Insights Into the Condominium Market in Canada s Eight Largest Census Metropolitan Areas. Metropolitan Condo Outlook Summer 2007

Transcription

1 Metropolitan Condo Outlook Summer 27 Insights Into the Condominium Market in Canada s Eight Largest Census Metropolitan Areas ECONOMIC PERFORMANCE AND TRENDS

2 Metropolitan Condo Outlook: Insights Into the Condominium Market in Canada s Eight Largest Census Metropolitan Areas by Robin Wiebe About The Conference Board of Canada We are: A not-for-profit Canadian organization that takes a businesslike approach to its operations. Objective and non-partisan. We do not lobby for specific interests. Funded exclusively through the fees we charge for services to the private and public sectors. Experts in running conferences but also at conducting, publishing and disseminating research, helping people network, developing individual leadership skills, and building organizational capacity. Specialists in economic trends, as well as organizational performance and public policy issues. Not a government department or agency, although we are often hired to provide services for all levels of government. Independent from, but affiliated with, The Conference Board, Inc. of New York, which serves nearly 2, companies in 6 nations and has offices in Brussels and Hong Kong. Publication The Conference Board of Canada* Printed in Canada All rights reserved Agreement No *Incorporated as AERIC Inc. Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice. Genworth Financial Canada Genworth Financial Canada, The Homeownership Company, works with lenders, mortgage brokers, real estate agents and builders to make homeownership more affordable and accessible throughout Canada. The company combines global experience in mortgage insurance with technological and service leadership to deliver innovation to the mortgage marketplace. Additional information about Genworth Financial Canada is available at Genworth Financial Genworth is a leading insurance holding company, serving the lifestyle protection, retirement income, investment and mortgage insurance needs of more than million customers. It has operations in 29 countries. For more information, visit Preface This report from The Conference Board of Canada and Genworth Financial Canada offers an in-depth analysis of the condominium market for Canada s eight largest census metropolitan areas (CMAs). The report covers a wide range of condominium market statistics, such as starts, completions, absorptions, and prices. The main goal of this publication is to provide an analysis of the recent trends in the condo market in each of the eight CMAs, as well as an analysis of where each of the eight markets is heading over the next five years. The eight census metropolitan areas covered are Québec, Montréal, Ottawa, Toronto, Calgary, Edmonton, Vancouver, and Victoria. This report is published twice a year, in summer and winter.

3 Contents Executive Summary Québec Montréal Ottawa Toronto Calgary Edmonton Vancouver Victoria Definitions and Concepts Standard Geographical Classification (SGC) The Conference Board of Canada 2 Smyth Road Ottawa ON K1H 8M7 Canada Tel Fax The Conference Board, Inc. 84 Third Avenue, New York NY USA Tel Fax The Conference Board Europe Chaussée de La Hulpe 13, Box 11 B-1 Brussels, Belgium Tel Fax The Conference Board Asia Pacific 282 Admiralty Centre, Tower 1 18 Harcourt Road, Admiralty Hong Kong SAR Tel Fax

