economic & real estate outlookeconomic & real estate outlook · 2011-04-30 · economic...

Economic & Real Estate OutlookEconomic & Real Estate Outlook

IMBA CONFERENCE –April 2011

TED TSIAKOPOULOSRegional Economist – [email protected]

Housing market intelligence you can count on

AGENDA

• K I i ht f 2011/12• Key Insights for 2011/12• Housing Outlook: Sales & Prices• Factors Shaping Housing Outlook• Risks to the Outlook• Summary• Q & As

CANADA MORTGAGE AND HOUSING CORPORATION

Key Insights for 2011/12

• Canadian/Ontario housing market stabilizing• Southern Ontario to lag activity in Northern Ontario &

Western Canadian markets• P i t b l l t t f th• Prices to grow below long term rate of growth• No evidence of housing price bubble• Inflation and interest rates will riseInflation and interest rates will rise• First time buyers sensitive to interest rates, demographics• Outlook still subject to uncertainty/riskj y


Canadian Sales Stabilize But Less Impetus For Growth in 2011

Existing home sales, saar - CANADA600000

400000

450000

500000

550000

250000

300000

350000

400000

150000

200000

250000

2Q1

2Q3

3Q1

3Q3

4Q1

4Q3

5Q1

5Q3

6Q1

6Q3

7Q1

7Q3

8Q1

8Q3

9Q1

9Q3

0Q1

0Q3

1(F)

3(F)

2002

2002

2003

2003

2004

2004

2005

2005

2006

2006

2007

2007

2008

2008

2009

2009

2010

2010

2011

Q1

2011

Q3


Source: CREA, CMHC forecast

But Sales Grow Faster in the West in 2011

CANADA-1.1%

-21%

0.5%5 9%

2.0%8.5%

-5.9%

Source: CMHC MLS Forecast, CREA

Northern Ontario Leads Housing Market Activity in 2011

2 0%

3.0%existing home sales, %chg - Ontario

0.0%

1.0%

2.0%

-2.0%

-1.0%

5 0%

-4.0%

-3.0%

-6.0%

-5.0%

Northern Ontario Eastern Ontario Southern Ontario Western Ontario


Source: CMHC MLS Forecast, CREA

Canadian Housing Prices Stabilize

600000

Existing home price, s.a - Canada

400000450000500000550000600000

250000300000350000400000

150000200000

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

(F)

3(F)

S CREA CMHC f t

2002

Q20

02Q

2003

Q20

03Q

2004

Q20

04Q

2005

Q20

05Q

2006

Q20

06Q

2007

Q20

07Q

2008

Q20

08Q

2009

Q20

09Q

2010

Q20

10Q

2011

Q1

2011

Q3


Source: CREA, CMHC forecast

Are Real Estate Markets Defying Logic?

M aybeM aybe

• House Price to Income Ratios Are High• Household Debt to Income Ratios Are High


Source: Statistics Canada, Bank of Canada, CMHC

Deeper Analysis Suggests No Housing Bubble Exists

103

Actual Resale Price vs Fundamental Price Ratio - ONTARIO

101

102

103

99

100

97

98

96

2009Q1 2009Q2 2009Q3 2009Q4 2010Q1 2010Q2 2010Q3 2010Q4

Actual vs Fundamental Price Ratio Fair Market Value


Source: CREA, CMHC model estimates

Actual vs Fundamental Price Ratio Fair Market Value

The Big Picture & Why it Matters

Why is housing momentum set to slow?Why is housing momentum set to slow?


DRIVERS OF MORTGAGE BROKER BUSINESS

ECONOMY (SHORT RUN)(SHORT RUN)

MORTGAGE BROKER

CREDIT CONDITIONS (SHORT RUN)

HOUSING MARKETS &

POLICY(SHORT & LONG

) BUSINESS (SHORT RUN) RUN)

DEMOGRAPHICS(LONG RUN)


2010 GDP Growth – Ontario Among Leaders

6 Real GDP % - 2010f

4

5

3

1

2

0

BC ALTA SAS MAN ONT QUE NFLD CAN


Source: Statistics Canada, CMHC forecast (f)

