1,95 2,11 2,265 2, New listings 1,645 11,196 12,367 12,789 13,159 13,749 14,332 14, Sales-to-new-listings ratio (%) Average price of a resale home ($) 21, , , , , , ,3 284, Sources: The Conference Board of Canada; Canadian Real Estate Association. 26 The Conference Board of Canada

29 Montréal Montréal s GDP is forecast to rise just 1.7 per cent in 212. For the second straight year, little employment change is predicted, pushing the already-high unemployment rate up further. In the existing home market, the continued rise in the population will spur new demand, pushing unit sales up 1 per cent. However, the population advance will not be enough to prevent a 24.6 per cent drop in housing starts in 212 the result of a retreat in multiple-unit construction following several years of heavy activity. Economic Outlook Montréal s economy is expected to grow by 1.7 per cent this year, up from 1.5 per cent in 211. Employment stalled in 211 and is forecast to remain relatively unchanged again in 212, before rising 2 per cent in 213. Weak labour force growth limited the rise in the unemployment rate to 8.8 per cent. Another small uptick is expected for 212 before easing starts. Heavy arrivals from other countries have outweighed declines in interprovincial and intercity migration, allowing population growth to exceed 1 per cent for five straight years, something that bodes well for domestic demand moving forward. Housing Outlook EXISTING HOUSING MARKET With the global economy shifting into recovery mode in 29, low interest rates encouraged buyers to return to Montréal s resale home market. Unit sales jumped nearly 35 per cent (at annual rates) in the second quarter, leaving them up 6 per cent for the year as a whole. The market was also being boosted by the strongest population growth in Montréal in 2 years, helping price growth accelerate to 4.9 per cent. But the good news was short-lived. In 21, further global uncertainty was hampering consumer confidence once again, and so, despite better employment and income growth, existing home sales dropped steadily through the first three quarters of the year. Continued weakness in global markets, a soft labour market, tighter mortgage rules, and provincial tax hikes kept consumers at bay in 211 as well. Unit sales of existing homes declined through the first half of last year, bringing the total decline over the past two years to almost 5 per cent. However, sellers remained interested in the market, perhaps spurred on by the higher price growth of the previous year, raising new listings by 4.9 per cent in 211. With the sales-to-new-listings ratio falling closer to 5 per cent, average price growth began to decelerate, slowing from 8 per cent in 21 to 4.8 per cent for 211 still enough to push average existing home prices above $3, for the first time. A small uptick in Montréal s economy and better income and population growth will help to offset the negative impact of further tax increases this year, resulting in a 1 per cent rise in unit sales of existing homes. However, new listings have been falling as of late, and are expected to decline by 4.5 per cent in 212. Resale price growth has also remained modest forecast to reach just 3.4 per cent this year. In 213, we anticipate that a more stable world economy will allow for stronger growth in Montréal s real GDP, allowing for decent gains in both employment and incomes as well. This will help to keep demand Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply Singles Multiples 2-year average 4, 35, 3, 25, 2, Price ($) Months supply Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. The Conference Board of Canada 27

30 in the resale housing market on an upward trend. Unit sales are forecast to grow by 1.4 per cent in 213, and average roughly the same pace over 214 to 216. Montréal s resale home market will remain in a balanced state in the coming years, holding price increases to a modest 3.4 per cent per year on an average annual basis. NEW HOUSING MARKET The effect of the global downturn on Montréal s new home market lasted well into 29. Weaker demand led builders to reduce housing starts by 4.6 per cent in 28 and 13.5 per cent in 29, down to just 19,3 units, their lowest level in eight years. However, even with this decline, months supply in the new home market still rose. As a result, growth in new home prices began to weaken, from 4.9 per cent in 28 to 2.4 per cent in 29. Housing starts rose 15.1 per cent in 21, driven by a robust 17.9 per cent increase in the multiple-unit segment. Multiple starts rose another 1.2 per cent in 211, while the single home market and the resale market faltered with the slowing economy. The multiples market was being boosted by a number of projects in suburban areas as well as in the downtown core. Overall, total starts increased 2.2 per cent last year. Months supply fell to 2.1 months in 211, holding growth in new home prices to 2.9 per cent. Starts reached 22,6 units in 211 the ninth time in the past 1 years that starts have surpassed 2, units. At this level, starts are unsustainable over the medium term, even with healthy population growth. With several multiple-unit projects finishing up, Montréal s housing starts have now fallen in recent months and are poised to decline Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio Sources: The Conference Board of Canada, Canadian Real Estate Association ,5 2, 1,5 1, Chart 4 Affordability P&I payment ($) P&I/income (%) 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 Real GDP at basic prices 122, , ,39 129, , , ,97 142,192 (22 $ millions) Total employment (s) 1,95 1,954 1,952 1,953 1,993 2,25 2,63 2, Unemployment rate (%) Personal income per capita ($) 34,722 35,666 36,8 36,451 37,572 38,663 39,962 41, Population (s) 3,819 3,859 3,98 3,957 4,6 4,58 4,18 4, Retail sales ($ millions) 41,857 44,517 44,771 46,861 48,796 5,842 53,78 55, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. 28 The Conference Board of Canada

