Metropolitan Housing Outlook - Genworth Canada

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

metropolitan housing outlook Autumn 2013

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

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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.

Contents What Has Changed? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 National Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Provincial Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Atlantic Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Quebec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Ontario . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Prairies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Alberta . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . British Columbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12 12 15 18 21 24 27

Metropolitan Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Québec City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Montréal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Toronto . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Ottawa–Gatineau . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 Winnipeg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Calgary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 Edmonton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Vancouver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Victoria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 Definition and Concepts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

What Has Changed?

T

he forecast for Canada’s real gross domestic product is relatively unchanged from our spring 2013 Metropolitan Housing Outlook, as the main assumptions supporting the outlook seem to be holding up. Growth in Canada’s real GDP is expected to be 1.8 per cent in 2013—a second consecutive year of tepid growth. However, housing markets have strengthened in some regions over the past couple of months, and consumer and business confidence has picked up. As a result, the Canadian economy is expected to perform better in 2014, expanding by 2.4 per cent. This is still a 0.1 percentage point downward revision from six months ago when we completed the previous housing outlook publication. The Canadian dollar lost ground this past summer, pulled down, in part, by weaker commodity prices, including heavily discounted crude oil. The loonie is expected to average US$0.97 this year, much lower than the US$1.02 forecast in the previous housing outlook. Despite some pickup in the economy in the coming months, the Canadian dollar is expected to slip to US$0.96 for 2014, a 7-cent drop from the last housing outlook publication. Modest economic growth and tighter mortgage rules lowered demand in Canada’s new housing market in the first half of this year. Accordingly, builders are expected to reduce housing starts by 15.5 per cent in total for 2013, down to 181,400 units. This is an 800-unit

reduction from the previous Metropolitan Housing Outlook. However, demand has already improved in some markets, and so modest growth of 1.9 per cent is anticipated for housing starts next year. In level terms, housing starts are expected to be 184,900 units in 2014, up from 184,500 units in the last publication. Weaker demand in the Canadian housing market in the past few months has also slowed price growth in the new home market. The current outlook forecasts new home prices will rise by 1.8 per cent this year and 2 per cent in 2014. This is down from the 2.1 per cent and 2.5 per cent increases anticipated six months ago. Meanwhile, resale prices have been stronger so far in 2013. Existing home prices are now expected to increase 3.1 per cent this year, up from the 0.9 per cent increase expected in the previous outlook. Resale price growth will be more moderate next year, however, at 1.7 per cent, down from the 3.3 per cent forecast previously. The number of mortgage approvals is also expected to be lower in 2013, slipping 2.3 per cent, the second annual decline in a row. This is a more pronounced drop than the 1.1 per cent decline expected six months ago. Next year, with housing markets improving, total mortgage approvals are anticipated to grow by 2.9 per cent, an upward revision from the 1.7 per cent expected in the previous forecast.

The Conference Board of Canada

Executive Summary National Overview

C

anada’s economic prospects seem to be brightening: housing markets remain decent, consumer and business confidence has picked up, and the U.S. economy is improving. Accordingly, Canada’s real GDP is forecast to advance by 2.4 per cent in 2014, following 1.8 per cent growth this year. Employment growth is also forecast to pick up from 1.3 per cent this year to 1.4 per cent in 2014, cutting the unemployment rate from 7.2 per cent to 7 per cent. Financial markets have calmed recently. While the European sovereign debt crisis still lurks, the eurozone has emerged from crisis mode. The U.S. Federal Reserve continues its policy of quantitative easing, and the Bank of Canada has said interest rates will stay low as long as Canada’s economy remains weak and inflation is dormant. On the currency front, the Canadian dollar is still below par with its U.S. counterpart, largely a result of the global flight to the “safe haven” of the U.S. dollar. Meanwhile, mortgage interest rates are on the rise as yields on bonds, from which mortgages are funded, increase. Accordingly, we expect the posted three-year conventional mortgage rate to increase gradually from 3.8 per cent in 2013 to 4.4 per cent in 2014 and 5.1 per cent in 2015. This, along with ongoing employment gains, should allow indebted households to adapt gradually to the resulting higher mortgage payments. There is little sign of current mortgage stress; default rates are low. Canadian housing markets remain generally solid, despite repeated attempts to cool them by tightening mortgage insurance rules. Housing starts dipped to 175,500 units at an annual rate during the first quarter of 2013, but quickly rebounded to 185,500 units in the second quarter. We expect starts to end the year at 181,400 units. For next year, we expect nearly 185,000 starts. New home price growth will remain subdued at 1.8 per cent this year and 2 per cent in 2014, down from gains of 2.2–2.4 per cent between 2010 and 2012. The national housing market does not seem out of balance with demographic requirements. Canada’s ratio of housing The Conference Board of Canada

starts to absolute population changes has averaged 0.54 over the past 25 years and has been near that each of the past three years. Meanwhile, the national average existing home price, which increased by a marginal 0.2 per cent in 2012, is forecast to rise 3.1 per cent to $372,770 this year and 1.7 per cent in 2014. In short, Canadian housing markets should land softly. The economy continues to advance modestly. Interest rates, although rising, remain low. Recent homebuyers have locked in low mortgage rates and will have paid off a relatively large share of their debt when they have to renegotiate. New construction does not appear out of line with demographic requirements, even in Toronto, where concern over inflated condominium supplies abounds. A crash would require a significant negative surprise like an interest rate spike or employment collapse. Since none of this is in the cards, a housing crash like the one in the U.S. is nowhere near a possibility.

Provincial Overview Stronger performance by British Columbia’s goods-producing industries will lift GDP expansion to 3 per cent in 2014, following a disappointing 1.5 per cent in 2013. This will produce only 0.3 per cent job growth in 2013 but a stronger 1.7 per cent in 2014. Housing markets are improving in Vancouver and Victoria, although a subdued Chinese economy could cool offshore demand for provincial real estate. Housing starts are nonetheless forecast to decline 8 per cent in 2013, and then jump over 10 per cent in 2014. Little change is expected in prices for both new and existing homes in 2013 and 2014, after both dropped in 2012. Alberta has largely shrugged off the effect of the June floods, thanks to decent energy sector activity. Provincial GDP is forecast to rise 3.2 per cent in 2013 and 3 per cent in 2014. This will lift employment 2.2 per cent in 2013 and 2 per cent in 2014. Housing starts are predicted to rise 4.3 per cent in 2013, building on a 30 per cent jump in 2012. They should essentially stabilize in 2014. We

Autumn 2013—Metropolitan Housing Outlook | 3

expect the average sale price of an existing home to rise 4.5 per cent in both 2013 and 2014; new home price growth should be closer to 3 per cent in both years. Healthy GDP growth of 2.5 per cent is forecast in 2013 for Manitoba and Saskatchewan combined and then 2.3 per cent in 2014. This will foster job growth of 2.2 per cent in 2013 and 1.6 per cent in 2014. Economic momentum will largely come from Saskatchewan’s goods-producing sector, since Manitoba’s metal mining and services sectors are expected to be weak. Housing starts soared 31 per cent in the two provinces combined in 2012, but should drop 19 per cent in 2013 this year. But construction volumes will remain very strong, in line with continued sound population growth, and a small 4.4 per cent rebound is expected for 2014. The average resale home price will increase 5.3 per cent in 2013 and 4.7 per cent in 2014, while new home prices will rise 3.3 per cent and 3.2 per cent. Continued manufacturing struggles in 2013 will limit Ontario’s GDP growth to 1.2 per cent, but next year will see manufacturing improve and GDP advance 2.2 per cent. Employment is forecast to rise 1.3 per cent in 2013 and 1.6 per cent in 2014. Housing starts are on track to fall 21 per cent this year, led by a big drop in multi-family starts. For 2014, we see both single and multiple construction stabilizing, with total starts rising by 2.5 per cent. Average existing home price growth is forecast to slow to 2.8 per cent in 2013 and 1.6 per cent in 2014. Moderate new home price advances are forecast: 3 per cent this year and 1.8 per cent in 2014. Quebec’s GDP is forecast to rise only 1.4 per cent this year but a stronger 2.2 per cent in 2014. Still, employment will grow 1.4 per cent this year and 1.1 per cent next. Significant declines in both single-detached and multi-family construction are forecast to cut total housing starts by 24 per cent in 2013, the third consecutive annual decline. Next year is forecast to see both single and multiple starts stabilize. House price growth will be modest: 1 per cent this year and 2.7 per cent in 2014 for existing homes and advances of 1.4 per cent and 1.9 per cent for new units. Canada’s four Atlantic provinces will see their combined GDP grow 2.3 per cent in 2013, following a 1.5 per cent contraction in 2012. A 1.9 per cent expansion

is on tap for 2014. Employment advances will remain sluggish at 0.5 per cent in 2013 and 0.6 per cent in 2014. Housing markets are similarly weak. This year, we expect double-digit percentage drops in both singledetached and multi-family construction to cut total starts by 13.4 per cent. Another 11 per cent drop is on tap for 2014, as multiples retrench further. The average existing home price is forecast to dip 1.5 per cent this year, but rise 2.9 per cent in 2014. The average new home price is forecast to rise 3.6 per cent this year and 1.7 per cent in 2014.

Municipal Overview Most cities are forecast to see somewhat slower GDP growth in 2013 than in 2012. Victoria’s 0.1 per cent GDP expansion (down from an already-low 0.3 per cent in 2012) is predicted to be the slowest among our cities. Edmonton is forecast to be this year’s leader, although its GDP growth of 4.2 per cent will be a cooling from hikes near or above 6 per cent in the previous three years. For 2014, we expect growth will accelerate in all cities except Edmonton, where it will slow to a stillstrong 3.2 per cent. Calgary’s 3.4 per cent will be next year’s fastest advance, while Ottawa’s 1.6 per cent will be the slowest, as the city grapples with ongoing federal restraint. Unsurprisingly, the Alberta cities are the only two cities where GDP growth is expected to average at least 3 per cent per year between 2015 and 2017. By contrast, we think Québec City’s GDP expansion will average only 2 per cent. For the second consecutive year, sales of existing homes are forecast to drop everywhere except the Alberta cites in 2013. In the case of Calgary and Edmonton, sales growth, while positive this year, will slow from the previous year’s pace. The most notable news elsewhere is the apparent end of Vancouver’s market correction. Sales rose briskly during the second quarter of 2013 and exceeded their year-earlier volume for the first time since the third quarter of 2011. Nonetheless, sales will still end 2013 down 2.3 per cent. Sales in Toronto are also expected to post their second straight annual dip. This year’s largest forecast drops are in the province of Quebec—10 per cent in Québec City and 8 per cent in Montréal. For 2014, we think sales will rise everywhere except Ottawa, which will suffer a fifth straight annual The Conference Board of Canada

4 | Metropolitan Housing Outlook—Autumn 2013

sale decline. Increases will be modest elsewhere, with a 3 per cent gain in Winnipeg leading the pack. Between 2015 and 2017, sales will rise at an annual average rate of roughly 2 to 3 per cent in most places except Toronto, where growth will be slightly faster. Quarterly sales-to-new-listings ratio data indicate balanced markets in most cities, although the more volatile monthly data show Calgary has edged into a sellers’ position and Québec City has dipped into buyers’ territory. Measured by annual data, though, we expect balanced markets everywhere in 2013. Still, the sales-to-newlistings ratio will fall in our five easternmost cities, led by a 7 percentage point drop in Québec City. Vancouver and Victoria will see 6 and 7 percentage point increases respectively. For 2014, we expect the ratio to advance in five cities, the largest gain being another 6 percentage point rise in Vancouver. Little movement in most cities’ sales-to-new-listings ratio is expected between 2015 and 2017. A 2 percentage point increase in Montréal and a similar decline in Winnipeg are the only two changes greater than 1 per cent. The average resale price is poised to rise in all cities in 2013 for the first time since 2010. Last year, the average resale price fell in Vancouver and Victoria. This year, prices are forecast to inch higher in both these cities, but still at the slowest pace among our nine areas. Unsurprisingly, we expect Calgary will enjoy the fastest price growth in 2013, at 4.7 per cent. For 2014, we think price growth will remain the strongest in Alberta, with prices forecast to rise 4.6 per cent in both Calgary and Edmonton. But price advances will remain below 2 per cent in both B.C. cities, which are again forecast to have our nine cities’ slowest price growth. Between 2015 and 2017, price gains will be the strongest in Calgary, Edmonton, and Winnipeg, which are all forecast to see advances average at least 4 per cent annually. Widespread pullbacks in housing starts are expected in 2013. Especially large drops are forecast for our eastern cities; Montréal, Toronto, and Québec City are all expected to see starts decline near 30 per cent, while starts are forecast to fall 21 per cent in Ottawa. Only Edmonton and Winnipeg are forecast to see increases, and these will both be less than 10 per cent. Another uneven year is expected in 2014, with starts forecast to The Conference Board of Canada

drop in five cities, led by a 16 per cent decline in Edmonton. Between 2015 and 2017, we see the fastest starts growth in Toronto and Winnipeg. During the past five years, more multi-family units than single-detached homes were built in six of our nine cities; multiples’ share was over 70 per cent in Québec City, Montréal, Toronto, and Vancouver. This proliferation of multifamily units is expected to increase, particularly in former single-family bastions like Calgary, Edmonton, and Winnipeg. Vancouver will continue to see the lowest share of single-detached units; these are forecast to make up only 20 per cent of starts between 2013 and 2017. Low and easing interest rates following the 2009 recession have contained increases in average principle and interest payments in most cities, despite rising house prices. Indeed, these payments were lower in 2013 than in 2008 in Calgary, Edmonton, and Victoria and rose only 5 to 6 per cent in Montréal, Ottawa, and Vancouver. But carrying costs did rise in double-digit terms in Toronto, Québec City, and Winnipeg. Rising mortgage interest rates in 2014 are predicted to lift average monthly mortgage payments moderately in all cities; the largest jump will be 4.8 per cent in Calgary and Edmonton. Vancouver remains our least affordable city, both absolutely and measured against local incomes. Monthly principle and interest payments in Vancouver are projected to average $4,030 in 2014 and consume 41 per cent of average household income. No other city approaches these levels. Financial Indicators (Canada) 2012

2013f

2014f

Exchange rate (U.S./Can.)

1.00

0.97

0.96

Inflation rate

1.5

1.1

1.9

Bank rate

1.3

1.2

1.5

One-year mortgage rate

3.2

3.1

3.7

Three-year mortgage rate

3.9

3.8

4.4

Five-year mortgage rate

5.3

5.2

5.3

Federal bonds: 1–3 years

1.1

1.2

1.5

Federal bonds: 7 years

1.5

2.0

2.3

Federal bonds: long term

2.4

2.9

3.0

f = forecast Sources: Bank of Canada; Canada Mortgage and Housing Corporation; Canadian Real Estate Association; Statistics Canada; The Conference Board of Canada.

303,322 1.0

32,661 1.2

158,778 1.1

574,469 1.4

62,532 0.8

284,318 1.9

106,366 2.4

33,144 1.5

276,908 3.9

105,987 4.3

78,082 5.9

191,749 1.7

108,038 2.6

14,976 0.3

Quebec

Québec City

Montréal

Ontario

Ottawa

Toronto

Prairies

Winnipeg

Alberta

Calgary

Edmonton

British Columbia

Vancouver

Victoria

2014f

14,995 0.1

110,428 2.2

194,568 1.5

81,384 4.2

109,485 3.3

285,644 3.2

33,604 1.4

109,063 2.5

288,915 1.6

63,015 0.8

581,252 1.2

160,851 1.3

33,085 1.3

307,656 1.4

91,706 2.3

15,318 2.2

113,872 3.1

200,473 3.0

83,989 3.2

113,164 3.4

294,226 3.0

34,310 2.1

111,582 2.3

296,856 2.7

64,025 1.6

594,144 2.2

164,287 2.1

33,811 2.2

314,389 2.2

93,415 1.9

1,690,671 1,730,882 1.8 2.4

2013f

186 2.2

1,275 1.9

2,313 1.6

693 3.3

752 3.7

2,149 2.6

417 2.1

1,167 1.5

3,007 1.6

712 2.5

6,786 0.8

1,979 1.4

421 0.5

3,985 0.8

1,110 0.7

17,510 1.2

2012

184 –1.2

1,281 0.5

2,320 0.3

710 2.5

770 2.4

2,196 2.2

420 0.7

1,192 2.2

3,084 2.5

699 –1.8

6,874 1.3

2,018 2.0

424 0.8

4,042 1.4

1,115 0.5

17,736 1.3

2013f

185 0.7

1,313 2.5

2,360 1.7

722 1.6

792 2.8

2,240 2.0

426 1.5

1,212 1.6

3,134 1.6

710 1.6

6,982 1.6

2,031 0.6

433 2.0

4,085 1.1

1,122 0.6

17,986 1.4

2014f

Employment (000s)

5.5

6.7

6.8

4.7

4.8

4.6

5.6

5.1

8.5

6.3

7.9

8.5

5.1

7.8

10.3

7.3

2012

5.6

6.5

6.5

4.5

4.9

4.7

5.9

4.7

8.2

6.4

7.7

8.0

4.6

7.7

10.3

7.2

2013f

5.2

6.2

6.2

4.6

4.6

4.7

5.5

4.6

8.0

6.1

7.6

7.9

4.6

7.6

9.8

7.0

2014f

Unemployment Rate

f = forecast Italics indicate percentage change. Sources: Bank of Canada; Canadian Real Estate Association; Statistics Canada; The Conference Board of Canada.