4 Executive Summary Canada s apartment condominium market has been strong in recent years but is starting to cool. This easing is relative, though, because both new construction and resale activity will stay high by historical standards. An aging population particularly the increasing population share of those and over in all major urban areas provides a solid demographic underpinning that is critical to the condo market s longer term health, although the absolute size and share of the population aged and over varies in different cities. Victoria and Québec stand out as cities with relatively old populations, while Calgary s is younger. Rising prices for single-detached homes have also bolstered demand for apartment condominiums, which are a relatively affordable ownership alternative. In most markets, condominium starts have risen in tandem with increases in average overall housing prices. Affordability concerns are also impacting first-time homebuyers, and make condos an attractive option for this segment of the home buying population. Starts of new apartment condominiums in several markets have recently hit historical highs. Calgary, Edmonton, Ottawa, and Victoria all posted record starts last year. Toronto s record came in 2, while those in Québec and Montréal were in 24. Vancouver was the outlier; its best year for apartment condominium starts was Even here, though, starts posted a 1-year high in 2. Ottawa saw last year s largest relative growth in apartment condominium starts, with 26 volumes up 87 per cent. Victoria (up 68 per cent) and Calgary (up 2 per cent) also saw significant increases. At the scale s other end, starts fell 9 per cent in Québec and 7 per cent in Toronto. Apartment condominium starts will drop in seven of this report s eight cities this year, with only Edmonton posting an increase. New apartment condominium construction volumes will be held back by rising numbers of complete and unabsorbed apartment condominiums, mainly in this report s eastern centres. This is particularly obvious in Québec and Montréal, although the number of unsold condominiums is also relatively high in Ottawa and Toronto. Builders will seek to clear inventories in many of these markets before embarking on a fresh expansion of new construction. Table 1 Apartment Condo Indicators Starts Resale sales Median resale price ($) 26 27f 28f 26 27f 28f 26 27f 28f Québec 1, ,441 1,22 1,9 124,3 132,47 13, Montréal 7,78 6,4,48 9,41 9,868 1,269 17,47 179,38 184, Ottawa 1,183 1,78 1,2 1,38 1,47 1,27 17,413 18, , Toronto 13,338 11,391 12,487 18,39 18,779 19,89 213,4 222, , Calgary 4,222 2,87 2,667 3,936 4,38 4,124 22,8 27, , Edmonton 3,44 4,23 2,728 3,848 4,411 3,3 164,7 224, , Vancouver 8,93 8,78 7,923 18,183 16,164 17, ,37 314, , Victoria 1, ,176 2,47 2,97 248, , , The Conference Board of Canada /Genworth Financial Canada

5 In the western cities, the number of complete and unabsorbed apartment condominiums either is very low compared with recent history, as in Vancouver and Victoria, or has recently tumbled, as in Calgary and Edmonton. Any weakness in starts in the West, however, is resulting from shortages of required construction inputs rather than from major market slowing. Resale markets in most cities were similarly robust last year, with apartment condominium sales rising in all markets but Victoria. Volumes posted record highs in Québec, Montréal, Ottawa, Edmonton, and Vancouver. All markets saw price increases last year, ranging from 1.7 per cent in Ottawa to 48 per cent in Calgary. Not surprisingly, price increases were faster in the western cities. Price increases are attracting a rising supply of listings in most markets, something that will start to temper price growth this year. Rapid price hikes and slight interest rate increases are eroding affordability in all markets. This is most true in Vancouver, where principle and interest payments on an average-priced condominium consume a quarter of average household income. By contrast, mortgage payments on average condominiums in Québec require only about half that share of income. The Conference Board of Canada /Genworth Financial Canada 3

6 Québec Apartment condominium developers in Québec are responding to changing patterns of housing demand, so although starts are expected to drop back to more sustainable levels, Québec s condominium market may be inoculated against significant volatility. Québec s apartment condominium construction has run up sharply in recent years. Apartment condominium starts averaged 1,86 units per year between 23 and 26, a fourfold increase from average starts in the previous four years. Although the take-up or absorption of new condominiums has been generally solid, it has not matched the rapid growth in starts. Moreover, seasonally adjusted absorptions hit a 16-quarter low in the first quarter of 27. In this environment, the number of complete and unoccupied apartment condominiums has risen sharply, hitting a 1-year high of over 32 units in both the third and fourth quarters of 26. And, despite a slight easing during the winter, first quarter counts of unsold new condominiums remained high. Accordingly, significant drops in apartment condominium starts are expected through the forecast period as builders sell their stocks and construction throttles back to a more sustainable pace. In the next few years, starts are expected to revert to the levels recorded in the late 199s. Québec s resale apartment condominium market has slowed from its hot tempo earlier this decade, although sales volumes remain buoyant and price growth exceeds inflation. Prices have increased steadily despite a drop in the resale sales-toactive-listings ratio since late 23. Optimism is warranted, though, because the decline in the ratio has been prompted by a listings run-up, rather than by easing sales. Sales have exceeded 1,4 units seasonally adjusted at an annual rate in five of the latest six quarters, a high level for this market. The Conference Board expects resale volumes to expand steadily through the forecast period; unit sales are forecast to grow by about 6 per cent this year and by a further per cent in 28. Québec s median apartment condominium price will advance by just under 7 per cent this year, and increase by 2 to 3 per cent annually in the longer term. Developers appear to be catering to an aging population, rather than affordability. People aged and over the prime condominium demographic make up 27 per cent of the total population, second only to Victoria among the eight cities in this report. Indeed, the population aged and over rose by 77 per cent in the 2 years to 26. Continued population aging will support demand for condominiums. Meanwhile, Québec s average resale price for all forms of housing was only about $2, more than the median price for an apartment condominium in 26, further suggesting that demand for condominiums is being driven less by affordability and more by demographics. Local apartment condominium resale affordability has diminished slightly in the last two years, but it remains solid compared with other major markets. Québec s median apartment condominium price rose Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 1,8 1, 1, Chart 2 Apartment Condo Construction Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 4 The Conference Board of Canada /Genworth Financial Canada