31 by 24.6 per cent in 212. Starts are forecast to slip another 2.1 per cent in 213 and then remain under 18, units over 214 to 216, allowing them to realign with underlying demographics. The lower level of starts will keep months supply fairly stable in the coming years. As a result, new home prices are expected to grow by 2 per cent in 212 and only 2.3 per cent per year on average from 214 to 216. Table 2 New Housing Market Indicators Housing starts 19,266 22,166 22,643 17,64 16,73 16,897 17,35 17, Singles 5,43 5,855 4,663 5,15 5,542 5,693 5,953 6, Multiples 13,836 16,311 17,98 12,48 11,161 11,24 11,397 11, Under construction 12,86 14,375 16,258 16,131 13,759 13,686 14,218 14, Housing completions 19,486 19,922 19,866 2,71 18,8 16,52 16,799 17, Singles 5,216 6,34 4,851 4,395 5,788 5,687 5,912 6, Multiples 14,27 13,888 15,15 15,676 12,292 1,834 1,888 11, Newly completed and unabsorbed 4,664 3,965 3,39 3,343 2,835 2,398 2,48 2, Absorptions 19,725 21,84 19,827 2,258 18,787 16,74 16,693 16, Months supply Average price of a new home ($) 32, , ,21 327, , ,677 35, , Series Database. Table 3 Resale Housing Market Indicators Unit sales 42,525 41,927 4,59 4,916 41,54 42,135 42,733 43, Dollar volume sales ($ millions) 11,579 12,327 12,477 13,28 13,612 14,33 15,57 15, New listings 69,29 72,68 75,65 72,179 72,56 73,462 72,323 73, Sales-to-new-listings ratio (%) Average price of a resale home ($) 272, ,7 38, 318, ,98 339,46 352, , Sources: The Conference Board of Canada; Canadian Real Estate Association. The Conference Board of Canada 29

32 Toronto Toronto s real GDP is expected to rise by 2.3 per cent in 212, down slightly from the 2.5 per cent increase recorded last year. A decline in non-residential construction output and modest services sector growth are holding back overall growth. Demand in the both the new and resale home markets has been healthy so far in 212, leading to a forecast 8.9 per cent increase in housing starts and an 8.7 per cent rise in unit sales. Economic Outlook Toronto s economy expanded 2.5 per cent in 211, down from 3.7 per cent the previous year. Most sectors of the economy saw slower growth, hampered by an uncertain global outlook, with manufacturing and wholesale and retail trade two of the hardest hit. Real GDP is expected to increase by just 2.3 per cent in 212. While both the manufacturing and the wholesale and retail trade sectors will accelerate, construction output will be pulled down by the end of government infrastructure spending programs. Improved conditions at home and abroad in 213 will lead to a 3.5 per cent increase in Toronto s GDP. Housing Outlook EXISTING HOUSING MARKET A new land transfer tax and the start of the global recession in 28 reduced consumer confidence and, in turn, demand in Toronto s resale housing market. Unit sales slipped 2.3 per cent to 67,7 units that year. Price growth also slowed, in line with a rapidly decreasing salesto-new-listings ratio, falling to just 1 per cent. But the downturn was short-lived. At the first sign of a recovery, low interest rates lured buyers back, and so sales of existing units increased 18 per cent in 29. Sellers remained more cautious, however, reducing new listings 16.5 per cent. Accordingly, by the third quarter of 29 the sales-tonew-listings ratio had jumped back up to 78 per cent (from a low of 34.8 per cent in the final quarter of 28), clearly back in sellers territory. Price growth then began to accelerate, rising to 4 per cent for 29 and 9.4 per cent in 21. Higher prices eventually attracted more sellers to the market, pushing new listings up by 14.2 per cent in 21. But these same high prices, and a slowing economy, were also discouraging buyers once more. Unit sales of existing homes fell significantly in the middle two quarters of 21, finishing the year 1.5 per cent lower and helping to bring the salesto-new-listings ratio back into balanced territory. Although Toronto s real GDP remained constrained by global uncertainty last year, demand in the resale market showed some small improvements, thanks, in part, to continued low interest rates, as well as a deceleration in price growth. Sales increased 4.3 per cent in 211, to 82, units, only the second time on record that sales had topped 8, units. Despite persistent softness in Toronto s economy, including modest income and employment gains, unit sales of existing homes have been healthy so far this year. The current outlook calls for an additional 8.7 per cent increase in sales Chart 1 Housing Starts (s) Singles Multiples 2-year average Series Database. 7, 6, 5, 4, Chart 2 New Housing Price and Months Supply Price ($) Months supply Sources: The Conference Board of Canada; CMHC Housing Time Series Database The Conference Board of Canada