89,660 –1.5

1,661,559 1.7

2012

GDP (2002 $ millions)

Atlantic provinces

Canada

Economic Indicators

40,656 3.1

38,711 3.5

37,742 3.2

49,110 2.8

55,524 1.5

51,768 5.6

37,231 3.2

38,399 3.7

40,055 3.4

45,137 3.1

38,810 2.3

36,250 3.6

39,223 3.9

35,921 3.1

35,323 3.2

34,136 3.4

2012

41,167 1.3

39,207 1.3

38,704 2.5

50,187 2.2

56,602 1.9

53,516 3.4

38,004 2.1

39,571 3.1

41,252 3.0

44,816 –0.7

39,681 2.2

37,320 3.0

40,216 2.5

36,486 1.6

36,316 2.8

35,028 2.6

2013f

42,169 2.4

40,494 3.3

39,810 2.9

51,225 2.1

58,176 2.8

54,852 2.5

39,078 2.8

40,617 2.6

42,274 2.5

46,226 3.1

40,887 3.0

38,118 2.1

41,347 2.8

37,449 2.6

37,290 2.7

36,018 2.8

2014f

Personal Income per Capita

4,183 1.2

28,628 3.4

61,565 1.9

22,467 4.5

24,164 3.6

68,452 6.9

10,360 1.8

34,766 4.6

67,669 1.0

17,379 2.8

165,177 1.6

45,993 1.7

12,413 2.1

103,648 1.1

34,449 1.4

468,252 2.6

2012

4,159 –0.6

28,963 1.2

62,170 1.0

23,659 5.3

25,224 4.4

73,057 6.7

10,669 3.0

35,404 1.8

68,348 1.0

17,470 0.5

166,624 0.9

48,466 5.4

12,685 2.2

105,551 1.8

35,119 1.9

483,438 3.2

2013f

4,280 2.9

30,074 3.8

64,477 3.7

24,841 5.0

26,531 5.2

76,462 4.7

11,157 4.6

36,901 4.2

70,794 3.6

18,072 3.4

173,391 4.1

50,126 3.4

13,064 3.0

109,222 3.5

36,174 3.0

501,819 3.8

2014f

Retail Sales ($ millions)


1,273 1.4

5,941 1.7

2,342 1.6

778 1.6

3,860 2.4

1,309 3.2

1,230 2.8

4,618 1.0

2,464 1.5

Ottawa

Toronto

Prairies

Winnipeg

Alberta

Calgary

Edmonton

British Columbia

Vancouver

365 0.4

2,501 1.5

4,657 0.9

1,264 2.8

1,350 3.1

3,973 2.9

789 1.3

2,378 1.5

6,042 1.7

1,286 1.0

13,606 0.9

3,996 1.0

777 1.0

8,109 0.8

2,361 –0.1

35,193 1.1

2013f

367 0.6

2,541 1.6

4,712 1.2

1,289 1.9

1,378 2.1

4,051 2.0

798 1.2

2,417 1.7

6,147 1.7

1,294 0.7

13,755 1.1

4,037 1.0

784 0.9

8,173 0.8

2,366 0.2

35,586 1.1

2014f

1,663 1.9

19,071 6.7

27,465 4.0

12,758 38.3

13,186 43.5

33,396 29.9

4,025 20.5

17,210 31.2

48,368 21.7

8,873 6.3

76,742 13.2

20,420 –9.9

6,262 12.6

47,367 –2.1

12,647 1.0

214,827 10.8

2012

1,347 –19.0

17,357 –9.0

25,257 –8.0

14,006 9.8

12,834 –2.7

34,823 4.3

4,304 6.9

13,870 –19.4

34,133 –29.4

7,034 –20.7

60,326 –21.4

14,376 –29.6

4,386 –30.0

36,220 –23.5

10,950 –13.4

181,446 –15.5

2013f

2014f

1,465 8.7

16,536 –4.7

27,819 10.1

11,734 –16.2

13,444 4.8

34,698 –0.4

3,953 –8.2

14,477 4.4

38,717 13.4

6,225 –11.5

61,805 2.5

15,392 7.1

4,134 –5.8

36,395 0.5

9,734 –11.1

184,927 1.9

Housing Starts

1,591 –3.1

16,958 31.3

26,380 17.0

10,166 13.7

9,593 24.8

26,446 8.9

3,258 2.5

12,869 6.6

31,907 –5.7

8,122 –2.8

58,613 –3.3

19,092 –3.9

5,518 –2.6

44,564 0.1

11,699 2.8

180,646 3.0

2012

1,610 1.2

18,073 6.6

25,564 –3.1

13,114 29.0

12,129 26.4

31,811 20.3

3,891 19.4

14,715 14.3

36,403 14.1

6,838 –15.8

63,886 9.0

17,110 –10.4

4,881 –11.5

42,758 –4.1

11,352 –3.0

188,966 4.6

2013f

1,434 –10.9

17,339 –4.1

25,425 –0.5

12,442 –5.1

12,912 6.5

31,701 –0.3

3,933 1.1

13,513 –8.2

38,748 6.4

6,631 –3.0

60,512 –5.3

14,883 –13.0

4,007 –17.9

37,309 –12.7

10,109 –11.0

177,776 –5.9

2014f

Housing Completions 2013f

2014f

484,164 486,225 492,802 –2.8 0.4 1.4

730,063 737,162 750,861 –6.4 1.0 1.9

512,974 516,753 529,046 –7.9 0.7 2.4

334,300 346,581 362,609 2.7 3.7 4.6

412,315 431,760 451,798 2.3 4.7 4.6

361,969 378,376 395,376 2.6 4.5 4.5

255,080 263,529 273,446 5.7 3.3 3.8

260,308 274,070 286,990 5.5 5.3 4.7

520,663 533,035 543,456 7.5 2.4 2.0

329,150 333,746 339,771 2.5 1.4 1.8

381,328 392,017 398,171 5.0 2.8 1.6

318,244 323,253 331,303 3.5 1.6 2.5

256,196 267,821 274,743 5.0 4.5 2.6

272,014 274,868 282,264 4.1 1.0 2.7

142,756 140,607 144,668 1.0 –1.5 2.9

361,494 372,769 379,236 0.2 3.1 1.7

2012

Existing Home Prices 2012

400,585 –2.8

662,097 –0.5

634,715 –0.4

382,809 0.9

490,128 1.7

435,951 1.1

432,930 4.2

397,470 3.2

605,473 5.1

404,027 2.6

517,813 4.7

325,459 1.4

232,176 2.9

304,180 1.5

339,660 2.3

397,915 –0.7

662,452 0.1

634,714 0.0

387,803 1.3

509,415 3.9

447,813 2.7

449,458 3.8

410,659 3.3

620,137 2.4

408,564 1.1

533,304 3.0

330,350 1.5

235,387 1.4

308,506 1.4

351,763 3.6

421,284 1.8

2013f

2014f

403,822 1.5

674,797 1.9

644,990 1.6

399,334 3.0

526,002 3.3

462,468 3.3

458,249 2.0

423,780 3.2

631,169 1.8

416,644 2.0

542,869 1.8

336,949 2.0

239,898 1.9

314,380 1.9

357,729 1.7

429,782 2.0

New Home Prices 413,730 2.3

f = forecast Italics indicate percentage change. Sources: CMHC Housing Time Series Database; Canadian Real Estate Association; Quebec Federation of Real Estate Boards; Statistics Canada; The Conference Board of Canada.

363 0.4

13,489 1.0

Ontario

Victoria

3,958 1.0

Montréal

770 1.1

8,043 0.9

Quebec

Québec City

2,363 0.1

34,827 1.1

Atlantic provinces

Canada

2012

Population (000s)

Demographic and Housing Indicators 6 | Metropolitan Housing Outlook—Autumn 2013


Canada Housing Starts (000s)

Singles

20-year average

Multiples

250 200 150 100 50 0 2010

11

12

13f

14f

15f

16f

17f

f = forecast Sources: The Conference Board of Canada; CMHC Housing Time Series Database.

C

anada’s economy is again expected to grow by a modest 1.8 per cent this year, but increase to 2.4 per cent growth in 2014 thanks to the improving U.S. economy next year. A slower resale housing market and tighter mortgage rules discouraged builders in the new home market through the last half of 2012 and into the first quarter of 2013. Although starts have picked up again in recent months, the outlook calls for total housing starts to decline 15.5 per cent this year and grow by just 1.9 per cent next year.

Economic Outlook Canada’s real gross domestic product is set to grow by 1.8 per cent in 2013. For much of the first half of 2013, economic indicators provided few encouraging signs. But through the summer, consumer and business confidence picked up and the U.S. economy gained some speed. Indeed, stronger business investment is expected to help Canada’s economic growth advance at a reasonable pace (above 2 per cent) through the second half of this year, leading to a 2.4 per cent forecast increase in real GDP for 2014. However, hiring will remain muted. And, while tight labour markets (especially in Saskatchewan and Alberta) and subdued inflation will help lift households’ purchasing power, real consumer

House Price Growth (percentage chage)

New

Resale

8 6 4 2 0 2010

11

12

13f

14f

15f

16f

17f

f = forecast Sources: The Conference Board of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association; Quebec Federation of Real Estate Boards.

spending will not outpace income as households try to reduce their debt burdens and increase savings. Public sector spending will also remain muted this year and next. Provincial and federal governments are both targeting balanced budgets, some sooner than others, resulting in very little contribution to economic growth. Still, some provinces have avoided cutting back on much-needed infrastructure, and most provinces are accommodating modest budgetary increases to health care spending. Thus, the brunt of the public sector cuts in 2013–14 will be felt in public administration, education, and social programs.



Financial Markets Outlook The U.S. Federal Reserve has reiterated that the current pace of quantitative easing through major bond purchases will continue until the unemployment rate falls below 7 per cent, and that interest rates will remain essentially at zero until even later, when the unemployment rate falls to below 6.5 per cent. Equity markets have been appeased, recovering from an early summer dive and stabilizing. At the same time, given that the Canadian economy is not yet at full capacity and that near-term growth may be choppy, the Bank of Canada has indicated that monetary conditions will remain loose until economic growth strengthens or inflation starts to accelerate. We expect the Bank of Canada will likely start raising rates gradually by mid-2014, well ahead of the U.S., largely because the gap between the economic potential and the current output level is significantly smaller in Canada than in the United States. Therefore, as economic conditions improve south of the border, excess capacity in Canada will be eaten up more quickly. Over the past few months, the loonie has lost ground vis-à-vis the greenback. In part, the swoon in the Canadian dollar—from above parity in February to below US$0.95 in July—was the result of softer commodity prices, especially heavily discounted Western Canadian Select crude oil. But it was also about the strength in the U.S. dollar, as Canada’s currency remained steady in comparison with many other currencies. Federal Reserve statements about possibly easing the pace of bond purchases in its quantitative easing program made global financial and equity markets nervous and pushed up the value of the U.S. dollar. Overall, the Canadian dollar is expected to average US$0.97 this year and US$0.96 in 2014.

Housing Outlook Canada’s new home market capped an impressive three-year run of growth last year. From 2010 to 2012, a recovering economy and low interest rates drove demand for new homes, as builders increased starts by an average of 13.4 per cent per year, up to 214,800 units in 2012—back above 200,000 units for The Conference Board of Canada

Mortgage Approval Growth

(dollar volume percentage change)

Conventional

High-ratio

15 10 5 0 −5 −10 −15 2010

11

12

13f

14f

15f

16f

17f

f = forecast Sources: The Conference Board of Canada; Genworth MI Canada; CMHC Housing Time Series Database.

Household Net Worth

(as a per cent of disposable income)

700 650 600 550 500 1998

00

02

04

06

08

10

12

Sources: The Conference Board of Canada; Statistics Canada.

the first time since 2008. Growth in multiple-unit starts was particularly strong over the past two years, thanks to a wave of condominium development across the country. But new home price growth remained modest, at an annual average of 2.3 per cent. Average annual growth in existing home prices was a much stronger 6.7 per cent in 2010 and 2011, but fell to just 0.2 per cent last year, signalling a slower resale market. While housing starts rose nearly 11 per cent in total last year, developers began to curtail new home construction in the second half of the year. The new home market was feeling the effects of the federal government’s decision to limit rising household debt by steadily lowering the qualifying period for insured mortgages from 40 years in 2008 to just 25 years by mid-2012, making it difficult for some first-time homebuyers to enter the market. With economic growth tepid, builders continued to reduce housing starts through the first quarter of 2013. Starts then increased once again in the second quarter


of this year. In part, builders were lured back to the market by rising sales of existing homes and prices in the first months of 2013. Still, the Canadian housing market is expected to stay cool this year and next. Following the recent run-up in multiple starts in a number of urban centres, a significant number of new units will become available over coming months, helping to keep some builders at bay. Overall, housing starts are forecast to fall by 15.5 per cent to 181,400 units in 2013 and increase by a modest 1.9 per cent to 184,900 units in 2014. New home price growth is expected to remain around 2 per cent this year and next. Meanwhile, resale home prices are set to rise 3.1 per

cent in 2013, because of stronger gains at the beginning of this year, and a much more moderate 1.7 per cent next year. Looking ahead, there is room for more growth in the new home market. In general, even with the significant growth in housing starts since 2010, they are still in line with demographic requirements. Over the past 20 years on average, 0.47 homes have been started per additional person in Canada’s population. During the past three years, this ratio has been 0.46—well within historical norms. By 2015, better employment gains will also reignite demand despite the gradual rise in interest

Consumer Finances

(left, per cent; right, per 1 million people)

Atlantic Provinces

Quebec

Mortgages in arrears


Bankruptcies

Bankruptcies

0.7

250

0.9

400

0.6

200

0.7

350

0.5

150

0.5

300

0.4

100

0.3

250

50

0.1

0.3 1998 00

02

04

06

08

10

12

Ontario

02

04

06

08

10

12

Prairie Provinces Mortgages in arrears


Bankruptcies

0.7 0.6 0.5 0.4 0.3 0.2

350 300 250 200 150 100 1998

200 1998 00

00

02

04

06

08

10

220

0.6

180

0.4

140

0.2

100

0

60 1998 00

12

Alberta

Bankruptcies

0.8

02

04

06

08

10

12

British Columbia Mortgages in arrears

Bankruptcies

0.9

300

0.7

250

0.5

200

0.3

150 100

0.1 1998 00

02

04

06

08

10

12

0.7 0.6 0.5 0.4 0.3 0.2 0.1


1998 00

02

04

06

Bankruptcies

08

10

250 225 200 175 150 125 100

12

Sources: The Conference Board of Canada; Canadian Bankers Association; Superintendent of Bankruptcy Canada.



rates. As economic growth accelerates, therefore, developers will be encouraged to boost housing starts to about 197,100 units in 2015 and above 210,000 units by 2017. Growth in new home prices is forecast to remain at 2 per cent on an average annual basis from 2015 to 2017, while resale price growth will be slightly higher, at 2.5 per cent per year on average.

Mortgage Outlook Mortgage interest rates are widely expected to increase in the next year, pushing up carrying costs. Yields on bonds, from which banks finance mortgages, have already moved higher. Still, the Bank of Canada is not expected to start raising its overnight rate before mid-2014, and even then, the Bank will raise rates only gradually, giving households time to adapt. Furthermore, employment and income growth will help to further alleviate some of the pressure of rising interest rates on households. In fact, rising mortgage rates could even provide a short-term boost to the market, as house-hunters with mortgages pre-approved at low interest rates rush to buy homes before these contracted rates expire. The current outlook calls for the three-year conventional mortgage rate to rise from a record-low 3.8 per cent this year to 4.4 per cent in 2014 and 5.1 per cent in 2015.

The total number of mortgage approvals fell by 0.3 per cent 2012, as the resale housing market slowed in the second half of last year. Approvals in the new home market continued to climb however, rising 2.2 per cent. Both markets are forecast to see lower levels of mortgage approvals in 2013, reducing total approvals by 2.3 per cent. With growth in the new home market expected to be modest in 2014, the number of new mortgage approvals will decline once again. However, thanks to the existing home market, total mortgage approvals are anticipated to rise in 2014, up by 2.9 per cent. The dollar volume of mortgage approvals rose 0.7 per cent last year, thanks to price growth in the new and resale markets. A similar increase is expected for 2013, with growth in dollar volumes improving to 4.5 per cent next year. Not surprising, tighter mortgage rules are having a bigger impact on the number of high-ratio mortgage approvals (set to fall 3.1 per cent in 2013) than the number of conventional mortgage approvals (set to drop 1.7 per cent). Growth in highratio approvals will be 1.3 per cent for 2014, while conventional mortgage approvals will rise 4.2 per cent.

Economic Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

1,593,357 3.4

1,633,640 2.5

1,661,559 1.7

1,690,671 1.8

1,730,882 2.4

1,775,323 2.6

1,817,917 2.4

1,857,362 2.2

17,046 1.4

17,309 1.5

17,510 1.2

17,736 1.3

17,986 1.4

18,305 1.8

18,578 1.5

18,801 1.2

8.0

7.5

7.3

7.2

7.0

6.4

6.0

5.7

Personal income per capita ($)

31,625 1.8

33,001 4.4

34,136 3.4

35,028 2.6

36,018 2.8

37,175 3.2

38,292 3.0

39,344 2.7

Population (000s)

34,076 1.2

34,439 1.1

34,827 1.1

35,193 1.1

35,586 1.1

35,992 1.1

36,407 1.2

36,826 1.2

438,525 5.6

456,388 4.1

468,252 2.6

483,438 3.2

501,819 3.8

523,767 4.4

546,047 4.3

567,271 3.9

0.97

1.01

1.00

0.97

0.96

0.98

0.98

0.98

1.8

2.9

1.5

1.1

1.9

2.1

2.0

2.0

Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

Retail sales ($ millions) Exchange rate (U.S./Can.) Inflation rate (per cent)

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; Bank of Canada; Statistics Canada.



Financial Indicators (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

Bank rate

0.9

1.3

1.3

1.2

1.5

2.3

3.2

3.9

Prime lending rate

2.6

3.0

3.0

3.0

3.3

4.1

5.0

5.7

Three-month Treasury bill

0.6

0.9

1.0

1.0

1.2

2.0

2.9

3.5

One-year conventional mortgage rate

3.5

3.5

3.2

3.1

3.7

4.5

5.4

6.0

Three-year conventional mortgage rate

4.3

4.3

3.9

3.8

4.4

5.1

5.9

6.6

Five-year conventional mortgage rate

5.6

5.4

5.3

5.2

5.3

5.6

6.3

6.9

Federal bonds: 1 year

1.5

1.4

1.1

1.2

1.5

2.1

2.9

3.6


2.4

2.1

1.4

1.7

2.0

2.4

3.0

3.6


2.7

2.3

1.5

2.0

2.3

2.5

3.1

3.7


3.2

2.8

1.9

2.3

2.5

2.7

3.2

3.8

Federal bonds: long term

3.7

3.3

2.4

2.9

3.0

3.0

3.4

3.9


Housing Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

189,930 27.4

193,950 2.1

214,827 10.8

181,446 –15.5

184,927 1.9

197,088 6.6

207,126 5.1

210,212 1.5

Singles

92,554 22.3

82,392 –11.0

83,657 1.5

76,797 –8.2

77,530 1.0

81,028 4.5

84,391 4.1

82,609 –2.1

Multiples

97,376 32.6

111,558 14.6

131,170 17.6

104,650 –20.2

107,397 2.6

116,060 8.1

122,735 5.8

127,603 4.0

186,212 5.3

175,431 –5.8

180,646 3.0

188,966 4.6

177,776 –5.9

183,522 3.2

195,782 6.7

201,293 2.8

Singles

90,578 15.7

79,976 –11.7

80,630 0.8

79,303 –1.6

76,330 –3.7

78,099 2.3

82,314 5.4

82,293 0.0

Multiples

95,635 –3.0

95,455 –0.2

100,015 4.8

109,663 9.6

101,446 –7.5

105,423 3.9

113,468 7.6

119,000 4.9

Average price of a new home ($)

395,561 2.2

404,247 2.2

413,730 2.3

421,284 1.8

429,782 2.0

439,275 2.2

447,938 2.0

456,488 1.9

Average price of a resale home ($)

338,199 6.8

360,648 6.6

361,494 0.2

372,769 3.1

379,236 1.7

389,163 2.6

399,110 2.6

408,657 2.4

Housing starts

Housing completions

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association; Quebec Federation of Real Estate Boards; Statistics Canada.



Atlantic Canada Housing Starts (000s)

Singles

20-year average

Multiples

15 10 5 0 2010

11

12

13f

14f

15f

16f

17f


G

rowth in the Atlantic Canadian economy is expected to be 2.3 per cent this year and 1.9 per cent in 2014. Rising oil production both in Newfoundland and Labrador and in Nova Scotia is contributing to these increases. However, housing starts in all four provinces are forecast to decline in 2013 and 2014, having topped 10,000 units for the past 12 years now. Starts will continue to fall in the medium term as well, bringing them back in line with demographic needs.

Economic Outlook Atlantic Canada’s real gross domestic product is expected to grow by 2.3 per cent in 2013, following a 1.5 per cent contraction in 2012. The region’s economy is then forecast to post a more modest increase in 2014, rising 1.9 per cent. Much of the decrease in real GDP last year, and the strength this year, has been driven by change in the Newfoundland and Labrador economy. The province’s economy contracted by 4.8 per cent in 2012, largely because of a 20 per cent drop in oil production. This year, renewed growth in the oil sector, along with a booming construction industry, will allow Newfoundland and Labrador’s economy to grow by a forecast 5.4 per cent. Meanwhile, after struggling for the past two years, Nova Scotia’s economy look brighter in the short term as well, thanks to Deep



New

Resale

6 4 2 0 −2 2010

11

12

13f

14f

15f

16f

17f

f = forecast Sources: The Conference Board of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association.

Panuke’s newly completed offshore natural gas field. Production at the field is forecast to help lift real GDP growth from 1.1 per cent 2013 to 2.9 per cent next year. However, the economy of Prince Edward Island continues to face a less-than-stellar outlook. Efforts by the provincial and federal governments to balance their budgets will continue to weigh on the economy, holding growth in real GDP to a forecast 1.3 per cent this year and just 1 per cent in 2014. In New Brunswick, economic growth is forecast to accelerate from 0.8 per cent in 2013 to 1.9 per cent next year, as weakness in the construction and food processing sectors offsets gains in the resources and manufacturing sectors.