7 by 8. per cent year-over-year in the first quarter of 27, while the average five-year mortgage rate nudged up 18 basis points. This lifted the average monthly principle and interest charge to $81, the highest in at least years and 1.2 per cent above that recorded in the first quarter of 26. Since Québec s average household income grew by only an estimated 3.1 per cent, this principle and interest payment is now equivalent to 12.2 per cent of household income, matching the 11-year high recorded in the second quarter of 26. Still, measured in this way, Québec s apartment condominium affordability is the best of all the cities covered in this report and is not expected to impair local development significantly. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) f 9f 11f 2, 2, 1, 1, Sales-to-active-listings ratio (per cent left) Median price growth (per cent right) f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 1,123 1,364 1,441 1,22 1,9 1,682 1,789 1, Active listings ,19 1,77 1,18 1,288 1,397 1, Months supply Median price ($) 18,62 119, ,3 132,47 13, ,21 143,64 148, Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 1,187 1,127 1, Under construction Completions 1,81 1,189 1, Complete and not absorbed Absorptions 98 1,16 1, Months supply The Conference Board of Canada /Genworth Financial Canada

8 Montréal Despite rising supply in both the new and resale markets, Montréal s apartment condominium market has so far remained relatively healthy. But moderating growth is expected on the resale side, along with further declines in starts. Apartment condominium construction in Montréal has eased recently, but remains strong by historical standards. Apartment condominium starts fell by per cent last year, after a per cent drop in 2. But last year s nearly 7,6 starts were still significantly higher than the 1-year annual average of just under 4,4 units. Unfortunately, many of these new condominium units are remaining builders property since, despite healthy unit absorptions, the number of complete and unoccupied apartment condominiums has risen sharply since mid-24. As a result, condominium starts are expected to fall sharply this year and next, before stabilizing at nearly, units in our forecast s later stages. Montréal s resale apartment condominium market has been strong over the past decade or so, and remains in a balanced position. But although resale volumes have been healthy, supply has been getting stronger; this run-up in active listings is boosting buyer choice, trimming the resale sales-to-active-listings ratio and limiting vendors pricing power. Accordingly, despite our expectation of continued sales growth, prices will average more modest but more sustainable growth of 3.4 per cent per year from 28 to 211. Montréal demographics paint a solid backdrop for the area s apartment condominium market. A large population of those aged and over will ultimately support Montréal s condominium market and help offset the competition from the city s relatively affordable single-detached homes. The population aged and over rose by nearly 47 per cent in the 2 years to 26, to reach 24.6 per cent of Montréal s total, relatively high compared with the seven other census metropolitan areas (CMAs) covered in this report. Indeed, demographics and related lifestyle choices likely outweigh affordability as a local market driver, since the average resale price for all forms of housing in Montréal was under $22, during this year s first quarter the lowest of all CMAs in this report except Québec. But despite low relative average prices for housing, local household income growth has not been enough to offset rising prices and interest charges. Therefore, local apartment condominium resale affordability is the poorest among the four eastern CMAs covered in this report, although nowhere near the British Columbia level. During the 12 months ending in the first quarter of 27, Montréal s median apartment condominium price rose by.1 per cent, and the average five-year mortgage rate nudged up 18 basis points. This lifted the principle and interest charge on Montréal s average condominium to $1,64 in the first quarter, the highest on record and 6.8 per cent above that recorded in the first quarter of 26. Over the same time frame, Montréal s average Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 1, Chart 2 Apartment Condo Construction 8, 6, 4, 2, Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; CMHC Housing Time Series Database The Conference Board of Canada /Genworth Financial Canada