33 for 212 and a 9.2 per cent rise in new listings. Resale price growth will ease to 4.9 per cent this year, allowing the average existing home price to reach $5, for the first time. Notwithstanding the high prices, stronger economic growth and healthy population gains should keep demand in Toronto s existing home market on the upswing, with sales increasing by an average of 2.2 per cent per year from 213 to 215. With the market still in balanced mode, resale prices are forecast to rise by 2.3 per cent on an average annual basis during this time. NEW HOUSING MARKET After the global recession led to a 38.7 per cent drop in Toronto s housing starts in 29, starts rose by 12.4 per cent in 21, as builders were encouraged by the recovering economy and spillover demand from the resale market. In turn, prices grew 2.6 per cent, up from a.1 per cent drop in 29. Builders increased starts by another 35.1 per cent last year, spurred on by falling inventories, still low interest rates, and solid population growth. Still, months supply slipped in 211, allowing for even stronger price growth of 4.7 per cent. While the gains were larger in the single-home market in 21, the reverse was true for 211 multiple-family starts rose by nearly 5 per cent compared with 9.5 per cent growth for single starts. Multiple starts did weaken in the second half of last year, but falling vacancy rates and continued foreign demand should allow them to increase again through 212, even as overall economic growth remains muted. Overall, starts are set to rise 8.9 per cent this year, before flattening out in Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio Sources: The Conference Board of Canada, Canadian Real Estate Association , 3,5 3, 2,5 2, 1,5 Chart 4 Affordability P&I payment ($) P&I/income (%) 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 Real GDP at basic prices 213,48 221,44 226,99 232,131 24, , , ,85 (22 $ millions) Total employment (s) 2,852 2,918 2,96 3,4 3,95 3,169 3,227 3, Unemployment rate (%) Personal income per capita ($) 38,299 39,36 4,46 4,715 42,195 43,571 44,812 46, Population (s) 5,634 5,741 5,853 5,949 6,49 6,161 6,274 6, Retail sales ($ millions) 59,1 62,869 65,88 67,816 71,68 75,358 78,821 82, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. The Conference Board of Canada 31

34 The number of newly completed but unoccupied units is expected to increase to its highest level since 25 this year, but not reach a worrisome level. Meanwhile, months supply is expected to rise only slightly, going from.5 months to.6 months. Both of these levels are forecast to fall in 213 as the economy picks up. With months supply hovering in balanced territory, prices will grow by a modest 3.3 per cent in 212, slowing to an average of 2.2 per cent per year over 213 to 216. Table 2 New Housing Market Indicators Housing starts 26,125 29,37 39,678 43,196 43,195 44,925 46,263 47, Singles 7,925 1,26 11,173 11,166 12,872 13,77 14,52 15, Multiples 18,199 19,164 28,55 32,3 3,323 31,155 31,744 32, Under construction 47,973 47,57 49,413 51,164 51,253 51,437 51,793 52, Housing completions 28,356 31,393 33,831 43,125 43,94 44,671 45,92 47, Singles 8,852 9,84 9,16 11,261 12,84 13,719 14,353 15, Multiples 19,54 21,589 24,725 31,864 3,254 3,953 31,567 32, Newly completed and unabsorbed 1,163 1,699 1,388 1,993 1,684 1,541 1,531 1, Absorptions 28,44 3,657 34,214 42,842 43,212 44,828 45,854 47, Months supply Average price of a new home ($) 536,436 55, ,94 594,99 67,997 62, , , Series Database. Table 3 Resale Housing Market Indicators Unit sales 79,922 78,7 82,88 89,219 9,412 92,745 94,964 97, Dollar volume sales ($ millions) 32,747 35,267 39,741 45,297 47,9 49,331 51,571 53, New listings 12, , , , , ,37 156,433 16, Sales-to-new-listings ratio (%) Average price of a resale home ($) 49, , ,128 57,74 519, , ,63 553, Sources: The Conference Board of Canada; Canadian Real Estate Association. 32 The Conference Board of Canada