Housing Outlook Atlantic Canada’s new home market came roaring back after the global recession, as builders increased housing starts 17.2 per cent in 2010, up to 12,800 units,

their highest level since 2003. Low interest rates and improved consumer confidence were boosting housing demand across the region. Buyers of new homes in Nova Scotia were benefitting from the introduction of a $7,000 sales tax rebate that year as well. Somewhat

Atlantic Canada: Economic Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

89,962 3.7

91,020 1.2

89,660 –1.5

91,706 2.3

93,415 1.9

95,654 2.4

96,733 1.1

97,764 1.1

1,099 0.6

1,102 0.3

1,110 0.7

1,115 0.5

1,122 0.6

1,137 1.3

1,141 0.4

1,145 0.4

10.5

10.0

10.3

10.3

9.8

9.1

8.5

8.2

32,738 2.6

34,225 4.5

35,323 3.2

36,316 2.8

37,290 2.7

38,459 3.1

39,433 2.5

40,401 2.5

2,352 0.5

2,361 0.4

2,363 0.1

2,361 –0.1

2,366 0.2

2,374 0.3

2,379 0.2

2,383 0.2

Retail sales ($ millions)

32,522 4.7

33,977 4.5

34,449 1.4

35,119 1.9

36,174 3.0

37,207 2.9

38,081 2.3

38,916 2.2

Inflation rate (per cent)

2.0

3.3

2.0

1.8

2.0

1.9

2.0

2.1

Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent) Personal income per capita ($) Population (000s)


Atlantic Canada: Housing Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

12,772 17.2

12,524 –1.9

12,647 1.0

10,950 –13.4

9,734 –11.1

9,493 –2.5

9,415 –0.8

8,933 –5.1

Singles

7,797 5.6

6,911 –11.4

6,865 –0.7

5,849 –14.8

5,693 –2.7

5,500 –3.4

5,461 –0.7

4,976 –8.9

Multiples

4,975 41.7

5,613 12.8

5,782 3.0

5,101 –11.8

4,041 –20.8

3,992 –1.2

3,954 –0.9

3,958 0.1

11,513 2.7

11,376 –1.2

11,699 2.8

11,352 –3.0

10,109 –11.0

9,639 –4.6

9,505 –1.4

9,266 –2.5

Singles

7,698 3.6

7,141 –7.2

6,521 –8.7

6,184 –5.2

6,002 –2.9

5,730 –4.5

5,634 –1.7

5,375 –4.6

Multiples

3,815 1.0

4,234 11.0

5,178 22.3

5,169 –0.2

4,107 –20.5

3,909 –4.8

3,871 –1.0

3,891 0.5


322,074 2.3

332,005 3.1

339,660 2.3

351,763 3.6

357,729 1.7

364,804 2.0

372,020 2.0

379,380 2.0


138,432 4.4

141,324 2.1

142,756 1.0

140,607 –1.5

144,668 2.9

147,791 2.2

150,978 2.2

154,078 2.1

Housing starts

Housing completions

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association; Statistics Canada.



surprisingly, even though demand was accelerating, growth in new home prices was slowing, slipping to a modest 2.3 per cent in 2010, down from 3.1 per cent the previous year and 10.9 per cent in 2008. In the resale market, existing home prices did strengthen a little in 2010, rising from 3.7 per cent in 2009 to 4.4 per cent. Weaker economies hampered demand in the housing markets in Newfoundland and Labrador and in New Brunswick in 2011. In turn, builders in those two provinces reduced housing starts, lowering them 1.9 per cent for the Atlantic region as a whole—even though starts in Nova Scotia and Prince Edward Island continued to increase. Indeed, Prince Edward Island’s new home market was particularly busy in 2011, with builders raising starts by nearly 25 per cent in response to stronger international migration numbers as a result of the province’s nominee program. Builders in Prince Edward Island held housing starts steady last year as well. A number of new condominium developments also increased starts in Newfoundland and Labrador’s new home market in 2012. But, with real GDP growth still muted, starts fell in each of Nova Scotia and New Brunswick, holding the increase in total starts for Atlantic Canada to just 1 per cent last year. Home prices in the new and resale markets continued to be


modest over the past two years, increasing 2.7 per cent on an average annual basis in the new market and an average of 1.6 per cent in the resale market. In spite of stronger economic growth overall for Atlantic Canada in 2013, tighter mortgage rules, the completion of some condominium projects, and a return to more modest population growth in Prince Edward Island have all been lowering demand in the region’s new home market. In addition, in level terms, housing starts in Atlantic Canada have been well above demographic requirements for a number of years now, having topped 10,000 units annually for more than a decade. Moreover, with interest rates eventually rising, builders are expected to lower Atlantic Canada’s housing starts both this year and through the medium term. Starts are forecast to fall 13.4 per cent in 2013, 11.1 per cent in 2014, and by an average of 2.8 per cent per year from 2015 to 2017. Growth in new home prices is expected to rise slightly in 2013, up to 3.6 per cent, while resale prices are forecast to fall 1.5 per cent, the first annual price decline in 13 years. Over the rest of the forecast, 2014 to 2017, price growth in the new market is anticipated to average 1.9 per cent annually, while it is forecast to average 2.3 per cent per year in the resale market.


Quebec Housing Starts (000s)

Singles

Multiples

20-year average

60 40 20 0 2010

11

12

13f

14f

15f

16f

17f


A

soft investment outlook, along with weak external demand, has led to anemic employment growth and unsteady household confidence in Quebec this year, holding real GDP growth to 1.4 per cent. Quebec’s new home market will also remain weak in 2013, with total starts falling 23.5 per cent. A balanced market and better economic growth in 2014 will encourage builders to raise starts an average of 2.4 per cent annually through 2014 and 2015.

Economic Outlook Growth in Quebec’s real gross domestic product is forecast to accelerate to a still modest 1.4 per cent this year, following an increase of only 1 per cent in 2012. A weak investment outlook for both the residential and non-residential construction sectors, coupled with weak demand for exports, underpins this year’s soft prognosis. But the much anticipated recovery in the U.S. economy and its housing market should improve export growth and the manufacturing outlook in 2014. Full production of Bombardier’s CSeries aircraft, to be assembled near Montréal, will provide an additional economic boost. Meanwhile, consumer spending is only slowly improving. Employment is forecast to gain 1.4 per cent in 2013 and 1.1 per cent in 2014, bringing the unemployment rate down only slightly to 7.6 per cent next year. Consumers will remain understandably wary. In all, the provincial economy is forecast to grow


New

Resale

10 8 6 4 2 0 2010

11

12

13f

14f

15f

16f

17f

f = forecast Sources: The Conference Board of Canada; CMHC Housing Time Series Database; Quebec Federation of Real Estate Boards.

by 2.2 per cent in 2014. The medium term looks decent, with GDP predicted to rise 2.5 per cent in 2015 and 2 per cent in 2016.

Housing Outlook Builders in Quebec’s new housing market increased starts by 18.3 per cent in 2010 as the province began to recover from the global recession. Indeed, demand for new housing was being driven by improved gains in employment that year, as well as stronger population growth and low interest rates. Construction of both single-detached and multiple-family housing contributed to this increase. In level terms, total housing starts topped



51,000 units in 2010, their highest level since 2004. However, in spite of the higher population growth, at their 2010 level, starts were above demographic requirements. As a result, inventories rose, and growth

in new home prices slowed, dropping to 2.4 per cent, down from 2.9 per cent the previous year and an average of 5 per cent annually in the five years before that.

Quebec: Economic Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

295,398 2.5

300,275 1.7

303,322 1.0

307,656 1.4

314,389 2.2

322,277 2.5

328,842 2.0

334,565 1.7

3,918 1.8

3,955 1.0

3,985 0.8

4,042 1.4

4,085 1.1

4,144 1.5

4,191 1.1

4,220 0.7

7.9

7.7

7.8

7.7

7.6

7.2

6.9

6.8

33,518 1.8

34,828 3.9

35,921 3.1

36,486 1.6

37,449 2.6

38,548 2.9

39,591 2.7

40,533 2.4

7,895 1.0

7,968 0.9

8,043 0.9

8,109 0.8

8,173 0.8

8,236 0.8

8,299 0.8

8,362 0.8


99,551 6.2

102,505 3.0

103,648 1.1

105,551 1.8

109,222 3.5

113,052 3.5

116,600 3.1

119,887 2.8


1.3

3.0

2.1

1.2

2.0

2.2

2.0

1.9



Quebec: Housing Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

51,363 18.3

48,387 –5.8

47,367 –2.1

36,220 –23.5

36,395 0.5

37,907 4.2

38,539 1.7

37,645 –2.3

Singles

19,549 11.5

16,554 –15.3

16,059 –3.0

13,796 –14.1

13,940 1.0

14,355 3.0

14,568 1.5

13,713 –5.9

Multiples

31,814 23.0

31,833 0.1

31,308 –1.6

22,424 –28.4

22,456 0.1

23,552 4.9

23,971 1.8

23,932 –0.2

45,798 5.8

44,526 –2.8

44,564 0.1

42,758 –4.1

37,309 –12.7

36,899 –1.1

38,291 3.8

38,117 –0.5

Singles

18,738 11.7

15,779 –15.8

15,847 0.4

14,228 –10.2

13,639 –4.1

13,548 –0.7

13,962 3.1

13,525 –3.1

Multiples

27,060 2.1

28,747 6.2

28,716 –0.1

28,529 –0.7

23,670 –17.0

23,351 –1.3

24,330 4.2

24,592 1.1


293,728 2.4

299,580 2.0

304,180 1.5

308,506 1.4

314,380 1.9

321,452 2.2

328,636 2.2

335,644 2.1


249,591 8.5

261,411 4.7

272,014 4.1

274,868 1.0

282,264 2.7

290,069 2.8

297,039 2.4

304,179 2.4

Housing starts

Housing completions

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; CMHC Housing Time Series Database; Quebec Federation of Real Estate Boards; Statistics Canada.



Higher inventories, a more modest economy, and increased taxes all led builders to reduce housing starts through 2011 and 2012. Starts fell 5.8 per cent in 2011 and another 2.1 per cent last year. Much of this decrease was in the singles market, as multiple starts were essentially flat in 2011 and declined just 1.6 per cent in 2012. The multiples market was being boosted by a number of condominium developments, especially in Montréal and Québec City. Even with the lower starts over the past two years, new home price growth continued to decelerate, slipping to 1.5 per cent for 2012. Growth in resale prices was also slowing during this time—falling from 8.5 per cent in 2010 to 4.1 per cent last year—suggesting a weaker resale market as well. Builders reduced both single and multiple starts significantly in the first quarter of 2013, as economic growth remained modest and some condominium projects wound down. The market was also being hampered by

tighter mortgage rules that were introduced last year. Single starts slowed again in the second quarter of this year, while multiples recorded a small increase. In all, total housing starts are expected to decline 23.5 per cent for 2013, down to 36,200 units, their lowest level since 2001. Price growth, in both the new and resale markets, is forecast to remain modest in 2013, at 1.4 per cent and 1 per cent, respectively. With housing starts now closer to demographic requirements, an improved economy and steady population growth should bring builders back to the new home market starting in 2014. Starts are expected to increase 0.5 per cent next year and 4.2 per cent in 2015. Price growth is also anticipated to accelerate, albeit slowly, in the coming years. New home prices are forecast to grow by 1.9 per cent in 2014 and 2.2 per cent in 2015. Resale price growth is expected to be just slightly higher, at 2.7 per cent per year over the same two years.



Ontario Housing Starts (000s)

Singles

Multiples

20-year average

100 80 60 40 20 0 2010

11

12

13f

14f

15f

16f

17f


O

ntario’s real gross domestic product will grow just 1.2 per cent in 2013, held back by weakness in both the public and private sectors. However, growth in the economy is then expected to improve to 2.2 per cent next year. The province’s new home market is expected to see housing starts fall for the first time in four years this year as both single and multiple starts decline. With an improved economy next year, builders will slowly return to the new home market, increasing starts a modest 2.5 per cent for 2014.

Economic Outlook Broad-based weakness in demand from households, government, and businesses (especially during late 2012 and early 2013) will result in real GDP growth of just 1.2 per cent for Ontario this year—the slowest pace since the recession. This lacklustre pace of economic growth, along with resulting slow employment growth, is weighing on consumer spending, which is anticipated to grow just 1.4 per cent for 2013. However, household confidence (as measured by The Conference Board of Canada’s Index of Consumer Confidence) has been increasing recently, and this will translate into higher spending on goods and services, especially durable goods. As a result, real consumer spending is expected to advance 2.7 per cent next year. Improving business confidence and demand for exports should also help



New

Resale

10 8 6 4 2 0 2010

11

12

13f

14f

15f

16f

17f


overall economic growth pick up steam later this year and into 2014. Accordingly, real GDP will expand 2.2 per cent next year.

Housing Outlook Ontario’s new home market has been robust for the past three years. Indeed, stronger demand following the 2009 recession enticed builders to increase total housing starts an average of 15.1 per cent per year from 2010 to 2012. Demand was being boosted not only by an improved economy but also by healthy population gains and lower interest rates. In level terms, Ontario’s housing starts reached 76,700 units in 2012, their highest level since 2005. With stronger demand came


increased price growth as well—new home prices rose an average of 3.8 per cent from 2010 to 2012, after holding flat in 2009. Growth in resale home prices was even larger during this time, at 6.7 per cent on an average annual basis.

The growth in housing starts in 2010 was split between the singles and multiples markets. However, over 2011–12, all of the increase in starts was due to more multiple-unit construction, as single-detached starts declined each year. One of the biggest factors driving

Ontario: Economic Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

556,863 3.5

566,741 1.8

574,469 1.4

581,252 1.2

594,144 2.2

610,994 2.8

627,020 2.6

640,899 2.2

6,611 1.6

6,732 1.8

6,786 0.8

6,874 1.3

6,982 1.6

7,114 1.9

7,238 1.7

7,330 1.3

8.6

7.8

7.9

7.7

7.6

6.6

6.1

5.9

Personal income per capita ($)

37,004 2.7

37,942 2.5

38,810 2.3

39,681 2.2

40,887 3.0

42,131 3.0

43,396 3.0

44,565 2.7

Population (000s)

13,203 1.2

13,350 1.1

13,489 1.0

13,606 0.9

13,755 1.1

13,917 1.2

14,091 1.2

14,270 1.3


156,904 5.4

162,528 3.6

165,177 1.6

166,624 0.9

173,391 4.1

180,135 3.9

186,970 3.8

193,191 3.3


2.4

3.1

1.4

1.3

2.0

2.1

2.0

2.0

Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)


Ontario: Housing Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

60,433 20.0

67,821 12.2

76,742 13.2

60,326 –21.4

61,805 2.5

70,458 14.0

81,339 15.4

86,985 6.9

Singles

28,089 24.1

26,884 –4.3

25,567 –4.9

23,282 –8.9

23,630 1.5

26,691 13.0

30,789 15.4

32,071 4.2

Multiples

32,344 16.6

40,937 26.6

51,175 25.0

37,044 –27.6

38,175 3.1

43,767 14.6

50,551 15.5

54,913 8.6

61,419 11.2

60,642 –1.3

58,613 –3.3

63,886 9.0

60,512 –5.3

62,653 3.5

71,303 13.8

78,340 9.9

Singles

27,497 11.0

24,798 –9.8

26,351 6.3

24,197 –8.2

23,999 –0.8

24,852 3.6

28,501 14.7

30,670 7.6

Multiples

33,922 11.3

35,844 5.7

32,261 –10.0

39,688 23.0

36,513 –8.0

37,801 3.5

42,802 13.2

47,671 11.4


474,960 2.5

494,665 4.1

517,813 4.7

533,304 3.0

542,869 1.8

554,947 2.2

566,368 2.1

577,843 2.0


340,225 8.3

363,073 6.7

381,328 5.0

392,017 2.8

398,171 1.6

406,163 2.0

414,709 2.1

423,168 2.0

Housing starts

Housing completions




multiples construction in recent years has been the influx of big high-rise condominiums, especially in Toronto. Apartment condominium starts in Toronto alone grew more than 70 per cent during 2010 and 2011, and by a further 42.8 per cent last year, to reach a record 27,400 units in 2012. Province-wide, multiple starts were 67 per cent of the total starts built last year, up from a share of 39 per cent just 10 years ago. Apartment condominiums have become a more attractive purchase for homeowners for several reasons, not the least of which is their relative affordability compared with single-detached homes. In addition, apartment condominiums are popular with an aging population, foreign investors, and also those who are choosing to live closer to the downtown core to avoid increased traffic flows. A sluggish economy, tighter mortgage rules, and the completion of several large developments have all worked to reduce housing starts in both the singles and multiples markets in recent months. Both single and multiple housing starts fell through the second half of 2012 and into the first quarter of this year. While multiple starts then increased once more in


the second quarter, single starts continued on their downward trend. In total, housing starts are forecast to slip 21.4 per cent for 2013. Modestly rising interest rates will keep demand in check early in 2014 as well. Builders are forecast to continue to reduce starts in the first half of next year. But renewed growth in the economy next year should create additional demand in the second half of 2014, helping to raise housing starts by 2.5 per cent for the year as a whole. Growth in new home prices is expected to decelerate this year and next, down to 3 per cent and 1.8 per cent respectively. Resale prices are forecast to grow by similar rates—2.8 in 2013 and 1.6 per cent in 2014. Steady growth in real GDP and continued increases in the population should help boost growth in Ontario’s new home sector through the medium term. We anticipate housing starts will reach nearly 87,000 units by 2017. Growth in multiples will be only slightly higher than that of singles in the coming years. Meanwhile, price increases in both the new and resale home markets are anticipated to be modest, at an average of 2.1 per cent per year from 2015 to 2017.


Prairies Housing Starts (000s)

Singles

Multiples

20-year average

20 15 10 5 0 2010

11

12

13f

14f

15f

16f

17f


H

ousing markets in Manitoba and Saskatchewan continue to flourish, thanks to decent economic growth, ongoing job gains, and robust population advances. Expected interest rate hikes next year are forecast to cool these markets only slightly. Housing demand is predicted to remain solid in both 2013 and 2014 and over the following few years. Although last year’s construction spike is unsustainable, housing starts are expected to stay high, even by recent standards, over the next few years. Price increases for both new and existing homes are also predicted to cool, but only a small slowing is expected.


New

Resale

8 6 4 2 0 2010

11

12

13f

14f

15f

16f

17f


Economic Outlook Healthy GDP growth continues in the Prairie provinces of Manitoba and Saskatchewan, although it throttled back to the mid-2 per cent range in 2012 from over 3 per cent in 2010 and 2011. Another 2.5 per cent GDP rise is on tap for this year, but increases will ultimately cool gradually to 1.6 per cent in 2017. Employment is also forecast to keep rising, although gains will slow from 2.2 per cent in 2013 to 1.1 per cent by 2017. This will cut the unemployment rate from 5.1 per cent in 2012 to 4.7 per cent this year and to 4.5 per cent by 2017.

Economic growth in Manitoba will be modest this year as a result of weakness in the metal mining sector and subpar advances among services-producing industries. There will still be decent gains in the manufacturing, construction, and agriculture sectors. In Saskatchewan, strong gains in mineral fuels production, as well as construction and manufacturing, will keep the goods-producing sector growing at a robust pace. But weakness in potash production due to low potash prices slightly clouds the outlook.



Housing Outlook Robust economic growth has attracted substantial in-migration to Manitoba and Saskatchewan and has spurred healthy housing demand. Not so long ago, these

provinces were losing people. Their combined population actually fell between 1999 and 2002. Now, the number of residents in the two provinces combined has risen at least 1 per cent in each of the past five years, including a record 1.6 per cent gain in 2012. Major

Prairies: Economic Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

100,432 3.6

103,862 3.4

106,366 2.4

109,063 2.5

111,582 2.3

114,785 2.9

116,933 1.9

118,763 1.6

1,144 1.4

1,150 0.5

1,167 1.5

1,192 2.2

1,212 1.6

1,234 1.8

1,251 1.4

1,265 1.1

5.3

5.2

5.1

4.7

4.6

4.6

4.5

4.5

34,931 1.8

37,015 6.0

38,399 3.7

39,571 3.1

40,617 2.6

41,693 2.6

42,689 2.4

43,619 2.2

2,276 1.4

2,306 1.3

2,342 1.6

2,378 1.5

2,417 1.7

2,457 1.6

2,496 1.6

2,533 1.5


31,365 4.8

33,247 6.0

34,766 4.6

35,404 1.8

36,901 4.2

38,231 3.6

39,428 3.1

40,521 2.8


1.1

2.9

1.6

2.3

2.4

2.2

2.1

2.1



Prairies: Housing Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

11,795 46.7

13,114 11.2

17,210 31.2

13,870 –19.4

14,477 4.4

15,269 5.5

15,113 –1.0

14,910 –1.3

Singles

7,806 33.0

7,983 2.3

9,340 17.0

7,853 –15.9

8,387 6.8

8,831 5.3

8,771 –0.7

8,352 –4.8

Multiples

3,989 83.9

5,131 28.6

7,870 53.4

6,018 –23.5

6,090 1.2

6,437 5.7

6,343 –1.5

6,558 3.4

10,368 3.7

12,077 16.5

12,869 6.6

14,715 14.3

13,513 –8.2

14,255 5.5

14,314 0.4

13,960 –2.5

Singles

7,814 20.4

7,701 –1.4

7,525 –2.3

8,598 14.3

7,783 –9.5

8,197 5.3

8,162 –0.4

7,779 –4.7

Multiples

2,555 –27.2

4,376 71.3

5,344 22.1

6,117 14.5

5,730 –6.3

6,058 5.7

6,152 1.6

6,182 0.5


371,949 3.9

384,971 3.5

397,470 3.2

410,659 3.3

423,780 3.2

436,554 3.0

449,272 2.9

461,456 2.7


230,859 7.0

246,798 6.9

260,308 5.5

274,070 5.3

286,990 4.7

299,617 4.4

312,501 4.3

325,001 4.0

Housing starts

Housing completions




centres, particularly Saskatoon and Regina, are experiencing even faster growth. By 2017, the population of Manitoba and Saskatchewan combined is forecast to be over 2.5 million, up nearly 200,000 people from 2012. This population growth has electrified residential construction activity. Nonetheless, last year’s combined volume of 17,210 housing starts, more than twice the 25-year average, was unsustainable and will not be replicated during our forecast horizon. While both single-detached and multi-family starts have risen in recent years, increases in multi-family starts have been relatively faster. Still, because new home prices are relatively modest on the Prairies and incomes have risen strongly, single-family homes continue to dominate the market. Over the past five years, single homes have made up a higher proportion of starts in the Prairies than in any other region. This prevalence of singlefamily homes is forecast to continue, but ease. Indeed, housing starts in the Prairie provinces of Manitoba and Saskatchewan pulled back to an annualized pace near 14,200 units during the first half of 2013. We think this pace will generally be sustained through year-end, resulting in a 19 per cent drop in

housing starts to roughly 13,900 units. Single-detached and multi-family construction should experience similar declines. A small uptick to nearly 14,500 starts is on tap for 2014, and then volumes hovering near 15,000 units between 2015 and 2017. This level of construction may be slightly below demographic requirements, so there could be upward surprises in the coming years. Strong housing demand has generated brisk house price increases. The average price of an existing home rose 5.5 per cent last year and is expected to advance a similar 5.3 per cent in 2013. Despite healthy sales advances, resale markets in both Regina and Saskatoon have slipped into buyers’ positions because of surging listings. Winnipeg remains balanced. Accordingly, we expect the average resale price in Manitoba and Saskatchewan combined to rise a slower 4.7 per cent in 2014. Growth will continue easing, but stay healthy at just above 4 per cent per year over the medium term. The average price for a new home has risen between 3 and 4 per cent annually over the past three years and is expected to advance similarly in both 2013 and 2014. Yearly increases near 3 per cent are on tap between 2015 and 2017.