9 household income grew by an estimated 4.4 per cent not enough to offset the rise in prices and interest rates. All in all, the average monthly principle and interest payment was equivalent to.6 per cent of household income in the first quarter of this year, up from.3 per cent a year earlier. Overall, however, current debt service ratios appear sustainable, since resale volumes have risen for two straight quarters. But Montréal s relatively low affordability presents a modest forecast risk. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) f 9f 11f, 12, 9, 6, 3, Sales-to-active-listings ratio (per cent left) Median price growth (per cent right) f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 6,89 8,3 9,41 9,868 1,269 1,98 11,68 12, Active listings 3,713,69 6,998 7,836 8,296 8,837 9,421 1, Months supply Median price ($), ,771 17,47 179,38 184,87 191, ,2 2, Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 9,34 7,973 7,78 6,4,48,14 4,979, Under construction 7,69 7, 7,279 7,27,878 4,98 4,61 4, Completions 7,63 7,966 7,773 8,23,368,6 4,998, Complete and not absorbed 1,14 1,61 2,342 2,31 1,668 1,3 1,27 1, Absorptions 6,79 7,72 6,47 9,24 6,129,24,49, Months supply The Conference Board of Canada /Genworth Financial Canada 7

10 Ottawa Apartment condominium starts and resale volumes both hit record highs in Ottawa in 26. And although starts are expected to sag this year, an aging population and deteriorating affordability of competing single-detached homes underpin favorable long-run prospects. Ottawa s apartment condominium starts totalled 1,183 units last year, up a whopping 87 per cent from a slow 2. This was the largest increase among the eight markets covered in this report. Condominiums have clearly gained acceptance among Ottawa homebuyers and developers; apartment condominium starts averaged 82 units annually in 22 26, nearly an eightfold hike from the prior five-year period. Still, 27 will see condominium starts pull back as last year s outburst is absorbed. Developers are well aware that the number of complete and unoccupied condominiums has been relatively high since early 24. Starts are expected pick up again next year, and then level off at a relatively high volume in the medium term as prices for competing single-family homes continue to escalate and the population continues to age. Price growth in Ottawa s apartment condominium resale market has cooled significantly in recent years, as double-digit percentage hikes in increasingly prompted condominium owners to list their units. This, combined with sales that were flat or falling in 23 2, cut the sales-to-activelistings ratio from 67.7 per cent in 22 to 23 per cent in 26. The easing sales-to-active-listings ratio brought about downward pressure on condominium price increases. Specifically, from an average annual increase of over 11 per cent from 2 to 2, resale price growth was reduced to 1.7 per cent last year. Rebounding sales of late, combined with an easing in new listings, are beginning to improve the market s balance. This will allow median apartment condominium prices to rise by nearly 6 per cent this year, after last year s limited hike. Looking forward, we expect the median local condominium price to post a more modest average annual increase of 3 per cent from 28 to 211. An aging population will provide reasonable support for Ottawa s condominium market. As of 26, 22. per cent of the Ottawa CMA s population was aged and over a key segment of the population interested in buying condominiums. That percentage was up from 19 per cent just 1 years before. The share of condominium starts relative to total housing starts has risen in line with the proportion of people aged and over. The continued aging of the population will only increase the pool of potential condominium inhabitants. Modest mortgage rate increases, slow-but-steady condominium price increases, and moderating income growth are combining to chip away at local resale affordability, although to a lesser extent than in cities further west. During the year ending in the first quarter of 27, the median condominium price rose by.9 per cent, and the average five-year mortgage rate edged up 18 basis points. This lifted the principle and interest charge on Ottawa s average condominium Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 1,4 1,2 1, Chart 2 Apartment Condo Construction Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation The Conference Board of Canada /Genworth Financial Canada