35 Ottawa Gatineau Federal fiscal restraint will lead to modest growth of 1.6 per cent in Ottawa Gatineau s economy this year and 1.9 per cent in 213. As a result, following gains in the second half of 211 and the first quarter of 212, existing home sales are forecast to slow through 212, culminating in a 1.7 per cent decline by 213. The same will hold true in the new home market, as starts are anticipated to fall through the rest of this year and next, posting a drop of 8.4 per cent in 213. Economic Outlook Fiscal austerity measures by the federal government resulted in Ottawa Gatineau s public administration employment falling in 211, with further declines expected this year and over the medium term. Given that the sector accounts for onequarter of the city s overall economy, public administration job losses will reverberate throughout the entire domestic economy. But the hightech sector s 212 outlook is decent, although the strong Canadian dollar will continue to be a drag on growth. After posting a modest gain of 1.4 per cent in 211, real GDP growth will remain subdued at 1.6 per cent in 212 and 1.9 per cent next year. Housing Outlook EXISTING HOUSING MARKET A recovering global economy and low interest rates boosted demand in Ottawa Gatineau s existing home market through 29. Buyers purchased close to 19,3 units that year, a 7 per cent increase over 28. Sellers were still cautious, however, reducing new listings by 7.3 per cent. This combination of higher sales and lower listings then bumped the sales-to-new-listings ratio near sellers territory, leading to significantly stronger price growth. Buyers retreated from the market in 21, discouraged by further rumblings in the global economy and the introduction of the HST. Unit sales of existing home decreased 2.4 per cent. But months of strong prices were finally encouraging sellers to come back to the market new listings increased 6.9 per cent in 21, helping to bring the sales-tonew-listings ratio clearly back into balanced territory. In turn, resale price growth slowed through the year. Existing home sales fell again in 211, by 1.9 per cent, hurt by a slowing domestic economy, tighter mortgage rules, and reduced consumer confidence in the face of public sector restraint. New listings rose once more, however, this time by 3.5 per cent, pushing the sales-tonew-listings ratio even lower, although still in balanced territory. Resale price growth remained healthy, at 5.8 per cent. Sales did pick up in the final two quarters of 211 and remained strong through the first quarter of this year as well. Still, with the latest federal budget outlining job cuts in the public service over the next few years, demand in the resale market is expected to start to mitigate once again. As a result, although existing home sales are forecast to rise 3.8 per cent in 212, they will then fall by a forecast 1.7 per cent in 213 and continue to weaken over the medium term. New listings are also expected to decline this year, given the uncertain job market. Accordingly, the market will remain balanced in 213. Weak growth in listings in the coming years will keep the Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply Singles Multiples 2-year average 45, 4, 35, 3, Price ($) Months supply Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. The Conference Board of Canada 33

36 resale market balanced for the rest of the forecast as well. Growth in existing home prices is expected to slow to 3 per cent this year, before rising to 3.3 per cent next year and an average of 3.8 per cent per year from 214 to 216. NEW HOUSING MARKET The impact of the recession on Ottawa Gatineau s new home market lasted well into the second quarter of 29. Falling absorptions led to an increase in months supply, even as builders reduced starts by a total of 14 per cent in 29. The decline in starts was split evenly between the singles and the multiples markets. Price growth also weakened, slipping to a modest 1.5 per cent, down from 3.7 per cent in 28. But stronger economic growth and low interest rates finally brought both buyers and builders back to the market in the last half of 29 and through the first two quarters of 21. Absorptions increased by 9.6 per cent in 21, lowering months supply and encouraging builders to break ground on 9,1 units the first time in four years that starts had topped 9, units. Higher demand also sparked new home price growth of 4 per cent. By the third quarter of 21, renewed uncertainty in the global economy and the new HST led builders to reduce starts once more. As concerns over federal public service job cuts began to cast a pall over the housing sector in 211, absorptions dipped another 13.2 per cent. In turn, rising inventories led builders to reduce housing starts by 9 per cent last year and slowed price growth to 3 per cent. Starts jumped back up over the six months ending in March, but we believe this increase was temporary and the market will slow again through the rest of 212 and into 213 as jobs are cut in the public sector. Months supply has also Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio 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 (%) 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 Real GDP at basic prices 45,93 47,127 47,779 48,546 49,47 5,522 51,64 52,711 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 41,924 42,93 43,595 44,263 45,421 46,97 48,38 49, Population (s) 1,219 1,239 1,256 1,267 1,277 1,288 1,299 1, Retail sales ($ millions) 15,87 15,885 16,482 16,952 17,635 18,319 18,997 19, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. 34 The Conference Board of Canada