Alberta Housing Starts (000s)

Singles

Multiples

20-year average

40 30 20 10 0 2010

11

12

13f

14f

15f

16f

17f


A

lberta’s strong economy and rapid population advances are fuelling expectations of a robust provincial housing market, despite Calgary’s flooding. Housing starts are up this year and are expected to remain decent in 2014, albeit well below pre-recession levels. New home prices are rising gently, and we expect these increases to stay moderate. There could be modest pent-up new home demand in Alberta thanks to a relatively low ratio of housing starts to population changes. Healthy resale markets in Calgary and Edmonton are supporting strong provincial pricing, and solid gains are forecast to continue through the next few years.

Economic Outlook While the full effect of floods that hit Calgary and southern Alberta in June will stretch out over years, their immediate impact on economic growth will be moderate; real GDP in the province will increase 3.2 per cent in 2013—the fourth consecutive year in which Alberta’s performance will exceed the national average—and a further 3 per cent in 2014. But Alberta faces risks. Uncertainty surrounding key pipeline projects to export Alberta’s oil is one of these, as transportation capacity is stretched in the face of rising oil sands production. A second issue is the expected competition from rising oil production in the United States. Still, energy investment is projected to stay



New

Resale

6 4 2 0 −2 2010

11

12

13f

14f

15f

16f

17f


elevated throughout the forecast, with benefits spread out to many sectors of the Alberta economy. As a result, employment is forecast to rise 2.2 per cent in 2013 and a further 2 per cent in 2014. This will keep the unemployment rate at 4.7 per cent in both 2013 and 2014, well below the national average.

Housing Outlook Alberta’s magnetic economy has boosted provincial population growth to 2.4 per cent in 2012 and an expected 2.9 per cent this year. This is by far the fastest growth among the six provinces and regions covered in this report. While the rate of increase is forecast to slow


in 2014 and subsequently, Alberta’s relative population gains will continue to outpace those elsewhere. In our forecast, Alberta is expected to add nearly 300,000 residents between now and 2017.

Strong population growth remains a driver of demand for Alberta’s new home markets. Housing starts rose in both Edmonton and, astonishingly, even in floodstricken Calgary during the second quarter of this year. Provincial starts averaged over 36,000 units at

Alberta: Economic Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

252,884 4.3

266,389 5.3

276,908 3.9

285,644 3.2

294,226 3.0

301,906 2.6

309,806 2.6

318,405 2.8

2,018 –0.4

2,095 3.8

2,149 2.6

2,196 2.2

2,240 2.0

2,288 2.1

2,323 1.6

2,353 1.3

6.5

5.5

4.6

4.7

4.7

4.3

4.0

3.9

46,069 1.5

49,046 6.5

51,768 5.6

53,516 3.4

54,852 2.5

56,740 3.4

58,409 2.9

60,013 2.7

3,716 1.5

3,769 1.4

3,860 2.4

3,973 2.9

4,051 2.0

4,119 1.7

4,187 1.7

4,254 1.6


59,910 6.0

64,006 6.8

68,452 6.9

73,057 6.7

76,462 4.7

80,123 4.8

83,382 4.1

86,439 3.7


1.0

2.4

1.1

1.8

2.2

2.1

2.1

2.1



Alberta: Housing Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

27,088 33.5

25,704 –5.1

33,396 29.9

34,823 4.3

34,698 –0.4

32,957 –5.0

30,847 –6.4

30,228 –2.0

17,851 24.4

15,193 –14.9

17,493 15.1

18,044 3.2

17,618 –2.4

16,544 –6.1

15,458 –6.6

14,595 –5.6

9,237 55.1

10,511 13.8

15,903 51.3

16,779 5.5

17,079 1.8

16,413 –3.9

15,389 –6.2

15,633 1.6

29,447 6.6

24,275 –17.6

26,446 8.9

31,811 20.3

31,701 –0.3

30,859 –2.7

29,227 –5.3

27,974 –4.3

Singles

18,096 29.7

15,281 –15.6

15,588 2.0

17,348 11.3

17,147 –1.2

16,397 –4.4

15,374 –6.2

14,397 –6.4

Multiples

11,351 –17.0

8,994 –20.8

10,858 20.7

14,463 33.2

14,554 0.6

14,462 –0.6

13,853 –4.2

13,577 –2.0


432,312 0.7

431,184 –0.3

435,951 1.1

447,813 2.7

462,468 3.3

473,976 2.5

484,151 2.1

494,343 2.1


350,841 3.0

352,653 0.5

361,969 2.6

378,376 4.5

395,376 4.5

413,546 4.6

432,465 4.6

448,870 3.8

Housing starts Singles Multiples Housing completions




an annual rate during the first half of 2013, the highest two-quarter average since 2008. This represents a remarkable increase from volumes that sank as low as annualized 21,000 units in the first quarter of 2011. Both single-detached units and multi-family starts rose. Singles made up over half of all Alberta’s housing starts in the first half of 2013, a distinction shared only with Manitoba and Saskatchewan among the regions in this report. Both areas enjoy high incomes and relatively few land restrictions, important for single-detached production. Accordingly, we expect Alberta’s housing starts to end 2013 up 4.3 per cent near 34,800 units. This would be the second straight annual gain, but modest compared with the 30 per cent jump recorded in 2012. Growth in single-detached starts is forecast to cool slightly, but still end 2013 up 3.2 per cent, while multiple starts are forecast to rise 5.5 per cent. Next year, starts are forecast to hover near this level, clocking in at 34,700 units, but then gradually ease to 30,200 units by 2017. These volumes remain strong by historical standards: starts


averaged 26,300 units per year between 1988 and 2012. Demographic demand easily supports these anticipated volumes, as population growth is expected to remain healthy. Moreover, there is no sign of overbuilding in Alberta, as the ratio of housing starts to absolute population changes is expected to trail its 25-year average this year and in 2014. Healthy resale markets in both Calgary and Edmonton are underpinning solid provincial price growth. Alberta’s average existing house price rose 2.6 per cent in 2012 and is expected to climb 4.5 per cent both this year and in 2014. These would be the fastest gains since the market corrected in 2009, but nowhere near boom-era advances. The medium-term outlook includes brisk increases near or above 4 per cent. By 2017, this forecast implies an average Alberta resale price of nearly $449,000. New home price growth has been slower; this year’s 2.7 per cent growth follows a 1.1 per cent ascent in 2013. For 2014, we expect a 3.3 per cent gain, followed by annual increases between 2 and 2.5 per cent.


British Columbia Housing Starts (000s)

Singles

Multiples

20-year average

40 30 20 10 0 2010

11

12

13f

14f

15f

16f

17f


A

n improving economy and emergence of balanced market conditions in Vancouver and Victoria bode well for British Columbia’s overall housing market, although the strength of offshore demand remains a wild card. Easing population growth and evidence of modest overbuilding slightly cloud the housing market outlook. All in all, housing markets are expected to post only small gains over the coming years. Resale prices are expected to end 2013 little changed and advance modestly thereafter. Housing starts are forecast to rise gently in the medium term, following a dip this year, but remain below peak levels until 2017. Multiple units dominate provincial construction because of their prevalence in Vancouver.

Economic Outlook While British Columbia’s economy has suffered from weak domestic demand and a soft job market, sluggishness should dissipate by the end of the year. Real GDP is expected to advance by 1.5 per cent this year and by a healthy 3 per cent next year. Positive underpinnings include stronger growth in the primary sector, construction, and manufacturing. Following modest growth this year, the province’s forestry industry is forecast to enjoy double-digit gains in 2014 as a rebounding U.S. housing market demands more lumber. The province’s manufacturing sector is


New

Resale

15 10 5 0 −5 −10 2010

11

12

13f

14f

15f

16f

17f


struggling this year, but 2014 looks better thanks to an improving U.S. economy and the start of work on the federal shipbuilding program. Strength in metal mining and in unconventional gas production and drilling will boost the mining industry in both 2013 and 2014. Next year’s output growth acceleration among B.C. goods industries is forecast to lift employment 1.7 per cent in 2014, improving on this year’s 0.3 per cent advance. This will cut the unemployment rate to 6.2 per cent in 2014. A stronger employment picture should improve prospects for B.C. services-producing industries.



Housing Outlook

China, an important source of housing investment in B.C., is also curbing enthusiasm. Still, the market for existing homes in 2014 will benefit from balanced market conditions in the province’s three largest centres, Vancouver, Victoria, and Abbotsford. The new home

A firmer economy in 2014 should boost provincial housing prospects, although rising interest rates will temper gains. A modestly softer economic outlook for

British Columbia: Economic Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

183,658 3.0

188,475 2.6

191,749 1.7

194,568 1.5

200,473 3.0

207,033 3.3

213,715 3.2

219,256 2.6

2,257 1.8

2,275 0.8

2,313 1.6

2,320 0.3

2,360 1.7

2,409 2.1

2,453 1.8

2,482 1.2

7.6

7.5

6.8

6.5

6.2

5.7

5.3

5.2

35,155 0.9

36,574 4.0

37,742 3.2

38,704 2.5

39,810 2.9

41,113 3.3

42,358 3.0

43,478 2.6

4,523 1.6

4,572 1.1

4,618 1.0

4,657 0.9

4,712 1.2

4,770 1.2

4,830 1.3

4,891 1.3


58,549 5.3

60,406 3.2

61,565 1.9

62,170 1.0

64,477 3.7

67,203 4.2

69,821 3.9

71,995 3.1


1.4

2.3

1.1

0.2

1.9

2.2

2.0

2.1



British Columbia: Housing Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

26,479 64.7

26,400 –0.3

27,465 4.0

25,257 –8.0

27,819 10.1

31,005 11.5

31,871 2.8

31,511 –1.1

Singles

11,462 45.2

8,867 –22.6

8,333 –6.0

7,973 –4.3

8,263 3.6

9,107 10.2

9,344 2.6

8,902 –4.7

Multiples

15,017 83.5

17,533 16.8

19,132 9.1

17,284 –9.7

19,556 13.1

21,898 12.0

22,527 2.9

22,609 0.4

27,699 –6.2

22,549 –18.6

26,380 17.0

25,564 –3.1

25,425 –0.5

27,677 8.9

29,632 7.1

29,587 –0.2

Singles

10,741 20.8

9,279 –13.6

8,787 –5.3

8,463 –3.7

8,013 –5.3

8,564 6.9

9,128 6.6

8,919 –2.3

Multiples

16,958 –17.8

13,270 –21.7

17,593 32.6

17,101 –2.8

17,412 1.8

19,113 9.8

20,504 7.3

20,668 0.8


640,351 2.8

637,566 –0.4

634,715 –0.4

634,714 0.0

644,990 1.6

656,562 1.8

664,691 1.2

672,293 1.1


505,230 9.8

556,713 10.2

512,974 –7.9

516,753 0.7

529,046 2.4

541,546 2.4

550,128 1.6

558,849 1.6

Housing starts

Housing completions




market will remain burdened by high inventories of unsold units in both Vancouver and Victoria, but these are forecast to ease in 2014. Provincial demographics provide an uneven background for new construction. On one hand, population growth is forecast to bounce back above 1 per cent in 2014, following a 2013 dip to 0.9 per cent, and then accelerate gently. But expected population advances will remain below their 25-year average throughout our forecast. Moreover, there are slight signs of overbuilding. Following big recessionary dips in 2009 and 2010 in the provincial ratio of housing starts to population growth, the ratio slightly surpassed its long-term average in 2012 and is expected to do so again in both 2013 and 2014. B.C. housing starts are therefore forecast to fall by 8 per cent in 2013, the first significant easing since the province recovered from recession in 2009. The decline puts volumes below their long-term average and nowhere near their 2007 peak. Single-detached starts are on track to drop for a third straight year in 2013 and, this year, will be accompanied by falling multifamily construction. For 2014, we expect starts to rise

10 per cent to 27,800 units, lifted by gains among both single and multiple units. Starts are forecast to rise in both 2015 and 2016. Total volumes will remain well below pre-recession peak levels; we expect only about 31,900 units by 2016. Multiple starts will continue to dominate, accounting for 70 per cent of all provincial starts between 2013 and 2017, by far the largest proportion among the six regions covered in this report. Boosted by a recovery in the Vancouver market, British Columbia’s average resale price has risen for three straight quarters, moving above its year-earlier level in the second quarter of 2013. This was the first yearover-year advance since late 2011. Gains will remain moderate and produce only a 0.7 per cent annual increase in 2013. Stronger 2.4 per cent price hikes are on tap for both 2014 and 2015, and then twin 1.6 per cent increases are anticipated for 2016 and 2017. These upticks will leave the province’s average resale price near $559,000 in 2017, slightly above its 2011 peak. New home prices are expected to be flat in 2013, following tiny declines in both 2011 and 2012, but advance 1.6 per cent in 2014. We expect small annual increases each year thereafter.



Québec City Housing Starts (000s)

Singles

20-year average

Multiples

8 6 4 2 0 2010

11

12

13f

14f

15f

16f

17f


R

eal GDP growth in Québec City is forecast to come in at 1.3 per cent in 2013, up only slightly from 2012, but then accelerate to 2.2 per cent for 2014. In the housing sector, both the resale and new home markets are expected to contract in 2013, with unit sales of existing homes and housing starts forecast to decline this year. A stronger economy in 2014 will help to boost housing demand again, although the new home market will see another year of falling starts as builders will continue to reduce inventories.

Economic Outlook Weakness in the important public sector is hampering Québec City’s economy, largely offsetting the boost provided by the construction of a new hockey arena suitable for an NHL team. Local real gross domestic product is forecast to rise 1.3 per cent this year, following a similar 2012 advance. Economic growth is expected to improve to 2.2 per cent in 2014, on par with the annual average during the previous decade. The job market is still feeling the strain this year, with employment forecast to rise less than 1 per cent for the second consecutive year in 2013, although employment growth is forecast to improve to 2 per cent by 2014. Soft employment has capped the participation rate, although it remains near an all-time high. This will limit labour force growth, allowing even the modest


New Housing Price and Months’ Supply (dollars)

Price

Months’ supply

300,000

3.0

250,000

2.5

200,000

2.0

150,000

1.5 1.0

100,000 2010 11

12

13f 14f 15f 16f 17f


employment advance to trim the unemployment rate to a record low of 4.6 per cent this year and keep it there next year as well.

Housing Outlook Existing Housing Market While most other urban centres in Canada and in fact around the globe were suffering from the impact of the global recession, unit sales in Québec City’s resale home market reached a record 7,960 units in 2009. Growth in resale prices had also been robust for several years, with average existing home prices topping $200,000 in 2009 for the first time ever. However, the


city’s resale market was hit the following year, as buyers began to shy away from the resale market, even as the economy strengthened and interest rates fell. Sales tumbled by 11.2 per cent in 2010, closer to 7,000 units. Sellers, meanwhile, now encouraged by higher prices, increased new listings 4.5 per cent, in turn, reducing the sales-to-new-listings ratio to 63 per cent, down from 74 per cent in 2009. But with the market still close to sellers’ territory, resale price growth remained robust in 2010, at 11.3 per cent.

As economic growth improved further, buyers returned to Québec City’s resale market in 2011, increasing unit sales 1.8 per cent. At the same time, sellers were continuing to take advantage of stronger prices; new listings rose by more than 10 per cent, thereby lowering the sales-to-new-listings ratio to 58 per cent, falling below 60 per cent for the first time in 11 years. Growth in resale home prices then moderated to 4.3 per cent, their smallest annual increase since 2002. Demand for existing homes fell once more in 2012, as economic

Affordability

(left, dollars; right, per cent)

MLS Sales-to-New-Listings Ratio and Price Growth

P&I payment

(per cent)

Sales-to-new-listings ratio

Price growth

2,000

25

1,500

20 15

12

80

9

70

1,000

6

60

500

3

50

0 11

12

13f

14f

15f

16f

10 2010 11

40 2010

P&I/income

12

13f

14f

15f

16f

17f

f = forecast Note: Principle and interest payments assume average resale price, 10 per cent down payment, 25-year amoritization, and 5-year fixed mortgage rate. Sources: The Conference Board of Canada; Canadian Real Estate Association.

17f

f = forecast; MLS = Multiple Listing Service Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards.

Québec City: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

31,617 3.0

32,258 2.0

32,661 1.2

33,085 1.3

33,811 2.2

34,559 2.2

35,208 1.9

35,890 1.9

409 3.7

419 2.4

421 0.5

424 0.8

433 2.0

440 1.7

446 1.3

451 1.1

4.9

5.4

5.1

4.6

4.6

4.5

4.4

4.4

37,440 1.4

37,745 0.8

39,223 3.9

40,216 2.5

41,347 2.8

42,510 2.8

43,654 2.7

44,857 2.8

753 1.0

761 1.0

770 1.1

777 1.0

784 0.9

791 0.9

798 0.9

805 0.9


12,162 5.9

12,160 0.0

12,413 2.1

12,685 2.2

13,064 3.0

13,484 3.2

13,885 3.0

14,304 3.0


1.4

3.0

2.2

1.3

2.0

2.2

2.0

1.9

Personal income per capita ($) Population (000s)

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; Statistics Canada.



With sales still below the long-term sales-to-population ratio, there is room for additional growth in the resale housing market through the medium term. Sales are expected to increase an average of 3.1 per cent per year from 2015 to 2017, and resale prices will rise by 2.6 per cent on an average annual basis.

growth slowed, and the region was hit by higher taxes and tighter mortgage rules. Unit sales declined 0.2 per cent last year. Growth in new listings was more modest as well, at 2.1 per cent, while resale prices advanced another 5 per cent. Sales of existing units declined yet again in the first quarter of this year, in line with the persistent weakness in the economy. And while they posted a small improvement through the middle of 2013, they are expected to decrease in the fourth quarter, limited by modest employment and income growth. Overall, unit sales are forecast to contract 9.9 per cent this year, down to 6,500 units. This will be the first time in nine years that unit sales in Québec City’s resale market have fallen below 7,000 units. The sales-to-new-listings ratio is anticipated to slip to 50 per cent for 2013. This positions the market in “balanced” territory, keeping growth in resale prices at 4.5 per cent.

