Windsor Housing Market Overview 16 May 2018 Andrew Scott Senior Analyst, Economics
Report Card Tailwinds Healthy labour market Increased migration Strong US and Global growth Interesting Cooling existing home markets in southern Ontario Rising inflation/oil prices Headwinds Higher mortgage rates Tightening mortgage rules Protectionism/NAFTA renegotiations Low Canadian dollar
The Ontario Fair Housing Plan MLS Average Price, Seasonally Adjusted $350,000 $300,000 $900,000 $850,000 Package of measures on housing introduced by Government of Ontario in April 2017 $250,000 $200,000 $150,000 Windsor (Left) GTA (Right) $800,000 $750,000 $700,000 Key measure is a new 15-per-cent Non-Resident Speculation Tax on the price of homes in the Greater Golden Horseshoe purchased by individuals who are not citizens or permanent residents of Canada or by foreign corporations $100,000 $650,000 Source: CREA, CMHC Last data point: March 2018
GTA Sales Below Pre-Recession Levels Ottawa & Windsor Above Existing home sales index (2007=100) 170 150 Tor Ott Win Sud 130 110 90 70 50 2007Q1 2009Q1 2011Q1 2013Q1 2015Q1 2017Q1 Source: CREA, CMHC calculation 4
Market balance suggests upward price pressure MLS Sales-to-new listings ratio (%), seasonally adjusted, Windsor and Essex 90 80 70 60 50 Balanced Market 40 30 20 Source: CREA Last data point: Q12018 5
2001Q1 2001Q3 2002Q1 2002Q3 2003Q1 2003Q3 2004Q1 2004Q3 2005Q1 2005Q3 2006Q1 2006Q3 2007Q1 2007Q3 2008Q1 2008Q3 2009Q1 2009Q3 2010Q1 2010Q3 2011Q1 2011Q3 2012Q1 2012Q3 2013Q1 2013Q3 2014Q1 2014Q3 2015Q1 2015Q3 2016Q1 2016Q3 2017Q1 2017Q3 2018Q1 Rapid price growth above historical average Year-over-year change (%) in MLS Average Price, Windsor and Essex 25 20 15 10 5 0-5 -10-15 Source: CREA Last data point: 2018Q1 6
House price growth to slow Annual MLS Average Price, Windsor-Essex County $300,000 $280,000 $260,000 $240,000 $220,000 $200,000 $180,000 $160,000 $140,000 $120,000 Inner range Outer range Source: CMHC (F) = Forecast
Financial conditions not as friendly Yields on Select Government of Canada Bonds (%) 2.5 2 year 5 year 2.0 1.5 1.0 0.5 0.0 02/01/2013 02/01/2014 02/01/2015 02/01/2016 02/01/2017 02/01/2018 Source: Bank of Canada
Bank of Canada s target rate on the rise Bank of Canada s Target for Overnight Rate (%) 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.25% 1.0 0.5 0.0 18/02/2008 18/02/2009 18/02/2010 18/02/2011 18/02/2012 18/02/2013 18/02/2014 18/02/2015 18/02/2016 18/02/2017 Source: Bank of Canada
Inflation in line with mandate Year-over-year change (%), Canada 3.5 CPI-common CPI-median CPI-trim 3.0 2.5 2.0 1.5 1.0 0.5 0.0 2013 2014 2015 2016 2017 2018 Source: Statistics Canada
Mortgage holders protected by fixed rate mortgages Share of new (flow) and existing (stock) mortgages holding fixed mortgage rate 78 76 74 72 70 68 66 64 62 2015 2016 2017 Source: FIRM New Mtg Existing Mtg
How Will Housing Affordability Affect Demand? Windsor London Kitchener Hamilton- Burlington GTA Required* Income (Based on 2017Q4 Average MLS Prices) $60,000 $70,000 $100,000 $125,000 $150,000 Percentage of Households in that Region with Required Income 54% 46% 36% 25% 19% *Based on mortgage qualifying rate 4.84%, 25 year amortization, 5% down payment, 30% of gross income spent on mortgage principal and interest Source: CREA, Statistics Canada (2016 Census), CMHC Calculations 12
Sales to be lower this year Windsor CMA, MLS Sales 8,000 Inner range Outer range 7,000 6,000 5,000 4,000 Source: CMHC (F) = Forecast
US Economy Gaining, World Maintaining, While Canada Losing Momentum Real GDP % 8 7 2016 2017 2018f 2019f 6 5 4 3 2 1 0 United States Canada Europe China Japan WORLD Source: Consensus Economics, IMF, Bank of Canada, CMHC 14