37 increased recently, as absorptions have not kept pace with starts. This will be a further deterrent to builders going forward. Still, the strength seen in the last quarter of 211 and the first quarter of this year will be enough to push housing starts up by 3.8 per cent in 212, before they fall by 8.4 per cent next year. With higher inventories, new home prices are forecast to grow by just 2.1 per cent in 212. Price growth will remain modest next year as well, at 2.4 per cent. Table 2 New Housing Market Indicators Housing starts 8,933 9,134 8,31 8,623 7,898 7,357 7,33 7, Singles 3,57 3,31 2,939 2,854 2,71 2,54 2,479 2, Multiples 5,426 5,833 5,371 5,769 5,197 4,854 4,824 4, Under construction 6,93 6,171 5,647 5,531 5,334 5,6 5,42 5, Housing completions 9,44 9,539 8,356 8,696 8,184 7,58 7,218 7, Singles 3,76 3,721 2,935 2,875 2,782 2,554 2,445 2, Multiples 5,68 5,818 5,421 5,821 5,41 5,26 4,774 4, Newly completed and unabsorbed 1,17 1,88 1,75 1, Absorptions 8,819 9,67 8,389 8,748 8,367 7,683 7,197 7, Months supply Average price of a new home ($) 367, , ,812 42,83 411, , ,311 44, Series Database. Table 3 Resale Housing Market Indicators Unit sales 19,268 18,87 18,454 19,156 18,83 18,717 18,642 18, Dollar volume sales ($ millions) 5,437 5,78 5,924 6,331 6,429 6,633 6,871 7, New listings 29,826 31,883 33,11 32,572 32,239 32,245 32,385 32, Sales-to-new-listings ratio (%) Average price of a resale home ($) 282,154 33, ,15 33, ,41 354,39 368, , Sources: The Conference Board of Canada; Canadian Real Estate Association. The Conference Board of Canada 35

38 Winnipeg Solid economics and demographics underpin a healthy housing market in Winnipeg. Both GDP and employment are forecast to grow more strongly in 212 than in 211, leading to further brisk population advances. The resale market is balanced, with sales expected to rise for a third straight year, fostering decent price growth. Our mediumterm outlook features continued market balance and moderate price increases. On the new home side, strong absorptions will keep trimming inventories of unsold new units. This, along with slight evidence of pent-up demand for new units, will lift housing starts. Economic Outlook Following a lull of 1.7 per cent growth in 211, GDP expansion is expected to hit 2.4 per cent in 212 and average a decent 2.5 per cent between 213 and 215. This year s growth will help lift job counts a forecast 1.4 per cent, following virtually no gain last year, leading to a dip in the unemployment rate to 5.6 per cent. Persistent job growth between 213 and 216 is expected to trim the unemployment rate to 5.2 per cent by 216. Population growth is forecast to remain high at an annual average of almost 1.3 per cent between 212 and 216. Housing Outlook EXISTING HOUSING MARKET In many other markets, a salesto-new-listings ratio of 78 per cent like Winnipeg s fourth-quarter value would indicate sellers conditions, but here, it merely suggests continuation of a balanced market, in place since 28, given the ratio s high average historical values above 8 per cent. The ratio s year-end rise fuelled a 7.1 per cent surge in price growth during the fourth quarter, although the full year s price hike was modest by recent standards. We expect a balanced market throughout our forecast. Faster increases in listings than in sales will boost homebuyer choice and keep price increases relatively subdued. Resale volumes certainly ended 211 strongly; the annualized fourthquarter volume above 13, units was a record high for this market. For all of 211, sales rose 6.3 per cent to 12,3 units, just under Winnipeg s all-time high of 12,32 units, set in 27. We expect this record to be surpassed in 212, with sales up a further 2 per cent to 12,54 units. In the medium term, sales are forecast to rise just above 2 per cent annually to near 13,74 units by 216. Listings have not kept pace with sales, particularly in the fourth quarter when their 1 per cent increase was dwarfed by an 8 per cent rise in sales. Listings in all of 211 rose 2.6 per cent to 16,386 units, well behind the outsized inventories that averaged 27,4 units annually between 1988 and Since rising prices attract additional supply, listings are forecast to increase an average of 5.2 per cent annually between 213 and 216 after a dip in 212. The faster increase in sales than in new listings lifted their ratio to an annual reading of 75 per cent in 211, the highest since 27. Our expectation of a small rise in sales and a tiny decline in listings implies a small rise in the sales-to-new-listings ratio to 77 per cent this year. Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply Singles Multiples 2-year average 5, 4, 3, 2, 1, Price ($) Months supply Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 36 The Conference Board of Canada