New Housing Market Strong absorptions kept builders active in Québec City’s new home market through the 2009 recession and into 2010. Starts rose nearly 25 per cent in 2010 alone, reaching a six-year high of 6,700 units. Both single-family and multiple-unit starts contributed to this increase, although the growth in multiple starts was much larger than the growth in single starts. However, even with this significant increase in total housing starts in 2010, demand outstripped supply, as months’ supply slipped to 1.7 months. Despite the tighter market, growth in new home prices eased, falling to 3.2 per cent for 2010, down from 7 per cent in 2009.

Next year, stronger economic growth is expected to boost demand in the resale market, although the total gain for the year will be modest given the forecast weakness in the fourth quarter of 2013. In total, unit sales are expected to increase 2.2 per cent in 2014. We anticipate sellers will take a breather, however, leading to a small decline in new listings. While the resulting sales-to-new-listings ratio will increase to 52 per cent, the market will remain balanced. As a result, resale home price growth is expected to fall to 2.6 per cent.

A slowing economy quickly reduced demand in Québec City’s new home market in 2011. Absorptions fell by 14.4 per cent, causing months’ supply to jump to 2.7 months. Builders pulled back from the market, lowering starts by 16.6 per cent, with the decrease split between singles and multiples. Growth in new home prices decelerated further as well, easing to a 12-year low of 1.4 per cent.

Québec City: Resale Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

Unit sales

7,073 –11.2

7,200 1.8

7,186 –0.2

6,476 –9.9

6,618 2.2

6,890 4.1

7,089 2.9

7,254 2.3

Dollar volume sales ($ millions)

1,655 –1.1

1,757 6.1

1,841 4.8

1,734 –5.8

1,818 4.8

1,940 6.7

2,048 5.5

2,149 5.0

11,168 4.5

12,337 10.5

12,601 2.1

12,891 2.3

12,779 –0.9

13,002 1.8

13,284 2.2

13,711 3.2

New listings Sales-to-new-listings ratio (%) Average price of a resale home ($)

63

58

57

50

52

53

53

53

233,994 11.3

243,973 4.3

256,196 5.0

267,821 4.5

274,743 2.6

281,566 2.5

288,841 2.6

296,311 2.6

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards.



Québec City: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

6,674 24.7

5,564 –16.6

6,262 12.6

4,386 –30.0

4,134 –5.8

4,387 6.1

4,442 1.2

4,368 –1.7

Singles

1,770 1.6

1,346 –23.9

1,275 –5.3

968 –24.1

1,244 28.6

1,395 12.1

1,415 1.4

1,337 –5.5

Multiples

4,904 35.8

4,217 –14.0

4,987 18.3

3,418 –31.5

2,889 –15.5

2,992 3.6

3,027 1.2

3,032 0.1

Under construction

3,158 27.0

3,083 –2.4

3,393 10.0

3,665 8.0

3,326 –9.3

3,484 4.8

3,603 3.4

3,682 2.2

Housing completions

6,419 25.4

5,667 –11.7

5,518 –2.6

4,881 –11.5

4,007 –17.9

4,240 5.8

4,340 2.4

4,302 –0.9

Singles

1,959 11.5

1,354 –30.9

1,235 –8.8

1,153 –6.6

1,176 2.0

1,383 17.6

1,410 2.0

1,354 –3.9

Multiples

4,460 32.6

4,313 –3.3

4,283 –0.7

3,728 –13.0

2,831 –24.1

2,857 0.9

2,930 2.6

2,948 0.6

863 0.9

1,219 41.2

1,298 6.5

1,172 –9.7

713 –39.1

622 –12.8

634 2.0

660 4.1

6,267 22.8

5,362 –14.4

5,349 –0.2

5,338 –0.2

4,347 –18.6

4,258 –2.1

4,315 1.3

4,279 –0.8

Housing starts

Newly completed and unabsorbed Absorptions Months’ supply Average price of a new home ($)

1.7

2.7

2.9

2.6

2.0

1.8

1.8

1.9

222,372 3.2

225,576 1.4

232,176 2.9

235,387 1.4

239,898 1.9

245,416 2.3

250,815 2.2

256,082 2.1

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; CMHC Housing Time Series Database.

Though economic growth continued to moderate last year, builders increased housing starts by 12.6 per cent in 2012, pushing months’ supply up to 2.9 months. Starts were being fuelled by surging construction of multiples as single starts eased by 5.3 per cent. With this growth, the multiples sector appeared to be slightly oversupplied by demographic standards last year, although sagging starts of single-family units kept the overall ratio of housing starts to population growth slightly below historical norms. For 2013, with the economy still muted, total housing starts are forecast to decline 30 per cent. Both singles and multiples are expected to contract this year. Multiple starts increased in the first quarter of 2013, but fell in the second quarter, and are expected to decline

through the rest of the year as well, as builders bring them more in line with demographics. Meanwhile, single starts remained on their downward trend in the first quarter of this year, but have since picked up. With months’ supply forecast at 2.6 months for 2013, growth in new home prices is expected to continue to be modest this year, at 1.4 per cent. Builders are expected to reduce multiple starts again in 2014, down an additional 15.5 per cent, to lower months’ supply further. At the same time, single starts will begin to increase next year. Accordingly, total housing starts are forecast to decline by 5.8 per cent. The tighter market (months’ supply is forecast to be 2 months for 2014) will lead to a slightly faster 1.9 per cent increase in new home prices next year.



Montréal Housing Starts (000s)

Singles

20-year average

Multiples

25 20 15 10 5 0 2010

11

12

13f

14f

15f

16f

17f


M

ontréal’s real GDP is expected to rise 1.3 per cent in 2013 and 2.1 per cent in 2014. In line with the modest economic growth, both the resale and new housing markets will weaken this year, with declines forecast for unit sales and housing starts. But both markets will show renewed signs of life in 2014 and onward thanks to an improved economy and stable population growth.


Price

Months’ supply

400,000

3.0

350,000

2.5

300,000

2.0

250,000

1.5 1.0

200,000 2010 11

Economic Outlook Montréal’s economy is expected to remain weak by national standards this year, with forecast real gross domestic product growth of only 1.3 per cent. Our anticipation of 2.1 per cent GDP growth for 2014 will keep the area trailing the nation next year as well. Weakness has been especially pronounced among the goods industries; in fact, their expansion has been slower than that of the services-producing industries for the past 12 years now. But despite soft output growth, the job market has been decent. Employment is on track to rise 2 per cent in 2013, the most since 2010. This will lift the job count for the year 2013 as a whole to over 2 million people for the first time ever, and help to cut the unemployment rate to 8 per cent, down from 8.5 per cent in 2012 and its lowest average level in five years.


12

13f 14f 15f 16f 17f


Housing Outlook Existing Housing Market Following a 7.4 per cent decline in 2008, unit sales in Montréal’s resale housing market increased 5.5 per cent through 2009 and 2010 as the region’s economy recovered from the global recession. Stronger population growth and low interest rates were also bringing buyers back to the market at this time. Sellers were a little slower to react, however. As a result, the sales-tonew-listings ratio rose to an average of 60 per cent (up from 54 per cent in 2008), in turn leading to stronger price growth. Average resale home prices increased 7.8 per cent in 2010, more than double their rate of increase in the preceding two years.


Higher taxes, tighter mortgage rules, and more modest economic growth over the past two years then slowed Montréal’s resale housing market once again. Unit sales slipped 4.6 per cent in 2011 and an additional 0.6 per cent in 2012. Combined with moderate growth in new listings, the sales-to-new-listings ratio fell back to 52 per cent last year. Still, in spite of the balanced market, resale price growth remained elevated through 2011–12, at an average of 4.2 per cent, with prices topping $300,000 for the first time ever.

Persistent weakness in Montréal’s economy continued to hurt the region’s resale housing market in the first quarter of this year. And while sales did pick up in the second quarter, likely, in part, thanks to improving employment numbers, they are still well below yearago levels given the declines in the last half of 2012. Indeed, unit sales of existing homes are forecast to drop a total of 8 per cent in 2013, falling below 40,000 units for the first time since 2006. But a stronger economy is expected to encourage buying again next year, increasing unit sales 2.6 per cent. Meanwhile, thanks to the Affordability



P&I payment

(per cent)


Price growth 9

60

6

55

3

50

0 11

12

13f

14f

15f

16f

2,500

26

2,000

24

1,500

22

1,000

20 2010 11

45 2010

P&I/income

12

13f

14f

15f

16f

17f


17f

f = forecast; MLS = Multiple Listing Service Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards.

Montréal: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

154,388 2.3

157,015 1.7

158,778 1.1

160,851 1.3

164,287 2.1

169,095 2.9

173,431 2.6

177,732 2.5

1,954 2.6

1,952 –0.1

1,979 1.4

2,018 2.0

2,031 0.6

2,066 1.8

2,097 1.5

2,124 1.3

8.6

8.3

8.5

8.0

7.9

7.7

7.5

7.3

34,325 1.3

35,002 2.0

36,250 3.6

37,320 3.0

38,118 2.1

39,348 3.2

40,554 3.1

41,757 3.0

3,869 1.4

3,918 1.3

3,958 1.0

3,996 1.0

4,037 1.0

4,080 1.1

4,123 1.1

4,168 1.1


44,289 6.0

45,218 2.1

45,993 1.7

48,466 5.4

50,126 3.4

52,093 3.9

54,003 3.7

55,925 3.6


1.2

2.8

2.0

1.2

2.0

2.2

2.0

1.9





region—a trend seen in many of Canada’s large urban centres in recent years. Demand for condominiums has risen as the population has started to age but also because people are more and more choosing to live downtown to avoid long commuting times given rising traffic flows. Despite the growth in starts in 2010–11, the demand for new homes was so strong that months’ supply in the new home market declined steadily, falling to 2.1 months for 2011 after hitting a 13-year high of 2.8 months in 2009. As a result, growth in new home prices accelerated slightly, averaging 3 per cent per year, up from 2.4 per cent in 2009.

higher prices, new listings remain on an upward trend and are anticipated to rise 1.1 per cent this year and 3.2 per cent in 2014. This will push the sales-to-newlistings ratio to 47 per cent, its lowest rate in 16 years. With the market getting closer to buyers’ territory, resale price growth is moderating, forecast to grow just 2.1 per cent per year on average over 2013–14. In the medium term, a solid economy and stable population growth of 1 per cent annually are expected to lead to further growth in housing demand in the resale market. Unit sales of existing homes are forecast to increase by an average of 2.1 per cent annually from 2015 to 2017. Accordingly, the sales-to-new-listings ratio is anticipated to rise slightly, nearing 50 per cent by 2017. The balanced market will hold the growth in resale prices to 2.6 per cent on an average annual basis.

With condominium projects wrapping up and economic growth modest, builders pulled back from both the singles and multiples markets last year. Total housing starts dropped by 9.9 per cent. Months’ supply continued to fall though, slipping to 1.9 months—below 2 months for the first time in seven years. Nevertheless, new home prices rose by only 1.4 per cent, their smallest increase since 1998.

New Housing Market Montréal’s new home market also strengthened following the 2009 global recession, thanks to spillover demand from the resale market. In total, builders increased housing starts by 15.3 per cent in 2010 and 2.1 per cent in 2011. Much of this increase was due to the multiple-unit market, as single-detached starts grew in 2010 but then fell again in 2011. Indeed, the multiples market was benefitting, in large part, from a number of new condominium projects across the

Housing starts are poised to fall again in 2013. Single and multiple starts declined substantially in the first quarter of the year. Although both picked up in the second quarter, more weakness is expected going forward, given the slow economy and now rising inventories, especially of apartment condominiums. In total,

Montréal: Resale Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

Unit sales

42,297 1.3

40,359 –4.6

40,114 –0.6

36,927 –7.9

37,900 2.6

39,038 3.0

39,893 2.2

40,374 1.2


12,390 9.2

12,408 0.1

12,766 2.9

11,937 –6.5

12,556 5.2

13,311 6.0

13,932 4.7

14,441 3.7

New listings

72,138 4.0

75,472 4.6

77,097 2.2

77,946 1.1

80,473 3.2

81,854 1.7

82,077 0.3

81,870 –0.3

59

53

52

47

47

48

49

49

292,926 7.8

307,446 5.0

318,244 3.5

323,253 1.6

331,303 2.5

340,986 2.9

349,234 2.4

357,688 2.4

Sales-to-new-listings ratio (%) Average price of a resale home ($)

f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards.



Montréal: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

22,194 15.3

22,652 2.1

20,420 –9.9

14,376 –29.6

15,392 7.1

15,809 2.7

15,933 0.8

15,640 –1.8

5,870 8.2

4,672 –20.4

3,959 –15.3

3,188 –19.5

4,574 43.5

4,651 1.7

4,692 0.9

4,430 –5.6

16,323 18.1

17,979 10.1

16,462 –8.4

11,187 –32.0

10,818 –3.3

11,157 3.1

11,241 0.7

11,210 –0.3

Under construction

14,346 11.7

16,214 13.0

18,567 14.5

17,229 –7.2

16,623 –3.5

17,050 2.6

17,395 2.0

17,574 1.0

Housing completions

19,922 2.2

19,866 –0.3

19,092 –3.9

17,110 –10.4

14,883 –13.0

15,383 3.4

15,663 1.8

15,512 –1.0

6,034 15.7

4,851 –19.6

4,191 –13.6

3,463 –17.4

4,289 23.9

4,724 10.1

4,762 0.8

4,583 –3.7

13,888 –2.7

15,015 8.1

14,901 –0.8

13,647 –8.4

10,594 –22.4

10,660 0.6

10,901 2.3

10,928 0.3

3,965 –15.0

3,390 –14.5

3,062 –9.7

2,911 –4.9

2,566 –11.8

2,524 –1.7

2,580 2.2

2,568 –0.4

21,086 6.9

19,833 –5.9

19,697 –0.7

17,126 –13.1

15,208 –11.2

15,365 1.0

15,588 1.5

15,580 –0.1

Housing starts Singles Multiples

Singles Multiples Newly completed and unabsorbed Absorptions Months’ supply Average price of a new home ($)

2.3

2.1

1.9

2.0

2.0

2.0

2.0

2.0

311,888 3.1

321,021 2.9

325,459 1.4

330,350 1.5

336,949 2.0

344,362 2.2

351,938 2.2

359,329 2.1


housing starts are forecast to decrease 29.6 per cent this year. New home prices are also expected to remain muted, increasing just 1.5 per cent. As economic growth improves next year, steady population increases should bring builders back to the market. Moreover, Montréal does not appear to be overbuilt; the ratio of housing starts to population growth has been

below its 25-year average in each of the past five years. Accordingly, total starts are expected to edge higher in 2014 and in 2015, up by 7.1 per cent and 2.7 per cent, respectively. Lower absorptions this year and next will raise months’ supply to 2 months. New home price growth is expected to continue to be modest, reaching 2 per cent in 2014 and 2.2 per cent in 2015.



Toronto Housing Starts (000s)

Singles

Multiples

20-year average

50 40 30 20 10 0 2010

11

12f

13f

14f

15f

16f

17f


T

oronto’s real GDP is forecast to rise by 1.6 per cent this year, limited by a decline in manufacturing output and a weak services sector. Next year, stronger demand, both at home and south of the border, is expected to help economic growth improve to 2.7 per cent. Although unit sales of existing homes and housing starts are both set to fall in 2013, they are forecast to rise once again next year, albeit at a modest pace, thanks to the improving economy and continued population growth.

Economic Outlook Toronto’s economy is expected to grow by 1.6 per cent in 2013, down from a modest 1.9 per cent increase in 2012. Although the construction sector is forecast to grow at a faster pace this year, thanks to a host of nonresidential projects, many other sectors are expected to post much slower growth or even declines. Indeed, weaker demand for manufactured products in late 2012 is expected to lead to a lower manufacturing output in 2013—the first annual drop for this sector since the 2009 global recession. And despite stronger forecast gains for employment in 2013—2.5 per cent versus 1.6 per cent in 2012—consumers have remained cautious. As a result, wholesale and retail trade output is expected to be flat this year, following a muted 0.4 per



Price

Months’ supply

700,000

0.7

600,000

0.6

500,000

0.5 0.4

400,000 2010 11 12f 13f 14f 15f 16f 17f


cent increase last year. By 2014, with global economic conditions expected to improve, overall economic activity will strengthen, leading consumers to open their purse strings once more. In total, real gross domestic product growth is forecast to reach 2.7 per cent next year.


Housing Outlook Existing Housing Market Unit sales of existing homes in Toronto rose by 18 per cent in 2009, nearly offsetting the decline from the previous year when demand fell as a result of the onset of the global recession in late 2008. Buyers were being enticed not only by an improving economy in 2009 but also by lower interest rates. Sellers were not as keen, however—new listings slipped 16.5 per cent, thereby

raising the sales-to-new-listings ratio to 66 per cent. In turn, growth in resale homes prices began to accelerate, increasing to 4 per cent, up from just 1 per cent the previous year. However, renewed uncertainty in the economy meant buyers pulled back from the resale market again in 2010, lowering unit sales 1.5 per cent. And, while additional new listings helped to push the sales-to-new-listings ratio back down to 57 per cent (in balanced territory), resale home prices increased at an even faster pace, up by 9.4 per cent.

Affordability



P&I payment

(per cent)


Price growth 12

65

8

60

4

55

0 11

12f

13f

14f

15f

16f

40 35 30 25 20 15 2010

50 2010

P&I/income

4,000 3,500 3,000 2,500 2,000 1,500 11

12f

13f

14f

15f

16f

17f


17f

f = forecast; MLS = Multiple Listing Service Sources: The Conference Board of Canada; Canadian Real Estate Association.

Toronto: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

273,040 3.9

278,911 2.1

284,318 1.9

288,915 1.6

296,856 2.7

306,646 3.3

315,415 2.9

322,926 2.4

2,919 2.3

2,960 1.4

3,007 1.6

3,084 2.5

3,134 1.6

3,220 2.8

3,279 1.8

3,326 1.4

9.1

8.4

8.5

8.2

8.0

7.1

6.7

6.5

38,307 2.2

38,740 1.1

40,055 3.4

41,252 3.0

42,274 2.5

43,607 3.2

44,675 2.5

45,653 2.2

5,741 1.8

5,841 1.7

5,941 1.7

6,042 1.7

6,147 1.7

6,261 1.9

6,379 1.9

6,500 1.9


63,410 6.5

67,030 5.7

67,669 1.0

68,348 1.0

70,794 3.6

73,953 4.5

77,007 4.1

79,761 3.6


2.5

3.0

1.5

1.4

2.0

2.1

2.0

2.0





fall 3.6 per cent for the year 2013 as a whole. With interest rates anticipated to slowly move up in the coming months, sales growth is expected to be modest but positive: unit sales of existing homes are forecast to grow by 0.8 per cent next year. A stable economy and solid population growth should keep unit sales on the upswing, growing by 3.7 per cent on an average annual basis from 2015 to 2017.

Continued low interest rates led buyers to return to Toronto’s resale market in 2011, as sales increased by 4.3 per cent, to top 80,000 units for only the second time on record. Accordingly, the sales-to-new-listings ratio jumped to 62 per cent, keeping resale price growth elevated, at 8 per cent for the year. Resale prices grew another 7.5 per cent in 2012 as well, topping $500,000—good news for sellers, who, in turn, increased new listings by 8.7 per cent last year.

Meanwhile, sellers have been taking a breather lately, and so new listings are expected to fall by 1.4 per cent per year on average over this year and next. Better economic conditions will bring sellers back to the market by 2015, increasing new listings by an average of 3.1 per cent over 2015–17. This will be enough to keep the resale housing market in balanced territory. As a result, growth in existing home prices will slow to 2.4 per cent this year, and then hover around the 2 per cent mark from 2014 onward.

Notwithstanding the large increases in prices, existing homes remain relatively affordable in Toronto, largely thanks to low interest rates. Indeed, the relationship of carrying costs to incomes and rents is still well within historical norms. Specifically, principle and interest payments on the average Toronto Multiple Listing Service house consumed 26 per cent of average household incomes in 2012—the same percentage as in 1991–92. This relative affordability, in the face of soft economic growth and tighter mortgage rules, kept existing home sales relatively high in 2012. True, they declined by 5 per cent, but from an almost record high in 2011.