Migratory Inflows from Rest of Canada Improve in 2010

10,000Net provincial migratory inflows to Ontario

5,000

7,500

0

2,500

-5,000

-2,500

10 000

-7,500

,


-10,00000 01 02 03 04 05 06 07 08 09 10

Source: Statistics Canada

…As Does Ontario`s Share of International Migration

75%

85% Ontario as share % of Canada immigration

65%

75%

Long Term Avg

45%

55%

25%

35%

2000

Q1

2000

Q3

2001

Q1

2001

Q3

2002

Q1

2002

Q3

2003

Q1

2003

Q3

2004

Q1

2004

Q3

2005

Q1

2005

Q3

2006

Q1

2006

Q3

2007

Q1

2007

Q3

2008

Q1

2008

Q3

2009

Q1

2009

Q3

2010

Q1



But Canada's Economic Story Changing

MANUFACTURING INVESTMENTS

2009/10 story

ENERGY/NON ENERGY INVESTMENTS

2011/12 t

ENERGY/NON ENERGY INVESTMENTS

2011/12 story


Resource Poor Emerging Economies Growing

Real GDP % chg

10

4

6

8

-2

0

2

-6

-4

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

Q1

Q3

2000

Q20

00Q

2001

Q20

01Q

2002

Q20

02Q

2003

Q20

03Q

2004

Q20

04Q

2005

Q20

05Q

2006

Q20

06Q

2007

Q20

07Q

2008

Q20

08Q

2009

Q20

09Q

2010

Q20

10Q

2011

Q20

11Q

World Advanced economies Emerging economies


Source: IMF

g g

Western Canada Tapping Into Emerging Markets

% share of exports to emerging markets

25

20

25

10

15

0

5

Source: Industry Canada

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Western Canada Ontario


Source: Industry CanadaSource: Industry Canada

But US Economy Improving

4%

6% US GDP Growth - Annualized

0%

2%

4%

‐4%

‐2%

‐8%

‐6%

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

S US B f E i A t

2008Q

2008Q

2008Q

2008Q

2009Q

2009Q

2009Q

2009Q

2010Q

2010Q

2010Q

2010Q


Source: US Bureau of Economic Accounts

Business Spending Will Lead During Expansion Phase

5

6 Quarterly real growth (2002$) - ONTARIO

3

4

5

0

1

2

‐3

‐2

‐1

09q3 09q4 10q1 10q2 10q3

Consumption Growth % Business Spending Growth %


Source: Provincial Economic Accounts

Credit Growth is Slowing in Canada

Credit Growth, annualized - Canada

12%

8%

10%

4%

6%

0%

2%



Canadian Households Will Pay Down Some Debt

600,000$

400,000

500,000

Household Assets

300,000

100,000

200,000

Household Debt

0

1990

Q1

1991

Q1

1992

Q1

1993

Q1

1994

Q1

1995

Q1

1996

Q1

1997

Q1

1998

Q1

1999

Q1

2000

Q1

2001

Q1

2002

Q1

2003

Q1

2004

Q1

2005

Q1

2006

Q1

2007

Q1

2008

Q1

2009

Q1

2010

Q1

Sources: Statistics Canada, National Income and Expenditure Accounts, National Balance Sheet Accounts.

6

First Time Buyers Sensitive to the Interest Rate Story

8 4

8.85 yr posted mtg rate %

7.6

8.0

8.4

6.8

7.2

6.0

6.4

5.2

5.6

00 01 02 03 04 05 06 07 08 09 10 11 12


Source: CMHC Forecast, Bank of Canada, Statistics Canada

First Time Buyers Sensitive to the Demographic Story

4000000Ontario Population

2500000

3000000

3500000

1500000

2000000

2500000 Age 25-44

Age 45-64

Age 15-24

500000

1000000

500000Age 65-99

0

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009


Source: Statistics Canada, CMHC

FORECAST

Ontario Region Economic Outlook Preliminary Estimates First Quarter - 2011

*Preliminary Estimates, First Quarter 2011

ECONOMY 2010e 2011f % chg 2012f % chgGDP 3.0 2.2 2.8GDP 3.0 2.2 2.8Employment % chg. 1.8 1.3 1.5Labour Force % chg. 1.5 0.8 1.3Unemployment Rate 8.7 8.2 8.0p yAverage Weekly Earnings 1.8 2.0 2.5

MIGRATION

%chg

Net Migration 102973 114100 10.8% 121200 6.2%Net International 111688 120000 7.4% 127500 6.3%Net Interprovincial -3200 -5900 84.4% -6300 6.8%


Source: Statistics Canada, CMHC Forecast *The outlook is subject to a heightened degree of uncertainty. Although point forecasts are presented in this publication, CMHC also presents forecast ranges and risks where appropriate. The forecastsincluded in this document are based on information available as of January 17, 2011.

Economic & Housing Summary

Ontario Housing Momentum Slows Through 2011 Growth in Housing Resumes in 2012 : Economy &

Migration Offset Rate Hikes Emerging Economies Leading Global Growth Energy & Industrial Goods Sector Leads Western Canada & Northern Ontario Will Outperform Signs US Economic Recovery Sustainable Inflation Expectations and Interest Rates on the Rise


economic & real estate outlookeconomic & real estate outlook · 2011-04-30 · economic...

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