39 For the year 211 as a whole, prices rose a still sound 5.5 per cent, though this increase pales when compared with the doubledigit advances in seven of the previous eight years. Ongoing market balance will keep annual price hikes just below 5 per cent in the medium term, starting with an expected 4.7 per cent rise in 212. Still, relatively low prices are keeping Winnipeg s housing affordable. Principle and interest charges on the average resale dwelling consumed only 15.6 per cent of household incomes in 211, tied with Calgary as our report s second most affordable market, trailing Edmonton only slightly. NEW HOUSING MARKET Healthy new-unit take-up holds the key to ongoing strength in housing starts in Winnipeg. Absorptions rose throughout 211, and the annualized fourth-quarter volume of just above 4,1 units was more than twice the first-quarter level. This lifted absorptions for all of 211 to 3,176 units, a three-year high. Since housing completions rose similarly, the number of completed and unoccupied units fell only slightly to 317 units in 211. We expect absorptions to have another excellent year, with purchasers snapping up a record 3,715 units, and home builder stocks of unsold units edging up to just 324. Accordingly, we expect housing starts to rise 14 per cent this year to 3,756 units, led by a strong rise in single-detached starts. Indeed, our forecast of 2,35 singles for 212 implies the highest local singledetached output since Good housing affordability continues to enable Winnipeg households to overwhelmingly choose singles; these made up 69 per cent of total housing starts during the past 2 years and are expected to account for a similar share in the highest share among the cities included in this report Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio Sources: The Conference Board of Canada, Canadian Real Estate Association , 1,5 1, 5 Chart 4 Affordability P&I payment ($) P&I/income (%) 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 Real GDP at basic prices 25,442 26,33 26,463 27,1 27,799 28,483 29,191 29,831 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 36,84 36,792 37,473 38,19 39,128 4,31 41,489 42, Population (s) Retail sales ($ millions) 9,137 9,669 1,51 1,588 11,39 11,471 11,871 12, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. The Conference Board of Canada 37

40 Demographics will further encourage home builders in the medium term. Winnipeg s population rose an average of 1.3 per cent annually during the past five years, more than triple the average pace of the previous 15 years. Population growth is expected to remain above 1 per cent throughout our forecast. Moreover, for several years, both housing starts and new home absorptions have been historically soft relative to population growth, suggesting the presence of some pent-up demand. Accordingly, we expect housing starts to rise steadily throughout our forecast, and exceed 4,9 units by 216. This would be the highest level since the 198s. Table 2 New Housing Market Indicators Housing starts 2,15 3,232 3,294 3,756 3,899 4,397 4,815 4, Singles 1,58 1,914 1,989 2,35 2,661 3,17 3,318 3, Multiples 57 1,319 1,36 1,46 1,239 1,38 1,497 1, Under construction 1,622 1,85 2,386 2,569 2,469 2,45 2,455 2, Housing completions 2,67 2,388 3,179 3,718 4,1 4,381 4,826 4, Singles 1,62 1,79 1,863 2,294 2,728 3,35 3,354 3, Multiples 1, ,316 1,425 1,281 1,346 1,472 1, Newly completed and unabsorbed Absorptions 2,81 2,523 3,176 3,715 3,983 4,352 4,8 4, Months supply Average price of a new home ($) 378, ,43 415, , , , , , Series Database. Table 3 Resale Housing Market Indicators Unit sales 11,59 11,571 12,297 12,543 12,831 13,114 13,428 13, Dollar volume sales ($ millions) 2,386 2,647 2,969 3,169 3,394 3,636 3,95 4, New listings 15,476 15,976 16,386 16,322 17,253 18,168 19,15 2, Sales-to-new-listings ratio (%) Average price of a resale home ($) 27, , ,49 252, , ,229 29,814 35, Sources: The Conference Board of Canada; Canadian Real Estate Association. 38 The Conference Board of Canada