New Housing Market Builders in Toronto’s new home market increased housing starts nearly 70 per cent from 2010 to 2012, to reach a record 48,400 units last year. Through 2010 and 2011, the growth in Toronto’s housing starts was due to increases in both single-detached and multipleunit starts. While multiple starts rose once again in 2012, thanks to the continued development of a number of large high-rise condominium developments across the city, tighter mortgage rules lowered single starts

Another round of interest rate cuts early in 2013 led to a rebound in Toronto’s resale housing market through the first half of this year, in spite of a still modest economy. Unit sales rose by an annual average of 4.1 per cent in each quarter. Still, given the slowdown in the fourth quarter of last year, unit sales are expected to

Toronto: Resale Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

Unit sales

78,707 –1.5

82,084 4.3

77,960 –5.0

75,182 –3.6

75,766 0.8

79,514 4.9

82,313 3.5

84,378 2.5


35,273 7.7

39,744 12.7

40,591 2.1

40,075 –1.3

41,176 2.7

44,109 7.1

46,564 5.6

48,677 4.5

137,939 14.2

132,217 –4.1

143,784 8.7

141,872 –1.3

139,867 –1.4

144,925 3.6

149,298 3.0

152,949 2.4

57

62

54

53

54

55

55

55

448,158 9.4

484,187 8.0

520,663 7.5

533,035 2.4

543,456 2.0

554,737 2.1

565,693 2.0

576,886 2.0


f = forecast Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association.



Toronto: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

29,413 12.5

39,745 35.1

48,368 21.7

34,133 –29.4

38,717 13.4

42,558 9.9

45,643 7.2

46,154 1.1

Singles

10,236 29.3

11,187 9.3

10,702 –4.3

10,181 –4.9

10,997 8.0

12,277 11.6

12,802 4.3

12,308 –3.9

Multiples

19,177 5.2

28,557 48.9

37,666 31.9

23,951 –36.4

27,721 15.7

30,281 9.2

32,840 8.5

33,846 3.1

Under construction

47,581 –0.8

49,424 3.9

60,964 23.3

66,156 8.5

65,290 –1.3

65,229 –0.1

65,316 0.1

65,381 0.1

Housing completions

31,393 10.7

33,831 7.8

31,907 –5.7

36,403 14.1

38,748 6.4

42,580 9.9

45,638 7.2

46,004 0.8

9,804 10.8

9,106 –7.1

11,036 21.2

10,109 –8.4

10,814 7.0

12,397 14.6

12,769 3.0

12,153 –4.8

21,589 10.7

24,725 14.5

20,871 –15.6

26,293 26.0

27,934 6.2

30,183 8.1

32,869 8.9

33,851 3.0

1,698 46.2

1,382 –18.6

1,628 17.8

1,356 –16.7

1,469 8.3

1,651 12.4

1,804 9.3

1,859 3.0

30,668 8.0

34,222 11.6

31,588 –7.7

36,807 16.5

38,575 4.8

42,420 10.0

45,484 7.2

45,998 1.1

Housing starts


0.7

0.5

0.6

0.4

0.5

0.5

0.5

0.5

550,269 2.6

575,904 4.7

605,473 5.1

620,137 2.4

631,169 1.8

645,055 2.2

657,956 2.0

671,115 2.0


by 4.3 per cent. Generally, over the past three years, new home demand has been driven by increased foreign investment, the recovering economy, low interest rates, and healthy population growth. In addition, demand for affordable dwellings and for downtown accommodation was further boosting the proportion of multi-family starts. Initially, the increase in demand kept up with the increases in supply. Absorptions rose nearly 20 per cent over 2010–11. But buyers backed away from the new home market last year, lowering absorptions by 7.7 per cent, and causing months’ supply to begin to creep up. At the same time, a number of big condominium projects were being completed. Accordingly, builders reduced multiple starts considerably over the first half of 2013. All told, total housing starts are expected to slip 29.4 per cent this year, down to 34,100 units. But the downturn will be short-lived. Although the ratio

of housing starts to population growth significantly exceeded its historical average last year, this followed several years of below-average readings. As a result, a healthier economy and continued solid population growth are expected to increase housing demand again by next year. In turn, builders are expected to return to the market, increasing total starts by 13.4 per cent in 2014 and by an annual average of 6.1 per cent from 2015 to 2017. By 2017, starts are forecast to be 46,200 units. This will keep months’ supply just under 0.5 months, a decent reading for the Toronto market. Growth in new home prices also picked up speed in recent years. New home prices rose by 4.1 per cent on an average annual basis from 2010 to 2012, topping $600,000 last year. Price growth in the new home market is forecast to slow to 2.4 per cent in 2013 and 1.8 per cent in 2014, in line with the softer demand, and then average 2.1 per cent per year over 2015–17.



Ottawa–Gatineau Housing Starts (000s)

Singles

20-year average

Multiples

10 8 6 4 2 0 2010

11

12f

13f

14f

15f

16f

17f


O

ttawa–Gatineau’s economy is on track to expand by a modest 0.8 per cent in 2013, while employment is poised to tumble by 1.8 per cent, the biggest decline in 18 years. Fortunately, things are expected to improve next year, with both real GDP and job growth forecast to reach 1.6 per cent. However, the resale and new housing markets are expected to continue to weaken this year and next, with declines forecast for unit sales of existing homes and housing starts.

Economic Outlook Ottawa–Gatineau’s economy continues to feel the pinch of federal government cutbacks. Real GDP expanded by only 0.8 per cent last year and is projected to grow at the same lacklustre rate this year. The public administration sector, which accounts for about 30 per cent of overall economic activity, is headed for its biggest drop in employment on record this year. In fact, we expect that about 12,800 public administration jobs will be eliminated in Ottawa–Gatineau over 2013 and 2014, with the vast majority of these cuts coming in 2013. Fortunately, public administration employment is expected to start stabilizing in 2014, allowing overall economic growth to improve to 1.6 per cent next year. The economy will also continue to benefit from robust non-residential construction activity, thanks to several major ongoing projects, including the largest



Price

Months’ supply 1.7 1.6 1.5 1.4 1.3 1.2 1.1

500,000 450,000 400,000 350,000 300,000 250,000 200,000 2010 11 12f 13f 14f 15f 16f 17f


construction project in Ottawa’s history—the $2.1-billion light-rail transit (LRT) project—and the $291-million redevelopment of Lansdowne Park.

Housing Outlook Existing Housing Market Demand in Ottawa–Gatineau’s resale home market has been decreasing for the past three years. After reaching a near-record 19,300 units in 2009, unit sales of existing homes declined an annual average of 1.7 per cent from 2010 to 2012. Although interest rates were very low during this time, buyers were discouraged, in part, by robust price growth. Indeed, existing home prices rose


by 7.1 per cent per year on average over the 10-year period from 2000 to 2010, topping $300,000 in 2009. Through 2011 and 2012, fiscal restraint in the public sector, and the resulting layoffs, weakened Ottawa– Gatineau’s economy, further hampering demand in the resale market. At the same time, sellers were enticed by this strong growth in resale prices. New listings increased by an annual average of 6.4 per cent from 2010 to 2012. As a result, the sales-to-new-listings ratio fell from 65 per cent in 2009 to 51 per cent last year. In turn, resale price growth finally began to slow, slipping to 5.9 per

cent in 2011 and 2.5 per cent in 2012. This was the smallest increase in resale home prices in the Ottawa– Gatineau region in 14 years. Unit sales of existing homes fell again in the first quarter of this year, and then increased in the second quarter. However, given the persistent weakness in the economy in 2013, reduced employment, the introduction of tighter mortgage rules last year, and rising interest rates, demand is expected to remain muted through the last half of this year and into next year Affordability



P&I payment

(per cent)


Price growth

P&I/income

2,500

23

2,000

21

8

65

1,500

19

6

60

1,000

17

4

55

500

2

50

0

45 2010

11

12f

13f

14f

15f

16f

15 2010

11

12f

13f

14f

15f

16f

17f


17f


Ottawa–Gatineau: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

61,240 3.0

62,038 1.3

62,532 0.8

63,015 0.8

64,025 1.6

65,499 2.3

67,010 2.3

68,487 2.2

687 2.4

694 1.0

712 2.5

699 –1.8

710 1.6

723 1.9

734 1.5

744 1.3

6.6

6.0

6.3

6.4

6.1

5.9

5.6

5.4

42,481 1.9

43,787 3.1

45,137 3.1

44,816 –0.7

46,226 3.1

47,787 3.4

49,213 3.0

50,579 2.8

1,239 1.6

1,256 1.4

1,273 1.4

1,286 1.0

1,294 0.7

1,304 0.7

1,316 0.9

1,330 1.1


16,199 5.0

16,911 4.4

17,379 2.8

17,470 0.5

18,072 3.4

18,679 3.4

19,328 3.5

19,970 3.3


2.5

3.0

1.3

1.3

1.9

2.1

2.0

2.0





year. Builders were being drawn back to the market in 2010 by rising absorptions, as buyers enjoyed a healthier economy and low interest rates. This increase in starts was entirely driven by the multiple-unit market, as single-detached starts continued to fall. A small decline in months’ supply, from 1.5 months to 1.3 months helped to boost growth in new home prices for 2010 as well, raising it to 4 per cent, up from 1.5 per cent in 2009.

as well. Unit sales of existing homes are expected to decline again in 2013 and 2014, down 5.2 per cent and 4.1 per cent, respectively. New listings have continued to increase so far this year, although at a more moderate pace. Accordingly, the sales-to-new-listings ratio is forecast to drop to 47 per cent in 2013, thereby slowing price growth further, down to 1.4 per cent. Sellers are expected to take a breather in 2014, lowering new listings by 9 per cent. However, the sales-to-newlistings ratio will remain at just under 50 per cent, and resale price growth will remain subdued at a forecast 1.8 per cent. Over the following few years, as the economy stabilizes, demand in Ottawa–Gatineau’s resale market is expected to pick up once more. Unit sales are forecast to grow by 1.9 per cent per year on average from 2015 to 2017. New listings are anticipated to rise at a similar pace, holding the market in a balanced state, with the sales-to new-listings ratio hovering around 50 per cent. Accordingly, growth in existing home prices is expected to remain modest over 2015–17, at an annual average rate of 2.1 per cent. New Housing Market Unlike the resale market, Ottawa–Gatineau’s new home market has been more volatile over the last couple of years, with starts at times increasing and at others decreasing. Specifically, housing starts grew 2 per cent in 2010, following a 13.7 per cent decline the previous

The threat of public sector layoffs lowered demand in the new home market again in 2011, as absorptions dropped more than 13 per cent. Builders pulled back from the market as a result, reducing starts 8.7 per cent, with the decline split between the singles and multiples markets. In turn, price growth in the new home market slowed to 3 per cent. Absorptions continued to decline in 2012, in line with the still weak economy. But a number of new condominium and multi-family home developments saw the light of day last year. In the end, while single starts fell by 20.8 per cent last year, multiple starts increases 21.1per cent, raising total starts by 6.3 per cent overall. The combination of lower absorptions and higher starts raised months’ supply to 1.6 months in 2012, its highest level since 1998. As a consequence, growth in new home prices decelerated further, down to 2.6 per cent. Still, average new home prices reached $400,000 for the first time last year.

Ottawa–Gatineau: Resale Housing Market Indicators Unit sales Dollar volume sales ($ millions) New listings

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

18,827 –2.2

18,411 –2.2

18,307 –0.6

17,363 –5.2

16,649 –4.1

17,164 3.1

17,498 1.9

17,627 0.7

5,709 5.1

5,912 3.6

6,026 1.9

5,795 –3.8

5,657 –2.4

5,950 5.2

6,201 4.2

6,380 2.9

31,935 7.1

32,939 3.1

35,888 9.0

36,824 2.6

33,497 –9.0

34,130 1.9

34,754 1.8

35,089 1.0

59

56

51

47

50

50

50

50

303,226 7.5

321,106 5.9

329,150 2.5

333,746 1.4

339,771 1.8

346,665 2.0

354,398 2.2

361,939 2.1





Ottawa–Gatineau: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

9,138 2.0

8,344 –8.7

8,873 6.3

7,034 –20.7

6,225 –11.5

6,309 1.4

6,522 3.4

6,829 4.7

Singles

3,304 –5.9

2,945 –10.9

2,333 –20.8

2,089 –10.5

2,048 –2.0

2,037 –0.5

2,028 –0.4

2,041 0.6

Multiples

5,834 7.0

5,399 –7.5

6,539 21.1

4,945 –24.4

4,177 –15.5

4,272 2.3

4,493 5.2

4,789 6.6

Under construction

6,167 1.2

5,646 –8.5

6,523 15.5

6,582 0.9

6,077 –7.7

5,940 –2.2

5,953 0.2

6,014 1.0

Housing completions

9,539 1.0

8,356 –12.4

8,122 –2.8

6,838 –15.8

6,631 –3.0

6,329 –4.6

6,495 2.6

6,749 3.9

Singles

3,721 –1.0

2,935 –21.1

2,548 –13.2

2,080 –18.4

2,060 –0.9

2,036 –1.2

2,026 –0.5

2,030 0.2

Multiples

5,818 2.4

5,421 –6.8

5,574 2.8

4,759 –14.6

4,571 –3.9

4,294 –6.1

4,469 4.1

4,719 5.6

Newly completed and unabsorbed

1,086 –1.8

1,073 –1.2

1,096 2.1

872 –20.4

763 –12.5

659 –13.6

668 1.4

726 8.7

Absorptions

9,676 9.6

8,394 –13.2

8,097 –3.5

7,039 –13.1

6,803 –3.4

6,379 –6.2

6,460 1.3

6,678 3.4

Housing starts

Months’ supply Average price of a new home ($)

1.3

1.5

1.6

1.5

1.3

1.2

1.2

1.3

382,463 4.0

393,812 3.0

404,027 2.6

408,564 1.1

416,644 2.0

426,227 2.3

435,604 2.2

444,752 2.1


In spite of the persistent lull in the economy and even lower absorptions, builders increased starts again through the first half of 2013, raising both single and multiple starts. But, with tighter mortgage rules, slowing population growth, and expected increases in interest rates in the coming months, demand is forecast to remain on a downward trend. Builders are therefore forecast to reduce starts in the second half of this year and into 2014. Total starts are anticipated to decline by

20.7 per cent in 2013 and 11.5 per cent next year, slipping below 7,000 units for the first time since 1999. Months’ supply will fall to 1.3 months as a result, allowing growth in new home prices to strengthen from 1.1 per cent this year to 2 per cent in 2014. Builders are then expected increase starts by a modest 3.1 per cent, per year, on average, over 2015 to 2017 as the economy improves. A stable months’ supply will lead to a 2.2 per cent average annual increase in new home prices.



Winnipeg Housing Starts (000s)

Singles

20-year average

Multiples

5 4 3 2 1 0 2010

11

12f

13f

14f

15f

16f

17f


A

strengthening economy in 2014 should lift Winnipeg resale housing volumes following a small downtick this year. Price growth is also expected to edge higher next year as sales pick up. The new home market should be rock-solid thanks to healthy new-unit absorptions, but a slight pullback in housing starts is expected for 2014 as multiple-family construction dips. Still, the medium-term outlook features a decent economy and brisk population growth that will underpin continued resale transaction and price advances, along with buoyant housing starts. Excellent ownership affordability and evidence of slight pent-up demand for new construction are additional positive factors.


Price

Months’ supply

500,000

2.5

450,000

2.0

400,000

1.5

350,000

1.0 0.5

300,000 2010 11 12f 13f 14f 15f 16f 17f


Economic Outlook

Housing Outlook

Moderate GDP growth of 1.4 per cent is on tap for Winnipeg in 2013, with a slight acceleration to 2.1 per cent in 2014. A strengthening services sector underpins the faster 2014 advance. Employment is forecast to rise 1.5 per cent in 2014, more than doubling this year’s projected 0.7 per cent increase. These job gains will cut the local unemployment rate to 5.5 per cent in 2014, following a projected 16-year high of 5.9 per cent this year. The outlook over the subsequent few years features moderate gains in output and employment, but ongoing sound population growth.

Existing Housing Market Winnipeg’s resale market is balanced and is expected to remain in this state throughout our forecast. Still, the market is cooling slightly; easing sales demand and rising listings supply point to moderating price growth this year. Thereafter, rising sales will support slightly stronger price advances.


Existing home sales averaged just over 11,700 units at an annualized pace during the first half of 2013. This was down modestly from the pace in the second half


of 2012 and from last year as a the whole. We expect sales to pick up slightly in the second half of 2013, but still end the year below 11,900 units. While this volume is a three-year low, it remains above the past decade’s average. Moreover, transactions are forecast to rise 3 per cent in 2014 and 2.7 per cent annually on average between 2015 and 2017. The 13,200 sales we expect by 2017 would be a record high for this market. New listings have edged higher recently, averaging nearly 17,000 units at an annual rate in the latest two quarters, the most since 1998. But increases have been gradual—between 1.8 and 3.2 per cent annually over

the past three years—suggesting that potential home sellers believe a healthy market will value their units fairly. Another moderate listings rise is on tap for 2013 as a whole. Generally easing sales and rising listings cut the sales-to-new-listings ratio below 70 per cent in the second quarter, the lowest since the first quarter of 2009, but still signalling a balanced market. For all of 2013, we expect the ratio to average 69 per cent, the lowest since 2000. This still points to a balanced market and will be the highest ratio among the cities covered

Affordability



P&I payment

(per cent)


Price growth

2,000

25

1,500

20 15

12

80

9

75

1,000

6

70

500

3

65

0 11

12f

13f

14f

15f

16f

10 2010 11

60 2010

P&I/income

12f

13f

14f

15f

16f

17f


17f


Winnipeg: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

32,181 2.4

32,640 1.4

33,144 1.5

33,604 1.4

34,310 2.1

35,393 3.2

36,341 2.7

37,170 2.3

408 1.9

409 0.1

417 2.1

420 0.7

426 1.5

435 2.0

442 1.7

448 1.4

5.7

5.8

5.6

5.9

5.5

5.3

5.1

4.9

35,509 0.5

36,091 1.6

37,231 3.2

38,004 2.1

39,078 2.8

40,389 3.4

41,720 3.3

43,026 3.1

753 1.5

766 1.7

778 1.6

789 1.3

798 1.2

808 1.2

818 1.2

827 1.2


9,933 5.7

10,175 2.4

10,360 1.8

10,669 3.0

11,157 4.6

11,534 3.4

11,940 3.5

12,318 3.2


0.8

2.9

1.6

2.7

2.6

2.1

2.1

2.1





Further gains are expected through the medium term thanks to solid local demand underpinnings. Despite such strong absorptions, builders’ unsold stocks at the end of the second quarter were nearly twice those during the first quarter of 2012 because the completion of new units had exceeded their take-up for five straight quarters. Such inventories of completed and unoccupied units are forecast to rise further during the second half of 2013, but decline during 2014 as absorptions begin to outpace completions. Although these inventories will remain relatively high through 2017, they will shrink from roughly 17 per cent of recent absorptions this year to only 12 per cent of absorptions in 2017.

in this report next year. By 2017, we expect slightly faster gains in listings than in sales to trim the ratio to 63 per cent. The easing market balance has prompted quarterly drops in the average resale price during three of the latest four quarters, although it remains above its yearearlier level. These dips will trim annual price growth to 3.3 per cent this year, the lowest since 2000 and only about half the 20-year average of nearly 6 per cent per year. Slightly faster growth of 3.8 per cent is on tap for 2014 and then annual increases slightly above 4 per cent between 2015 and 2017. Notwithstanding price gains and expected interest rate hikes, Winnipeg housing will remain relatively affordable. Principle and interest charges on the city’s average resale unit are forecast to consume only 16.6 per cent of average household income in 2014, above only Calgary and Edmonton among the nine cities in this report.

Strong demand for new homes lifted housing starts to an annual pace of roughly 4,700 units in the first half of 2013, the highest two-quarter average in 25 years. This built on large jumps in starts in two of the past three years, including last year’s 20.5 per cent increase. Big increases in multi-family construction have largely driven gains, although single-family starts have also risen. Total starts are expected to ease slightly in 2014, mainly because of a pullback in multiple construction, then rise steadily. In 2017, we expect over 4,800 total starts in the Winnipeg area, the most since 1987. Despite recent large increases among multiple starts,

New Housing Market New home absorption has averaged a brisk 3,400 units at an annual rate during the latest four quarters, exceeding any annual figure on record and also the 20-year average near 2,100 units. We expect absorptions to end 2013 above 3,700 units and exceed 4,000 units in 2014.