Car exports remain near post-recession highs Merchandise exports (dollars x 1,000,000) 10,000 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Motor vehicles and parts Consumer goods 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: Statistics Canada 15
Unemployment rate touched new lows Unemployment rate (%), seasonally adjusted, Windsor CMA 16 14 12 10 8 6 4 2 0 Source: Statistics Canada, Labour Force Survey Last date point: Q12018
Core working age population employment Number of Employed as a Share of Population (%) by age group, Windsor CMA 82 80 25-54 (left axis) 15+ (right axis) 64 62 78 60 76 58 74 56 72 54 70 52 68 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 50 Source: Statistics Canada
Employment growth CAGR* in the number of employed by industry, 2012-2017, Windsor CMA Business, building and other support services Manufacturing Health care and social assistance Construction Transportation and warehousing Professional, scientific and technical services Wholesale and retail trade Public administration Educational services Accommodation and food services Finance, insurance, real estate, rental and leasing Other services Information, culture and recreation -8% -6% -4% -2% 0% 2% 4% 6% 8% Source: Statistics Canada, CMHC calculations * Compounded annual growth rate
Ontario`s consumer confidence increasing Consumer Confidence Index (2002=100), Ontario 130 120 110 100 90 80 70 60 50 40 2012 2013 2014 2015 2016 2017 2018 Source: Conference Board of Canada
New home starts expected to remain stable Windsor CMA, Starts 2,000 Inner range Outer range 1,500 1,000 500 0 Source: CMHC (F) = Forecast
Will Single-Detached Starts Remain High? Windsor CMA Single-Detached Starts Five Year Average (2012-2016) 630 2017 760 2018 Forecast 750 to 900 Source: CMHC 21
Growth in housing stock below estimated demand 2,500 Household Growth Housing Stock Growth 2,000 1,500 1,000 500 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CMHC, Statistics Canada Census 2016 Note: Housing stock is estimated using CMHC completion adjusting for Statistics Canada demotions and conversion permits.
Smaller households driving growth Change in number of household by household type, Windsor CMA, 2016 vs 2011 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.1% 0.3% 1.5% 2.8% Family w/ Children Multi-Family Other Family w/o Children One-person Households 0.0% -1.0% Source: Statistics Canada, Census 2016
Fastest growing age groups 2016 vs 2011 percentage growth in population by age group, Windsor CMA 25% 20% 19.3% 15% 11.7% 10% 5% 0% 1.6% 3.7% -5% -2.3% -2.7% -10% -7.9% <15 15-24 25-34 35-44 45-54 55-64 65+ Source: Statistics Canada
Strong migration keeping vacancies low Contribution to Population Growth, Windsor CMA 5,000 Natural Increase Net Immigration Net Interprovincial Net Intraprovincial Net Non-permanent 4,000 3,000 2,000 1,000 0-1,000 2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 Source: Statistics Canada Note: 2016/17 are preliminary estimates
Low vacancy rates Purpose-built apartment vacancy rate (%), Windsor CMA 16 14.6 14 12.8 13.0 12 10.3 10.4 10.9 10 8 8.8 8.1 7.3 6 4 2 1.9 2.9 3.9 4.3 5.9 4.3 3.9 2.9 2.4 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CMHC Rental Market Survey
Millennials Accelerated rent growth due to lack of supply Annual Change in Same Sample Rent (%), Windsor CMA 4 3 3.1 2.7 3.2 2 1 0.9 1.3 2.0 1.4 0-1 -0.3-0.5-2 -3-2.3 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 *structures common to both periods compared Source: CMHC Rental Market Survey
Economic & Housing Forecast Risks Upside Risks Tight new supply conditions persist Stronger US/Global economy Downside Risks Declining business sentiment (US tax, protectionism, minimum wage) More pronounced interest rate impact from BoC, OSFI A disorderly unwinding of imbalances in GTA Source: CMHC, Bank of Canada, IMF 28
Andrew Scott Senior Analyst, Economics alscott@cmhc.ca