11 to $1,124 per month in the first quarter, 7.7 per cent higher than the year before, and the highest since our records begin in Unfortunately, income growth simultaneously slowed to 1. per cent. As a result, mortgage payments are now equivalent to 14.1 per cent of Ottawa s average household income, also the highest percentage on record. Nonetheless, Ottawa s condominium affordability remains good by the standards of the other cities in this report and does not represent a significant obstacle to the market s performance over the forecast horizon. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) f 9f 11f 2, 1,6 1, Sales-to-active-listings ratio (per cent left) Median price growth (per cent right) f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 1,187 1,189 1,38 1,47 1,27 1,66 1,616 1, Active listings Months supply Median price ($) 16, ,47 17,413 18, , ,1 22,378 28, Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 1, ,183 1,78 1,2 1,176 1,146 1, Under construction 1,219 1,148 1,277 1,474 1,449 1,33 1,246 1, Completions ,229 1,233 1,226 1, Complete and not absorbed Absorptions ,171 1,179 1,182 1, Months supply The Conference Board of Canada /Genworth Financial Canada 9

12 Toronto Steady sales increases and modest price growth for resale apartment condominiums in Toronto will persist through the medium term. Although Toronto s population is relatively young, the affordability of condominiums is expected to bolster the new and resale market. Apartment condominium starts in Toronto eased to roughly 13,3 units last year, but still posted the secondhighest number since at least 199. Recent annual starts patterns have fluctuated, with increases one year followed by declines the next. This year looks set to break this pattern, as we expect an additional dip in apartment condominium starts. This year s drop in starts will be prompted, in part, by easing absorptions, which hit a six-quarter low in the fourth quarter of 26, before rising slightly in the first quarter of 27. We expect absorptions will end 27 down about two per cent, but snap back nicely next year. Despite the recent easing in absorptions, the number of complete and unoccupied apartment condominiums has risen only slightly and, indeed, fell to a three-quarter low in the first quarter of 27. Toronto s resale apartment condominium market is purring along in a balanced state, as it has for the most part over the past few years. Sales rose by just under 4 per cent last year, and then advanced further in the first quarter of 27. Although Toronto s average apartment condominium price has risen roughly 6 per cent in each of the last two years strong growth by the standards of the two years before that such hikes remain modest compared with growth earlier this decade. The supply of active listings in the resale market has eased in recent quarters. This, along with recent sales growth, pushed the resale market s sales-to-active-listings ratio into the 3 per cent neighborhood a level consistent with a solid but not overheated market. Sales growth will pull back slightly this year but accelerate to the 7 per cent range through the rest of the forecast period. Meanwhile, Toronto s median apartment condominium price will rise just over 4 per cent this year, broadly consistent with the market s longterm historical growth, but ease to about 3 per cent in the medium term. Toronto has a lower proportion of the key condominium target population of those aged and over than other cities in this report. Still, as elsewhere, this group is growing rapidly, from 19 per cent of the total population in 1996 to 21 per cent in 26. The share of condominium starts relative to total housing starts in Toronto has risen in virtual lockstep with the rising population share of those aged and over. Toronto s high resale price for single-family homes makes affordability another factor in favour of the condominium market. Affordability has also been fairly stable over the past several quarters. Over the year ending in the first quarter of 27, Toronto s median apartment condominium price increased by 3. per cent, and the average five-year mortgage rate nudged up 18 basis points. This lifted the principle and interest charge on Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 16, 14, 12, 1, 8, 6, 4, 2, Chart 2 Apartment Condo Construction Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation The Conference Board of Canada /Genworth Financial Canada