Winnipeg: Resale Housing Market Indicators Unit sales Dollar volume sales ($ millions) New listings

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

11,573 0.6

12,298 6.3

12,093 –1.7

11,883 –1.7

12,234 3.0

12,711 3.9

12,966 2.0

13,239 2.1

2,647 10.9

2,969 12.2

3,085 3.9

3,131 1.5

3,345 6.8

3,624 8.3

3,851 6.3

4,092 6.3

15,976 3.2

16,385 2.6

16,675 1.8

17,295 3.7

18,249 5.5

19,367 6.1

20,128 3.9

20,889 3.8


72

75

73

69

67

66

64

63

228,687 10.3

241,389 5.6

255,080 5.7

263,529 3.3

273,446 3.8

285,115 4.3

296,985 4.2

309,047 4.1




Winnipeg: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

3,218 59.8

3,342 3.9

4,025 20.5

4,304 6.9

3,953 –8.2

4,576 15.8

4,793 4.7

4,848 1.1

Singles

1,915 26.8

1,993 4.1

2,123 6.5

2,272 7.0

2,220 –2.3

2,546 14.7

2,641 3.8

2,599 –1.6

Multiples

1,303 158.8

1,349 3.5

1,903 41.1

2,032 6.8

1,733 –14.7

2,031 17.2

2,152 6.0

2,249 4.5

Under construction

1,847 13.9

2,383 29.0

2,904 21.9

3,570 22.9

3,672 2.9

3,700 0.8

3,727 0.7

3,759 0.8

Housing completions

2,388 –10.6

3,179 33.1

3,258 2.5

3,891 19.4

3,933 1.1

4,546 15.6

4,764 4.8

4,819 1.2

Singles

1,790 10.5

1,863 4.1

1,911 2.6

2,731 42.9

2,201 –19.4

2,494 13.3

2,620 5.1

2,593 –1.0

Multiples

598 –43.0

1,316 120.1

1,347 2.4

1,160 –13.9

1,732 49.4

2,052 18.4

2,144 4.5

2,226 3.8


347 –36.3

318 –8.2

371 16.7

602 62.1

537 –10.8

551 2.7

580 5.1

581 0.2

Absorptions

2,523 –10.2

3,176 25.9

3,089 –2.7

3,732 20.8

4,050 8.5

4,506 11.2

4,735 5.1

4,827 1.9

Housing starts


1.6

1.2

1.4

1.9

1.6

1.5

1.5

1.4

396,430 4.8

415,489 4.8

432,930 4.2

449,458 3.8

458,249 2.0

465,179 1.5

471,099 1.3

477,096 1.3


good affordability will keep single-family construction dominant; this is the only city among the nine covered in this report in which single starts make up more than half of the forecast total between 2013 and 2017.

gains of above 1.5 per cent. Moreover, the ratio of housing starts to absolute population growth has recovered only slowly from the 2009 recession and was below its 25-year average in each of the past four years, hinting at potential pent-up housing demand.

Local demographics continue to be supportive. Population growth is forecast to remain above 1 per cent through 2017, despite cooling from recent annual



Calgary Housing Starts (000s)

Singles

20-year average

Multiples

15 12 9 6 3 0 2010

11

12f

13f

14f

15f

16f

17f


C

algary’s economy and housing demand continue to thrive as energy sector activity remains healthy. Rising GDP is spurring employment growth. On the resale housing market front, solid sales will lead to sound price gains this year and next. The new housing market is benefitting from strong absorptions, which are trimming unsold stocks of new units and fostering new construction. The medium term also looks decent. Ongoing economic growth will continue to produce gains in resale sales and prices and keep housing starts above their 20-year average. Good housing affordability, measured against local incomes, is an ongoing benefit to this market and allows single-family starts to maintain a high market share compared with other cities covered in this report.

Economic Outlook Summertime flooding in Calgary captured national attention. The resulting hit to third-quarter output will limit Calgary’s GDP to 3.3 per cent growth in 2013, modest by recent standards. Output will rise a slightly faster 3.4 per cent in 2014, spurred by governmentfunded rebuilding efforts. The job market will continue to expand, with annual growth of 2.4 per cent this year and 2.8 per cent in 2014 cutting the unemployment rate from 4.9 per cent this year to 4.6 per cent in 2014. Economic health should continue between 2015 and 2017, with GDP expanding roughly 3 per cent and employment rising about 2 per cent each year. The Conference Board of Canada


Price

Months’ supply

600,000

1.6

550,000

1.4

500,000

1.2

450,000

1.0 0.8

400,000 2010 11 12f 13f 14f 15f 16f 17f


Housing Outlook Existing Housing Market Calgary’s strong economic fundamentals allowed its resale market to largely shrug off the floods. Seasonally adjusted sales and the average resale price actually rose during June, the flood month, and have subsequently advanced. The market remains in “balanced” territory, but is approaching sellers’ conditions. Price growth is accelerating, although increases remain far below boom-era advances. We expect the market to remain balanced and price growth to stay healthy in 2014 and over the following few years.


Despite the flooding, transactions accelerated during the second quarter, building on a 19 per cent increase in 2012 and approaching an annualized 30,000 units, the most since 2007. We expect sales to ease slightly through year-end, but still end 2013 up 5.5 per cent at 28,100 units. Calgary’s healthy economy should produce a 2.4 per cent sales gain in 2014, then similar annual advances between 2015 and 2017. Sales volumes will remain below peak levels throughout our forecast.

The solidifying market has yet to attract a sustained increase in new listings. These fell 4 per cent to 42,138 units in 2012, the second straight small annual decline. The supply of listings hovered near this level during the first half of 2013 and is expected to end the year little changed. Continued gains in sales are ultimately forecast to encourage potential vendors, lifting listings 5 per cent in 2014 and modestly thereafter.

Affordability



P&I payment

(per cent)

6

70

4

60

2

50

2010

40

0 2010

11

12f

13f

14f

15f

16f

25 23 21 19 17 15 13

3,500 3,000 2,500 2,000 1,500 1,000 500


Price growth

P&I/income

11

12f

13f

14f

15f

16f

17f


17f


Calgary: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

96,414 3.9

101,651 5.4

105,987 4.3

109,485 3.3

113,164 3.4

116,794 3.2

120,275 3.0

123,640 2.8

705 –1.3

725 3.0

752 3.7

770 2.4

792 2.8

809 2.1

824 1.9

837 1.6

6.8

5.8

4.8

4.9

4.6

4.3

4.2

4.0

51,431 2.1

54,717 6.4

55,524 1.5

56,602 1.9

58,176 2.8

59,994 3.1

61,632 2.7

63,061 2.3

1,244 1.8

1,269 2.0

1,309 3.2

1,350 3.1

1,378 2.1

1,404 1.9

1,431 1.9

1,459 2.0


21,728 6.8

23,318 7.3

24,164 3.6

25,224 4.4

26,531 5.2

27,676 4.3

28,807 4.1

29,892 3.8


0.8

2.2

1.0

2.0

2.3

2.1

2.1

2.1





New Housing Market Buoyant housing demand is also energizing the new home market. Absorption of new units averaged 11,200 units in the four quarters to the second quarter of 2013, up 25 per cent from a year earlier. This included a surge to an annualized 15,000 units in the second quarter, the most since 2008. This strength will lift absorptions to a full-year total of 12,140 units in 2013, up 25 per cent from 2012. Another increase of nearly 6 per cent in absorptions is expected for 2014, which will nonetheless leave them trailing the peak of 13,700 units reached in 2008. Solid new-unit take-up trimmed the number of completed and unoccupied new units in 2012 and is forecast to further shave them in 2013. While an increase in builder inventories is on tap for 2014, we expect persistently strong absorptions to limit the impact of these stocks on the market. Indeed, forecast 2014 inventories will, on average, be equivalent only to 7.8 per cent of the year’s absorptions— below the 9.7 per cent average of the 18 years of data available to us. We expect this share to remain stable through 2017.

Last year’s listings drops and rising sales lifted the sales-to-new-listings ratio to 63.2 per cent for the full year, the highest since 2006. The ratio remained elevated in the first half of 2013 and will end the year averaging 67 per cent. This is squarely within our estimate of a balanced market, which ranges between 48 per cent and 71 per cent for this market. We expect the ratio to average a similar 65 per cent in 2014, then dip very slightly. Unsurprisingly, Calgary’s resale prices are rising briskly. Year-over-year growth has averaged a solid 4.6 per cent in the latest four quarters, including a firstquarter jump near 8 per cent. These increases will lift Calgary’s average price 4.7 per cent in 2013, the largest gain since 2007 and finally exceeding that year’s peak value. Similar price growth is expected between 2014 and 2016, with a slight tapering in growth to 4 per cent in 2017. These increases will slightly erode local housing affordability. Principle and interest charges on Calgary’s average resale home were under 16 per cent of average household income the last two years and are expected to remain there in 2013. But house prices will rise faster than incomes, pushing the ratio to roughly 20 per cent by 2017. This remains decent, as affordability is better only in Edmonton, Ottawa, and Winnipeg among the cities in this report.

Healthy new-unit take-up fuelled a big jump in housing starts to 13,186 units in 2012, more than double the recessionary trough in 2009, but well off peak levels of the last decade. We expect starts to ease a modest 2.7 per cent in 2013 as an 11 per cent dip in multiple starts slightly outweighs a 7 per cent gain in singledetached starts. For 2014, rebounding multiple starts

Calgary: Resale Housing Market Indicators Unit sales Dollar volume sales ($ millions) New listings

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

20,996 –15.6

22,466 7.0

26,634 18.6

28,112 5.5

28,793 2.4

29,418 2.2

30,027 2.1

30,620 2.0

8,372 –12.8

9,050 8.1

10,982 21.3

12,138 10.5

13,009 7.2

13,929 7.1

14,928 7.2

15,831 6.1

46,276 11.1

43,782 –5.4

42,138 –3.8

42,219 0.2

44,484 5.4

46,181 3.8

47,411 2.7

48,481 2.3

45

51

63

67

65

64

63

63

398,764 3.3

402,852 1.0

412,315 2.3

431,760 4.7

451,798 4.6

473,470 4.8

497,139 5.0

517,016 4.0





Calgary: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

9,233 48.9

9,190 –0.5

13,186 43.5

12,834 –2.7

13,444 4.8

12,578 –6.4

11,654 –7.3

11,378 –2.4

Singles

5,835 23.7

5,083 –12.9

5,970 17.4

6,382 6.9

6,280 –1.6

5,988 –4.7

5,714 –4.6

5,557 –2.7

Multiples

3,398 129.0

4,107 20.9

7,217 75.7

6,452 –10.6

7,164 11.0

6,590 –8.0

5,941 –9.9

5,821 –2.0

8,535 –8.8

7,569 –11.3

10,279 35.8

11,577 12.6

12,721 9.9

12,821 0.8

12,634 –1.5

12,556 –0.6

10,991 33.4

7,689 –30.0

9,593 24.8

12,129 26.4

12,912 6.5

12,608 –2.4

11,888 –5.7

11,343 –4.6

Singles

6,364 48.3

4,824 –24.2

5,371 11.3

6,021 12.1

6,323 5.0

6,089 –3.7

5,834 –4.2

5,654 –3.1

Multiples

4,627 17.2

2,865 –38.1

4,222 47.4

6,108 44.7

6,589 7.9

6,519 –1.1

6,055 –7.1

5,688 –6.0

1,030 1.5

1,055 2.4

929 –12.0

865 –6.9

998 15.4

955 –4.3

901 –5.7

878 –2.5

10,753 28.7

7,816 –27.3

9,687 23.9

12,140 25.3

12,811 5.5

12,676 –1.1

11,934 –5.9

11,348 –4.9

Housing starts

Under construction Housing completions

Newly completed and unabsorbed Absorptions Months’ supply Average price of a new home ($)

1.1

1.6

1.2

0.9

0.9

0.9

0.9

0.9

482,596 1.7

482,091 –0.1

490,128 1.7

509,415 3.9

526,002 3.3

539,089 2.5

549,821 2.0

560,768 2.0


will fuel a 5 per cent increase in total starts despite relatively unchanged single-detached construction. In the medium term, we expect housing starts to ease slightly, as both single-family and multiple construction dip. By 2017, we expect 11,400 units to get under way; this would slightly outpace the 20-year average of housing starts. While multiple starts are expected to increase their market share, they are forecast to make up only 52 per cent of total starts between 2013 and 2017. Only Winnipeg is forecast to have a lower share of multiple starts during this period. This speaks to Calgary’s relatively good housing affordability.

Brisk population advances underpin this solid construction outlook. Calgary’s population rose 3.2 per cent in 2012, the fastest jump since 2006, and is forecast to rise similarly in 2013. Population growth of roughly 2 per cent annually is expected between 2014 and 2017. Moreover, Calgary’s ratio of housing starts to absolute population hikes was below its 25-year average in both 2011 and 2012, hinting at the possibility of pent-up housing demand.



Edmonton Housing Starts (000s)

Singles

20-year average

Multiples

15 10 5 0 2010

11

12f

13f

14f

15f

16f

17f


E

dmonton’s housing markets continue to benefit from the area’s sound economy, low interest rates, and ongoing population growth, although the city’s economic exposure to energy markets introduces risk. The resale market is balanced and is delivering steady gains in sales and the average price. We expect this balance to persist over the next few years—despite rising interest rates—thanks to the market’s favourable underpinnings. Strengthening new home demand has spurred construction, particularly of multi-family units. Starts will pull back in 2014, as multiples retrench, then stabilize.


Price

Months’ supply

450,000

2.5

400,000

2.0

350,000

1.5 1.0

300,000 2010 11 12f 13f 14f 15f 16f 17f


Economic Outlook Edmonton’s economy is forecast to remain healthy. While local GDP growth is expected to slow to 3.2 per cent in 2014 from 4.2 per cent in 2013 and 5.9 per cent in 2012, forecast advances remain above the national average. Employment will rise 2.5 per cent in 2013 and 1.6 per cent in 2014, a more sustainable pace following larger post-recession rebounds in 2011 and 2012. This will trim the unemployment rate to 4.5 per cent in 2013 and keep it low at 4.6 per cent in 2014. The medium term also looks solid, with GDP advancing roughly 3 per cent annually between 2015 and 2017 and ongoing employment growth trimming the unemployment rate to 4.1 per cent by 2017.


Housing Outlook Existing Housing Market Edmonton’s resale market has recovered from the 2009 downturn and has hit a sustainable pace. Transactions have remained relatively stable over the latest five quarters, and new listings are also coming on the market steadily. Moderate carrying costs and decent employment growth are giving consumers confidence to maintain this buying pace. The market’s currently balanced state is projected to persist through the medium term, fostering moderate sales and price growth.


Annualized sales of existing homes have hovered slightly above 18,000 units since the second quarter of 2012, apart from a brief dip during the fourth quarter of 2012. A modest easing is also expected during the final quarter of 2013 as slightly rising mortgage rates cool demand. Still, transactions for all of 2013 are expected to be up 3.4 per cent after a 4 per cent increase in 2012. The pace of gains will slow to 1.5 per cent in 2014, but rebound to average 2.3 per cent annually between 2015 and 2017 as the local economy remains sound and interest rates rise only moderately. We expect nearly 19,800 sales in 2017, well above the 20-year average, but still below the 2006 peak of almost 22,000 units.

Fresh supplies of existing homes are also being delivered regularly. New listings edged higher in the first half of 2013 following a late 2012 dip, but their annualized volume near 30,250 units remained slightly below the 31,400 units in 2012. We expect listings to dip slightly along with sales later this year, ending 2013 at 30,100 units, down 4 per cent. For 2014, continued sales increases will keep potential home sellers confident of a good market for their units, boosting new listings 2.7 per cent. Broadly similar gains are on tap between 2015 and 2017 as market balance persists. Affordability



P&I payment

(per cent)


Price growth

P&I/income

3,000

22

2,500

20

6

65

2,000

18

4

60

1,500

16

2

55

1,000

0

50

−2

45 2010

11

12f

13f

14f

15f

16f

14 2010

11

12f

13f

14f

15f

16f

17f


17f


Edmonton: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

68,926 5.7

73,719 7.0

78,082 5.9

81,384 4.2

83,989 3.2

86,716 3.2

89,356 3.0

91,973 2.9

633 –0.7

671 5.9

693 3.3

710 2.5

722 1.6

739 2.4

751 1.6

761 1.3

6.7

5.4

4.7

4.5

4.6

4.4

4.2

4.1

45,061 0.4

47,785 6.0

49,110 2.8

50,187 2.2

51,225 2.1

52,990 3.4

54,401 2.7

55,615 2.2

1,176 1.6

1,197 1.7

1,230 2.8

1,264 2.8

1,289 1.9

1,311 1.7

1,334 1.8

1,358 1.8


20,138 5.0

21,492 6.7

22,467 4.5

23,659 5.3

24,841 5.0

25,923 4.4

26,999 4.2

28,051 3.9


1.0

2.5

1.2

1.7

2.2

2.1

2.1

2.1





to strengthen further during the second half of 2013 and end the year up 26 per cent from the average 2012 level. But absorptions will essentially plateau at this level, then ease in the medium term.

This year’s slight listings drop, combined with the sales uptick, will lift the sales-to-new-listings ratio to 60.6 per cent, the highest since a pre-recession reading of 62 per cent in 2009, but still signalling a balanced market. Similar movements in sales and listings during the medium term are expected to keep the ratio near 60 per cent.

While absorptions have been strong, the completion of new units has been even larger, so the number of completed and unoccupied units has edged higher. These inventories are expected to average nearly 1,560 units this year, but ease slightly in 2014 as absorptions outweigh completions. Inventories are forecast to stay above 1,300 units through the medium term as completions generally exceed absorptions. This is slightly high by historical standards, since such stocks averaged roughly 1,230 units over the previous 20 years.

This well-performing housing market is producing healthy price increases. Last year, Edmonton’s average resale price rose 2.7 per cent, following a slight 2011 dip. Gains accelerated slightly during the first two quarters of 2013. We expect ongoing strength in the second half of 2013 to lift the average resale price for the full year by 3.7 per cent, putting it at $346,580—above the boom-era peak of $338,653 in 2007. The average price is expected to rise an even faster 4.6 per cent in 2014, but hikes will subsequently ease.

This solid demand environment lifted housing starts to 12,758 units in 2012, up nearly 40 per cent from the 2011 level. The jump was led by a 66 per cent increase in starts of multi-family units, although single-detached activity also rose. A further uptick in singles starts and another big jump in multi-family construction propelled total starts to an annualized rate near 16,500 units in the first half of 2013, the highest two-quarter average on record. Although this surge is unsustainable, starts will finish 2013 at 14,000 units, the most since 2007.

New Housing Market New home demand has also improved against Edmonton’s healthy economic backdrop. The take-up of new units rose 16 per cent in 2012. Absorptions jumped again during the first half of 2013, exceeding 12,600 units at an annual rate during the second quarter of 2013. This was the most since 2009 and up 18 per cent from a year earlier. We expect new unit demand Edmonton: Resale Housing Market Indicators Unit sales Dollar volume sales ($ millions) New listings

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

16,403 –14.3

16,963 3.4

17,642 4.0

18,236 3.4

18,514 1.5

19,037 2.8

19,411 2.0

19,794 2.0

5,393 –12.0

5,523 2.4

5,898 6.8

6,320 7.2

6,713 6.2

7,201 7.3

7,639 6.1

8,064 5.6

33,130 7.9

31,721 –4.3

31,408 –1.0

30,109 –4.1

30,930 2.7

31,734 2.6

32,334 1.9

32,970 2.0

50

53

56

61

60

60

60

60

328,803 2.6

325,595 –1.0

334,300 2.7

346,581 3.7

362,609 4.6

378,281 4.3

393,529 4.0

407,405 3.5





Edmonton: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

10,004 62.4

9,226 –7.8

12,758 38.3

14,006 9.8

11,734 –16.2

11,401 –2.8

10,973 –3.8

11,150 1.6

Singles

6,150 62.2

4,957 –19.4

5,663 14.2

6,026 6.4

5,904 –2.0

5,671 –4.0

5,448 –3.9

5,332 –2.1

Multiples

3,854 62.8

4,269 10.8

7,095 66.2

7,979 12.5

5,830 –26.9

5,731 –1.7

5,525 –3.6

5,818 5.3

Under construction

8,654 1.8

8,552 –1.2

10,164 18.8

12,571 23.7

11,385 –9.4

11,563 1.6

11,648 0.7

11,941 2.5

Housing completions

9,443 2.3

8,941 –5.3

10,166 13.7

13,114 29.0

12,442 –5.1

11,195 –10.0

10,915 –2.5

10,682 –2.1

Singles

5,433 74.9

5,308 –2.3

5,299 –0.2

5,554 4.8

5,711 2.8

5,565 –2.6

5,382 –3.3

5,252 –2.4

Multiples

4,010 –34.5

3,633 –9.4

4,867 34.0

7,560 55.3

6,731 –11.0

5,630 –16.4

5,533 –1.7

5,431 –1.9


1,394 –12.4

1,550 11.1

1,476 –4.7

1,559 5.6

1,511 –3.1

1,326 –12.3

1,348 1.7

1,415 5.0

Absorptions

9,603 4.6

8,835 –8.0

10,222 15.7

12,903 26.2

12,769 –1.0

11,206 –12.2

10,884 –2.9

10,583 –2.8

Housing starts


1.7

2.1

1.7

1.5

1.4

1.4

1.5

1.6

375,844 –0.8

379,327 0.9

382,809 0.9

387,803 1.3

399,334 3.0

409,062 2.4

418,608 2.3

427,950 2.2


For next year, easing starts of single-detached homes and a significant pullback of multi-family construction will cut total starts to near 11,700 units. Volumes will hover near this historically elevated level between 2015 and 2017. Nonetheless, there is some evidence that Edmonton remains slightly under-built. Even the

2012 construction uptick left the area’s ratio of housing starts to absolute population growth below its 25-year average; this will persist throughout the forecast period, suggesting that housing starts could surprise on the upside.