41 Calgary Expectations of a strengthening local economy underpin our forecast of an improvement in both new and resale housing markets in Calgary. Stronger employment and population growth should boost resale volumes and prices gently through the medium term in the context of a balanced market. The new home picture continues to be clouded by high inventories of unsold units, but this appears due to a previously soft local economy, since there is also slight evidence of unsatisfied new home demand. We expect strengthening absorptions to pare builder stocks throughout this year. Economic Outlook Gross domestic product growth in Calgary is forecast to hit 3.5 per cent in 212, up from 3.1 per cent in 211, as energy-related sectors continue to benefit from firm oil prices. Even better annual advances averaging 4.1 per cent are predicted for 213 to 216. Accordingly, we expect employment to rise 3.1 per cent in 212 and similarly in each of the following two years. This will cut the unemployment rate to 5 per cent in 212 and 4.7 per cent in 213. Resumed employment gains in 211 helped lift population growth back above 2 per cent. The stronger population growth is forecast to persist through 216. Housing Outlook EXISTING HOUSING MARKET Employment growth and low interest rates rekindled Calgary s resale market in 211. Stronger demand lifted sales, while listings eased. This has firmed the market s stance, which, in turn, boosted prices, albeit modestly, for a second straight year. The market is in a balanced position and is expected to remain in this state throughout our forecast, keeping price increases modest. Sales fluctuated at an annualized rate near 22,5 units during each quarter of 211, a marked improvement from the previous year, especially since transactions weakened sharply during the second half of 21. The final 211 tally, 22,465 units, was up 7 per cent from 21. We forecast sales growth of 9.2 per cent this year and then modest sales gains just above 3 per cent annually between 213 and 216. Even such ongoing hikes will keep sales well below the 31, 33, annual volumes that characterized the last decade s boom, with sales forecast to total roughly 27,7 units in 216. Meanwhile, the soft 21 market likely convinced potential home sellers to delay marketing their units; new listings fell by 5.4 per cent in 211. Another dip is forecast for 212, putting new listings at their lowest level since 23. Listings are forecast to drift higher in the medium term, but remain below boom-era peaks. Falling listings combined with stable sales led to a rise in Calgary s sales-to-new-listings ratio throughout 211, although it continued to signal a balanced market. The ratio averaged 5 per cent in the first quarter, but rose to nearly 54 per cent by the fourth, producing an average figure of 51 per cent for the entire year. We expect the ratio to rise further, as sales rise faster than listings, to 63 per cent from 214 to 216. Even this figure continues to depict a balanced market. Price increases are expected to remain Chart 1 Housing Starts (s) Chart 2 New Housing Price and Months Supply Singles Multiples 2-year average 6, 5, 4, 3, 2, 1, Price ($) Months supply Series Database. Sources: The Conference Board of Canada; CMHC Housing Time Series Database. The Conference Board of Canada 39

42 largely tame in this environment, but improve upon last year s 1 per cent uptick. Calgary s average resale price is expected to rise 2.7 per cent this year, then a much-stronger 4.5 per cent in 213. Such softer price hikes have helped Calgary s already-good affordability. For 212, mortgage charges will consume only 15.3 per cent of average household incomes; only Edmonton s carrying costs have a lower nibble among cities in this report. Although rising interest rates and ongoing house price growth will increase this bite over the medium term, it will remain modest by the standards of our nine cities. NEW HOUSING MARKET Calgary s new homes market continues to be burdened by a relatively large number of completed but unoccupied new units, a proven construction deterrent. High inventories remain a hangover from a slightly faster pace of completions than absorptions in mid-21; since then, completions and absorptions have been roughly equal. Decent economic and demographic underpinnings should help contain these stocks in 212. This will encourage home builders to lift starts. The rise in builder stocks came despite evidence of some pent-up demand. The ratio of housing starts to population growth has slightly lagged historical norms in four straight years. This suggests that a soft economy has deterred at least some potential new homebuyers. Slightly accelerating employment growth and persistently moderate mortgage rates could remove this obstacle. The better economy is forecast to attract newcomers, boosting Calgary s population by over 31,4 people in 212 the most since 29. Accordingly, we expect absorptions to jump by more than 4 per cent in 212, hitting nearly 11,2 units Chart 3 MLS Sales-to-New-Listings Ratio and Price Growth (%) Price growth Sales/new listings ratio Sources: The Conference Board of Canada, Canadian Real Estate Association ,5 3, 2,5 2, 1,5 1, Chart 4 Affordability P&I payment ($) P&I/income (%) 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 Real GDP at basic prices 6,919 62,597 64,59 66,736 69,653 72,564 75,474 78,397 (22 $ millions) Total employment (s) Unemployment rate (%) Personal income per capita ($) 52,366 53,834 55,227 56,635 58,397 6,42 62,45 64, Population (s) 1,22 1,243 1,268 1,3 1,329 1,359 1,388 1, Retail sales ($ millions) 2,523 21,671 23,131 25,336 26,936 28,431 3,21 31, Inflation rate (%) Sources: The Conference Board of Canada; Statistics Canada. 4 The Conference Board of Canada