13 Toronto s average condominium up.2 per cent to $1,33 per month. Since concurrent growth in average Toronto household income was 2.8 per cent, this principle and interest payment now represents 14.9 per cent of household income, up from 14.6 per cent a year earlier. But despite this relative stability, percentages near per cent are the highest since early 199 and present a slight forecast risk. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) Sales-to-active-listings ratio (per cent left) Median price growth (per cent right) f 9f 11f 2, 2,, 1,, f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 17,29 17,686 18,39 18,779 19,89 2,881 22,184 23, Active listings,332,171,73,139,242,43,714 6, Months supply Median price ($) 19,417 21, ,4 222, ,2 236,27 244,973 24, Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 12,4 14,376 13,338 11,391 12,487 13,369 14,27, Under construction 21,73 24,181 24,88 23,21 22, 2,14 19,28 18, Completions 9,798 12,134 13,81 13,149 14,87,8,21, Complete and not absorbed ,2 1,472 1, Absorptions 9,4 12,372 13,39 13,112 14,66 14,93,264, Months supply The Conference Board of Canada /Genworth Financial Canada 11

14 Calgary Calgary s market for apartment condominiums, like the rest of the city s economy, has been sizzling. This has prompted strong starts, sales and price growth. Although starts will drop this year, the resale market will stay robust. Apartment condominium starts in Calgary jumped 2 per cent to an all-time high of 4,222 units last year, eclipsing the previous record, set in 24, by more than a fifth. Annual starts had averaged just over 2, units in the 1 years to 24. Strong absorptions of new apartment condominiums, which averaged just under 2,7 units seasonally adjusted at an annual rate in the latest four quarters, and a virtual lack of complete and unoccupied apartment condominiums underpin this developer interest. Still, apartment condominium starts sagged in the first quarter, partly because of input shortages, and will end the year off significantly. Starts will hover around 2, units through the rest of the forecast period as resources stay fairly tight. Calgary s resale apartment condominium market has also been extremely hot and remains in a sellers state, although recent listing supply increases will cool torrid price increases. In the medium term, the market is expected to return to a balanced state. Sales rose 17 per cent last year, after a 23 per cent jump in 2, but were still below the 4,2 sales recorded in 22. Meanwhile, the average price for an apartment condominium rose a blistering 48 per cent last year, following 6.7 per cent growth in 2. The increase put Calgary s average apartment condominium price at $22,8, ahead of Toronto s and behind only Vancouver and Victoria among the cities in this report. Rapid price increases have encouraged active listings hikes averaging 8 per cent in the latest four quarters. Since simultaneous sales growth has averaged only eight per cent, the resale sales-to-active-listings ratio has eased from unbelievable levels well over 1 per cent (the point at which sales equal active listings) to a still-astounding average of 7 per cent during the latest three quarters. Sales will rise nearly 11 per cent to a new record this year, before pulling back next year. Meanwhile, the rising supply of active apartment condominium listings will cool increases in average prices to 2 per cent this year and to rates consistent with a balanced market in the medium term. Calgary demographics are not particularly favourable for apartment condominiums, at least as far as the pool of people aged and over is concerned. This group made up only 18.3 per cent of Calgary s population, the lowest among this report s eight centres. Still, the population is aging rapidly; the proportion of Calgary residents over was only 14 per cent in 1986 and.7 per cent in The absolute number of such residents has more than doubled in the 2 years to 26. Price run-ups have significantly eroded local apartment condominium resale affordability to the point where it represents a modest forecast risk. In the year ending at this year s first quarter, Calgary s median apartment Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 4, 4, 3, 3, 2, 2, 1, 1, Chart 2 Apartment Condo Construction Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation The Conference Board of Canada /Genworth Financial Canada