Vancouver Housing Starts (000s)

Singles

20-year average

Multiples

20 15 10 5 0 2010

11

12f

13f

14f

15f

16f

17f


V

ancouver’s resale housing market is in recovery following a sharp 2012 correction that cut both transactions and prices significantly. The resale market is now balanced, and we expect this state to persist through the medium term. This will limit increases in the average resale price, keeping it below its pre-downturn level through 2015. The new home market is reasonably healthy, although builders do hold relatively high stocks of unsold units. Housing starts will dip this year and again in 2014. Economics and demographics are generally supportive: gross domestic product, employment, and the population are all projected to advance throughout the forecast. The strength of offshore housing demand remains a wild card.


Price

Months’ supply

750,000 700,000 650,000 600,000 550,000 500,000

3.5 3.0 2.5 2.0 1.5 1.0 2010 11 12f 13f 14f 15f 16f 17f


Economic Outlook

Housing Outlook

Vancouver’s economy is decent. GDP is on track to rise only 2.2 per cent this year, down from 2.6 per cent in 2012, but advance 3.1 per cent in 2014 and an annual 2.9 per cent on average between 2015 and 2017. Employment gains will also slow to 0.5 per cent in 2013, but accelerate to 2.5 per cent in 2014 and remain above 1 per cent annually thereafter. This year’s modest job growth will still be enough to help trim the unemployment rate to a five-year low of 6.5 per cent, with a dip to 6.2 per cent forecast for 2014. The population will continue to rise between 1.5 and 1.7 per cent annually, just below its 20-year average, throughout the forecast period.

Existing Housing Market The correction in Vancouver’s resale market appears over, but recovery is likely to be modest. Sales are rising gently, although a significant listings drop appears equally responsible for recently firming prices. The market became balanced during the spring and appears set to remain there through the medium term. Vancouver’s poor ownership affordability likely results from years of offshore investment, but the market could correct again if this money is withdrawn.



Sales of existing homes surged in the second quarter of 2013, finally exceeding their year-earlier level after six quarterly drops. But volumes are expected to ease slightly in the second half of 2013 and end the year down roughly 2 per cent. Still, this is a much better outcome than the 23 per cent sales decline in 2012. We expect transactions to rise 2 per cent in 2014 and moderately thereafter but remain well below their precorrection level. The weak market cut new listings during four of the latest five quarters; these were off 12 per cent from a year earlier in the second quarter of 2013. We expect

listings to keep edging lower until late 2014; annual volumes will be off nearly 15 per cent this year and another 10 per cent in 2014. Rising sales and falling listings boosted the sales-to-new-listings ratio to 50 per cent in the second quarter of 2013 and will continue to push it higher next year, although it will remain in the lower end of Vancouver’s balanced market range. The firming market lifted Vancouver’s average resale price above its year-earlier level in the second quarter of 2013, although recent quarterly changes have been Affordability



P&I payment

(per cent)


Price growth

P&I/income 50 48 46 44 42 40 38

5,000 4,500 4,000 3,500 3,000 2,500 2,000

20

70

10

60

0

50

−10

40


2010

2011

2012

2013f

2014f

2015f

2016f

2017f

101,857 3.2

105,256 3.3

108,038 2.6

110,428 2.2

113,872 3.1

117,360 3.1

120,754 2.9

124,038 2.7

1,220 1.3

1,251 2.6

1,275 1.9

1,281 0.5

1,313 2.5

1,342 2.3

1,365 1.7

1,382 1.2

2010

11

12f

13f

14f

15f

16f

2010 11

17f


12f

13f

14f

15f

16f

17f

Vancouver: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

7.5

7.3

6.7

6.5

6.2

5.6

5.3

5.1

36,133 0.2

37,395 3.5

38,711 3.5

39,207 1.3

40,494 3.3

41,737 3.1

42,817 2.6

43,842 2.4

2,389 2.3

2,426 1.6

2,464 1.5

2,501 1.5

2,541 1.6

2,584 1.7

2,628 1.7

2,673 1.7


26,827 4.5

27,674 3.2

28,628 3.4

28,963 1.2

30,074 3.8

31,282 4.0

32,395 3.6

33,445 3.2


1.7

2.3

1.3

0.4

1.9

2.2

2.0

2.1





solid 17,200 units at an annual rate in the third quarter. We expect absorptions to remain strong and end 2013 up 8 per cent. Another 4 per cent increase is on tap for 2014. Despite the higher new-unit take-up, even stronger completions have pushed the number of completed and unoccupied dwellings above 4,000 units this year for the first time since 1998. While high by recent standards, unsold inventories were significantly larger in the late 1990s, exceeding 5,000 units in 1995 and 4,000 units in three of the next four years. We expect further strong absorptions in 2014 to finally outweigh completions and trim these vendor backlogs to 3,700 units. These stocks are forecast to fall to roughly 2,400 units by 2017.

volatile. Many buyers appear to have taken advantage of the slower market to snap up pricey single-detached units; their sales rose briskly over the summer. Their slightly higher market share has boosted the market’s average price. Accordingly, we expect this value to end 2013 up 1 per cent, a big improvement from its 6 per cent drop in 2012. Slightly firmer growth near 2 per cent is on tap for 2014, and moderate annual gains thereafter. We do not expect Vancouver’s average price to regain its 2011 pre-downturn level until 2016. Falling prices have slightly improved affordability. Principle and interest charges on the average-priced resale home are expected to end 2013 unchanged, following a 7.5 per cent drop last year. This year’s bite will be 41 per cent of average household income. Although this is down from a high of 46 per cent in 2011, it remains the highest among the cities covered in this report. The local burden is forecast to remain stable, at 41 per cent next year, but hit a new high of 46.7 per cent by 2017 as interest rates rise.

Continuing recovery of multi-family construction from the 2009 downturn lifted total starts above 19,000 units in 2012, the most since 2008. But multiples have pulled back this year as unsold stocks have risen. This is outweighing a brisk upturn among the relatively small number of single-detached homes started locally and will cut total starts 9 per cent to just under 17,400 units. For 2014, we expect dips in both single and multiple construction to trim total starts another 5 per cent. In the medium term, we see starts hovering between 17,500 and 18,000 units. Such volumes are slightly above the 25-year average of roughly 16,200 units.

New Housing Market The solidifying recovery in Vancouver’s resale market is mirrored in its new home market. The absorption of new dwellings, a proxy for new home demand, is up significantly from 2011 and was set to average a

Vancouver: Resale Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

Unit sales

31,143 –14.1

32,936 5.8

25,445 –22.7

24,853 –2.3

25,389 2.2

26,616 4.8

27,161 2.0

27,529 1.4


21,049 –2.0

25,681 22.0

18,576 –27.7

18,320 –1.4

19,064 4.1

20,480 7.4

21,190 3.5

21,777 2.8

New listings

59,818 9.1

61,305 2.5

60,015 –2.1

51,219 –14.7

46,314 –9.6

47,575 2.7

48,042 1.0

48,997 2.0

52

54

42

49

55

56

57

56

675,874 14.1

779,730 15.4

730,063 –6.4

737,162 1.0

750,861 1.9

769,468 2.5

780,184 1.4

791,064 1.4





Vancouver: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

15,270 85.2

17,868 17.0

19,071 6.7

17,357 –9.0

16,536 –4.7

17,855 8.0

17,945 0.5

17,549 –2.2

4,603 62.1

3,658 –20.5

3,397 –7.1

3,864 13.8

3,294 –14.7

3,522 6.9

3,549 0.8

3,345 –5.7

10,667 97.3

14,210 33.2

15,674 10.3

13,493 –13.9

13,241 –1.9

14,333 8.2

14,396 0.4

14,204 –1.3

Under construction

14,977 –27.2

18,547 23.8

22,263 20.0

22,704 2.0

21,632 –4.7

21,708 0.3

21,680 –0.1

21,245 –2.0

Housing completions

16,474 –1.9

12,919 –21.6

16,958 31.3

18,073 6.6

17,339 –4.1

17,490 0.9

18,217 4.2

18,072 –0.8

3,935 17.9

3,554 –9.7

3,585 0.9

4,375 22.0

3,502 –19.9

3,524 0.6

3,632 3.1

3,514 –3.3

12,539 –6.8

9,365 –25.3

13,373 42.8

13,698 2.4

13,837 1.0

13,966 0.9

14,585 4.4

14,558 –0.2

2,813 28.4

3,164 12.5

3,603 13.9

4,319 19.9

3,689 –14.6

2,966 –19.6

2,626 –11.5

2,402 –8.5

14,796 –13.9

13,175 –11.0

16,315 23.8

17,576 7.7

18,274 4.0

18,035 –1.3

18,491 2.5

18,257 –1.3



2.3

2.9

2.7

2.9

2.4

2.0

1.7

1.6

667,719 3.3

665,695 –0.3

662,097 –0.5

662,452 0.1

674,797 1.9

686,439 1.7

694,796 1.2

702,549 1.1


Vancouver’s new home market does not appear hugely overbuilt. Despite expensive houses, annual population growth here has exceeded the national average in 23 of the past 25 years, underpinning steady residential demand. Moreover, although the ratio of housing starts to absolute population growth slightly exceeded

its 25-year average in both 2011 and 2012, such an overshoot was inevitable as Vancouver’s economy, and housing market, recovered from the 2009 recession. Easing construction this year and next will leave starts near demographic requirements.



Victoria Housing Starts

(000s)

Singles

20-year average

Multiples

2.5 2.0 1.5 1.0 0.5 0 2010

11

12

13f

14f

15f

16f

17f


V

ictoria housing markets continue to suffer from a tepid local economy, which is limiting the city’s appeal to potential newcomers and constraining income growth. The resale market has recently moved into a balanced position, after a lengthy spell in a buyers’ state. Sales and prices are forecast to end 2013 little changed and grow only modestly in coming years. The new home market is also soft, held back by high inventories of unsold units. Housing starts will fall sharply this year, and rebound only partially in 2014. Ownership affordability has improved as the market has softened, but remains poor compared with most other cities in this report.

Economic Outlook Sluggish GDP growth of only 0.1 per cent is forecast for Victoria in 2013, following a weak 0.3 per cent increase in 2012. But GDP growth should pick up to 2.2 per cent in 2014 and remain above 2 per cent between 2015 and 2017. Last year, employment still managed to rise 2.2 per cent, a four-year high, but it is forecast to drop 1.2 per cent this year and gain only 0.7 per cent next year. Still, the unemployment rate will remain below 6 per cent throughout our forecast, including a six-year low of 5.2 per cent in 2014. The weak economy shaved population growth to below 1 per cent in both 2011 and 2012, and advances will continue to be soft.



Price

Months’ supply

450,000

6

400,000

5

350,000

4

300,000

3 2

250,000 2010 11

12

13f 14f 15f 16f 17f


Housing Outlook Existing Housing Market A weak economy, tepid population growth, and poor housing affordability continue to undermine Victoria’s resale market. The market moved into a balanced position during the spring, but remains unsettled. Despite rising slightly during the spring, sales are on track to fall for a fourth consecutive year in 2013. Moreover, this year’s forecast sales volume of 5,300 units is well below the annual average of above 7,000 units during the previous decade. Accelerating economic growth and rising employment will lift sales 2.6 per cent to roughly 5,400 units in 2014. Sales are forecast to increase an


average of 3.2 per cent between 2015 and 2017, sufficient to keep the market balanced, but we do not expect volumes to exceed 6,000 units, even by 2017. The soft market cut listings 5 per cent in 2012, and large drops in the first half of 2013 point to a 17 per cent decline for the year as a while. Another 7 per cent drop is on tap for 2014, given the muted market recovery, and then gains averaging nearly 3 per cent annually are expected between 2015 and 2017.

The recent sales uptick, combined with the listing dip, lifted the sales-to-new-listings ratio to nearly 52 per cent in the second quarter of 2013. This is the highest level since 2009 and indicates a balanced market. The ratio is forecast to keep rising through the end of 2013, but still average only 50 per cent for the year, since it was low during the first quarter. The sales advances and listings declines we expect for 2014 will push the ratio to roughly 55 per cent, where it will hover through 2017.

Affordability



P&I payment

(per cent)


Price growth

3,500

38

3,000

36

2,500

34 32

6

60

4

55

2

50

2,000

0

45

1,500

−2

40

−4 11

12

13f

14f

15f

16f

30 2010

35 2010

P&I/income

11

12

13f

14f

15f

16f

17f


17f


Victoria: Economic Indicators Real GDP at market prices (2002 $ millions) Total employment (000s) Unemployment rate (per cent)

2010

2011

2012

2013f

2014f

2015f

2016f

2017f

14,760 1.3

14,927 1.1

14,976 0.3

14,995 0.1

15,318 2.2

15,698 2.5

16,068 2.4

16,431 2.3

183 0.1

182 –0.7

186 2.2

184 –1.2

185 0.7

188 1.7

191 1.2

192 0.9

6.0

6.2

5.5

5.6

5.2

5.1

4.9

4.7

38,344 –0.6

39,439 2.9

40,656 3.1

41,167 1.3

42,169 2.4

43,594 3.4

44,915 3.0

46,273 3.0

359 1.4

362 0.7

363 0.4

365 0.4

367 0.6

369 0.6

372 0.7

374 0.7


4,068 3.5

4,133 1.6

4,183 1.2

4,159 –0.6

4,280 2.9

4,427 3.4

4,561 3.0

4,687 2.8


1.0

2.2

1.0

0.0

1.9

2.2

2.0

2.1





completions should drop. This will slightly trim builder stocks that year. Inventories are forecast to drop further in 2015, while remaining above their 20-year average. We expect additional modest dips in 2016 and 2017.

Persistence of a buyers’ market has softened residential values. Victoria’s average resale price fell 1.3 per cent in 2011 and 2.8 per cent last year, to a 2012 average of $484,164. But a strengthening market this year should produce a tiny price gain. Continued market firming will produce a 1.4 per cent price advance in 2014 and annual gains of 2 per cent thereafter. The recently weak pricing has improved poor local affordability. Principle and interest charges on Victoria’s average resale home are forecast to drop 1 per cent in 2013, following decreases of 3 to 4 per cent during the two previous years. This still means such charges will consume nearly 31 per cent of average household income in 2013 and 2014, the most among any of the cities in this report except Vancouver. Rising house prices and increasing interest rates will lift these costs above 35 per cent by 2017, although this will still be below their 2007 peak bite of 38 per cent.

Developers remain unsurprisingly cautious in light of these high inventories. Housing starts are on track to decline nearly 20 per cent in 2013. The drop will be led by a 25 per cent drop in starts of multiple-family structures, which are particularly risky for builders. Singledetached starts are expected to drop a comparatively modest 6 per cent. This will put total starts near 1,350 units in 2013, roughly half the peak levels of the previous decade and well below the average near 1,720 units during the past 20 years. For 2014, we expect small increases in both single-detached and multi-family construction to lift total starts to 1,465 units, with the number of starts hovering at about this level through 2017. Multiple starts’ market share has soared. Between 2008 and 2012, these made up 61 per cent of total starts, compared with 46 per cent a decade earlier.

New Housing Market The new home market is also soggy. Demand for new homes, measured by their absorptions, is on track to fall for the third year of the past four, with all these drops by double-digit rates. This year’s 12 per cent decline would leave annual absorption at 1,400 units, a solid 1,000 units below their 2009 peak. Unsurprisingly, builder inventories are swelling; the volume of unsold new homes is forecast to average 600 units in 2013, an 18-year high and up sharply from roughly 490 units in 2012. But the picture should start to improve in 2014. Absorptions are forecast to rise gently, while

Victoria’s soft population growth is coupled with evidence of slight demographic oversupply. The ratio of housing starts to absolute population changes exceeded its historical average by a wide margin in 2012 and is forecast to be slightly above it again this year. The ongoing adjustment in the supply of new homes will, however, bring this ratio back to its historical norm in 2014.

Victoria: Resale Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

Unit sales

6,168 –19.5

5,773 –6.4

5,460 –5.4

5,264 –3.6

5,403 2.6

5,704 5.6

5,848 2.5

5,940 1.6


3,113 –14.7

2,877 –7.6

2,644 –8.1

2,560 –3.2

2,663 4.0

2,867 7.7

2,998 4.6

3,106 3.6

13,250 12.8

13,428 1.3

12,766 –4.9

10,566 –17.2

9,880 –6.5

10,273 4.0

10,519 2.4

10,722 1.9


47

43

43

50

55

56

56

55

504,642 6.0

498,300 –1.3

484,164 –2.8

486,225 0.4

492,802 1.4

502,600 2.0

512,650 2.0

522,892 2.0




Victoria: New Housing Market Indicators 2010

2011

2012

2013f

2014f

2015f

2016f

2017f

2,174 112.6

1,632 –24.9

1,663 1.9

1,347 –19.0

1,465 8.7

1,544 5.4

1,509 –2.2

1,421 –5.9

843 32.3

609 –27.7

553 –9.3

518 –6.3

562 8.5

605 7.6

611 0.9

577 –5.5

1,331 245.5

1,023 –23.2

1,110 8.5

829 –25.3

902 8.9

938 4.0

899 –4.2

844 –6.1

Under construction

1,917 –8.2

1,856 –3.2

1,768 –4.7

1,573 –11.1

1,504 –4.4

1,534 2.0

1,515 –1.2

1,450 –4.3

Housing completions

1,784 –27.6

1,642 –8.0

1,591 –3.1

1,610 1.2

1,434 –10.9

1,520 6.0

1,552 2.1

1,500 –3.3

851 34.0

716 –15.9

570 –20.4

592 3.8

576 –2.7

605 5.1

622 2.9

602 –3.2

933 –49.0

926 –0.8

1,021 10.3

1,018 –0.3

858 –15.7

916 6.7

930 1.5

898 –3.4


393 –12.8

455 15.7

494 8.6

603 22.0

595 –1.2

455 –23.6

364 –19.9

304 –16.4

Absorptions

1,811 –24.6

1,551 –14.3

1,601 3.2

1,409 –12.0

1,584 12.4

1,641 3.6

1,628 –0.8

1,551 –4.7


Singles Multiples


2.6

3.5

3.7

5.1

4.5

3.3

2.7

2.4

418,664 –2.8

412,040 –1.6

400,585 –2.8

397,915 –0.7

403,822 1.5

414,833 2.7

421,115 1.5

427,492 1.5




Definitions and Concepts Terminology used in the Metropolitan Housing Outlook:1

Newly completed and unabsorbed—Refers to inventories

of newly completed units that remain unoccupied. Housing starts—Refers to the beginning of construction

work on a building, usually when the concrete has been poured for the entire footing around the structure, or at an equivalent stage where a basement will not be part of the structure.

Absorptions—Newly completed units sold or rented. Units pre-sold or pre-leased are not included until the completion stage. Months’ supply—The number of months needed to

Multiple starts—The sum of semi-detached starts, row

starts, and apartment and other non-single-detached starts. These starts are distributed among five tenures: homeownership, rental, condominium, co-op, and other.

absorb unoccupied units. It is defined as the ratio between unoccupied units and absorbed units (average for the last 12 months). Unit sales—The number of existing homes sold on the

Under construction—Units started but not completed.

Multiple Listing Service (MLS).

Completions—Refers to units where all the proposed construction work has been performed or, in some cases, where 90 per cent of construction work has been completed and the structure is fit for occupancy.

New listings—The number of homes listed for sale on the MLS during the year. Sales-to-new-listings ratio—The number of homes sold

divided by the number of homes newly listed. 1

Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation; Canadian Real Estate Association; Quebec Federation of Real Estate Boards.


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