43 Since this slightly outpaces our projection for completions, builder stocks will wane throughout 212, although an early-year spike will boost the annual figure. Absorptions are forecast to remain above 1,5 units in both 213 and 214. This will whittle the number of unabsorbed new dwellings below 9 units by 214. In this environment, total housing starts are forecast to jump 25.1 per cent to 11,5 units during 212. Total starts are forecast to dip to 1,4 units in 213, but bounce back to an average of more than 11, units between 214 and 216. Single-family homes are forecast to account for more than 55 per cent of total starts between 212 and 216. Decent housing affordability allows relatively more Calgary homebuyers to choose singles. Table 2 New Housing Market Indicators Housing starts 6,185 9,228 9,185 11,495 1,425 11,282 11,546 11, Singles 4,71 5,839 5,75 5,914 6,1 6,438 6,432 6, Multiples 1,475 3,389 4,11 5,581 4,325 4,844 5,114 5, Under construction 9,36 8,536 7,566 8,75 8,785 9,168 9,55 9, Housing completions 8,238 1,991 7,689 11,142 1,435 1,734 11,275 11, Singles 4,291 6,364 4,824 5,644 5,999 6,31 6,432 6, Multiples 3,947 4,627 2,865 5,498 4,435 4,433 4,843 5, Newly completed and unabsorbed 1,15 1,3 1,55 1, Absorptions 8,348 1,75 7,815 11,181 1,523 1,756 11,239 11, Months supply Average price of a new home ($) 474,37 482, ,91 496, ,45 532,42 551,55 567, Series Database. Table 3 Resale Housing Market Indicators Unit sales 24,881 2,996 22,465 24,539 25,279 26,91 26,881 27, Dollar volume sales ($ millions) 9,61 8,372 9,5 1,154 1,931 11,914 12,987 14, New listings 41,641 46,277 43,782 41,95 4,845 41,498 42,62 43, Sales-to-new-listings ratio (%) Average price of a resale home ($) 385, ,764 42, , , , , , Sources: The Conference Board of Canada; Canadian Real Estate Association. The Conference Board of Canada 41

44 Edmonton Solid employment growth and low mortgage interest rates are providing a firm underpinning for healthy housing markets in Edmonton. The resale market was in a balanced position throughout 211, although the average price fell slightly. Persistence of a balanced market is expected to foster renewed price growth, starting this year and continuing throughout our forecast. Meanwhile, falling inventories of unsold new homes will give builders confidence to increase housing starts this year. In the medium term, this level of housing starts should be maintained by solid population growth and hints of unsatisfied housing demand. Economic Outlook After hikes of 4 per cent and above in 21 and 211, Edmonton s GDP is forecast to rise a moderate 3.2 per cent in 212 and average 3.7 per cent annually between 213 and 216. Employment growth snapped back to 5.9 per cent in 211 following two years of losses and is forecast to keep rising by nearly 2 per cent in each of the next four years. Accordingly, the unemployment rate should fall to 4.9 per cent in 212 and to 4.1 per cent by 216. While population hikes have cooled, annual growth will average a solid 1.8 per cent between 212 and 216. Housing Outlook EXISTING HOUSING MARKET Edmonton s resale market remained balanced throughout 211. Sales edged higher through mid-year, while listings were more stable. This lifted the sales-to-listings ratio moderately. As a result, price growth resumed last spring. Nonetheless, weakness in prices late in 21 and in the first quarter of 211 was enough to trim the average 211 annual value from the 21 annual figure. Ongoing job gains point to continued market balance, with price growth reaching its historical average of 6 per cent by 216. Transaction volumes broke out from several soft quarters last spring, then hit an annualized 17,46 units in the third quarter of 211 up 16 per cent from a year earlier, and enough to help lift fullyear sales by 3.4 per cent to nearly 17, units. We think persistently rising employment and relatively moderate interest rates will boost sales at similar rates both this year and through the medium term. By 216, our forecast sees sales reaching a solid 2, units. While strong, the level will still be below highs set during the boom. The supply of listings was softer last year, ending the year on a sour note, declining by 4 per cent in that quarter alone. All in all, listings dropped 4.3 per cent in 211 to just over 31,7 units. The dip, combined with rising sales, modestly lifted the sales-to-new-listings ratio to a fourth-quarter reading of 56 per cent, firmly in balanced market territory. The ratio ended 211 averaging 53 per cent, up from 5 per cent in 21. Our outlook sees rising sales and falling listings, a combination that will boost the sales-tonew-listings ratio to 59 per cent in 212. Thereafter, further small increases will lift the ratio to nearly 65 per cent by 216 still a balanced market. While prices firmed as 211 progressed, a 2.4 per cent decline Chart 1 Housing Starts (s) Singles Multiples 2-year average Series Database. 5, 4, 3, 2, Chart 2 New Housing Price and Months Supply Price ($) Months supply Sources: The Conference Board of Canada; CMHC Housing Time Series Database The Conference Board of Canada