15 condominium price jumped 43 per cent, while the average five-year mortgage rate rose 18 basis points. This lifted the monthly principle and interest charge on Calgary s average condominium to $1,64 in the first quarter, the highest since at least 1993, when our Calgary data begins, and 4 per cent higher than what it was 12 months earlier. Since average household income was concurrently flat, this principle and interest payment is now equivalent to.9 per cent of household income, up from 1.8 per cent a year earlier. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) f 9f 11f, 4, 3, 2, 1, Sales-to-active-listings ratio (per cent left) Median price growth (per cent right) f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 2,746 3,379 3,936 4,38 4,124 4,49 4,68 4, Active listings ,34 1,126 1, Months supply Median price ($) 142,974 2,3 22,8 27, ,33 36,722 3, , Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 3,41 2,78 4,222 2,87 2,667 2,26 2,497 2, Under construction 3,98 4,141,386 4,72 3,32 3,121 3,91 3, Completions 2,461 2,66 2,79 2,419 2,749 2,71 2,688 2, Complete and not absorbed , Absorptions 2,48 2,717 2,849 2,216 2,97 2,63 2,667 2, Months supply The Conference Board of Canada /Genworth Financial Canada 13

16 Edmonton Edmonton s robust economy is driving the market for apartment condominiums. Low supplies of new and resale units will continue to generate strong price growth this year. But activity will moderate in the medium term because of deteriorating affordability. Edmonton s apartment condominium market is hot, as are most other aspects of its economy. Apartment condominium starts rose 11 per cent last year to a record 3,44 units following a robust 29 per cent jump in 2. Starts had averaged about 1,32 units in the prior 1 years, so the past two were exceptional. Brisk absorptions are underpinning developer confidence; these averaged just under 3,6 units seasonally adjusted at an annual rate in the 12 months leading up to the end of the first quarter of 27, above last year s starts count. Therefore, the number of complete and unoccupied apartment condominiums has fallen sharply. In the latest four quarters, these unabsorbed apartment condominiums were equivalent to just under eight per cent of starts. Although this year will see additional strong starts growth, activity is expected to taper off in the medium term, with apartment condominium starts hovering around 2, units. Edmonton s resale apartment condominium market will also stay strong this year, before moderating in 28. Its current strong sellers position is expected to persist through 27 but become more balanced next year. Resale volumes have run up strongly in recent years, with last year s volume more than twice the annual average of the previous 1 years. Sales soared 1 per cent to a record 3,848 units last year, following 22 per cent growth in 2. Resale price growth has been similarly strong, although below Calgary s incandescent rate. Average prices are also still modest compared with most other cities in this report. This strong market has sharply reduced the number of active listings, so the resale sales-to-active-listings ratio has vaulted past 1 per cent (the point at which sales equal active listings) in three of the latest four quarters. Sales will continue their strong growth this year, before pulling back in 28 and then rising moderately in the medium term. Prices will advance rapidly in the current market, which favours sellers, but throttle back to a more sustainable pace in the medium term. Edmonton has a relatively young population compared with this report s other cities, suggesting that demographics do not underpin developer building intentions as much as elsewhere. Nonetheless, Edmonton s population is aging rapidly and will continue to support the apartment condominium market. The number of potential condominium inhabitants and over rose 42 per cent from 1996 to 26, increasing their share of Edmonton s total population from 17.4 per cent to 2.9 per cent. Local apartment condominium resale affordability has deteriorated sharply as prices have run up and interest rates have advanced slightly. During 12 months ending the first quarter of this year, Edmonton s Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 4, 4, 3, 3, 2, 2, 1, 1, Chart 2 Apartment Condo Construction Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation The Conference Board of Canada /Genworth Financial Canada

17 median apartment condominium price rose 8.7 per cent, and the average five-year mortgage rate crept up 18 basis points. This boosted principle and interest mortgage costs for an average Edmonton apartment condominium to $1,341 per month in the first quarter, the highest on record. Since Edmonton s average household income actually eased modestly at the same time, this principle and interest payment is now equivalent to 17.3 per cent of household income, up from 1. per cent a year earlier. This proportion is also the highest on record, so its rapid increase represents a significant market risk. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) f 9f 11f, 4, 3, 2, 1, Sales-to-active-listings ratio (per cent left) Median price growth (per cent right) f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 2,93 2,4 3,848 4,411 3,3 3,48 3,694 3, Active listings Months supply Median price ($) 128,14 13, ,7 224, , ,79 27,98 263, Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 2,47 3,98 3,44 4,23 2,728 2,1 2,488 2, Under construction 4,2 3,867 4,8,144 3,36 2,97 2,869 2, Completions 2,7 2,149 2,631 3,732 2,663 2,492 2,4 2, Complete and not absorbed Absorptions 2,328 2,8 3,9 3,69 2,66 2,44 2,418 2, Months supply The Conference Board of Canada /Genworth Financial Canada

18 Vancouver Vancouver s market for apartment condominiums is set to cool modestly. Rising inventories of new units will cut starts this year and next. Meanwhile, a larger supply of resale listings is beginning to slow price increases. Affordability is also an issue. Starts of apartment condominium units in Vancouver eased four per cent last year but, at 8,93 units, were still well above the annual average of,6 units during the previous 1 years. Absorptions remain relatively high, although recent growth has been flat, trailing the increases in starts. This boosted the number of complete and unoccupied apartment condominiums to a four-year high in the first quarter of 27. In response, as builders attempt to lower their inventories of unsold units, apartment condominium starts will dip both this year and next, then rise gently over our forecast s later stages. Vancouver s resale apartment condominium market has been similarly buoyant and remains in a seller s position. Annual sales have risen for three straight years, including a 6 per cent rise last year to a record 18,183 units. Resale price increases have also been outsized. Double-digit percentage hikes in each of the last four years culminated in growth near 2 per cent last year, putting Vancouver s average apartment condominium price in the $3, neighbourhood, the highest among cities in this report. Such strong pricing is attracting a rising supply of active listings, with quarterly hikes averaging nearly 18 per cent over the past year. This is beginning to increase buyer choice and limit vendor pricing power. Indeed, the resale sales-to-active-listings ratio has averaged 4 per cent in the latest four quarters, still strong but below the prior four quarters average of 4 per cent. Sales will pull back 11 per cent this year, although the resulting 16,164-unit forecast remains well above the 12,38-unit average in Vancouver s median apartment condominium price will advance at a more sustainable pace, but growth will still reach 7.2 per cent this year and average 3.8 per cent per year from 28 to 211. Vancouver demographics are generally amenable to apartment condominiums. One of the target demographic age groups, of people aged and over, represents 23 per cent of Vancouver s total population, slightly above the average of the other cities in this report. Vancouver and Victoria, its British Columbia sister, have a different demographic history than this report s other six centres. Both had a relatively high share of their population aged and over in 1986, as their favourable climates attract retirees. These proportions then dipped in the mid- 199s. Still, Vancouver s and over population rose by 37 per cent in the 1 years to 26. Local apartment condominium resale affordability in Vancouver is the weakest among this report s eight cities and presents a significant forecast risk. During the year ending in the first quarter of 27, Vancouver s median apartment condominium Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 12, 1, 8, 6, 4, 2, Chart 2 Apartment Condo Construction Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation The Conference Board of Canada /Genworth Financial Canada

19 price increased by 12.1 per cent, while the average five-year mortgage rate nudged up 18 basis points. For an average apartment condominium, this meant a monthly principle and interest charge of $1,898 in the first quarter of 27, just off the $1,914 fourth quarter payment (the highest since our records began in 1993), but up 14 per cent year-over-year. Since Vancouver s average household income grew by only 3.2 per cent in the year to the first quarter, this principle and interest payment is now equivalent to 2.1 per cent of household income, up from 22.7 per cent a year earlier. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) Sales-to-active-listings ratio (units left) Median price growth (per cent right) f 9f 11f 2, 2,, 1,, f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 16,48 17,146 18,183 16,164 17,121 18,266 19,23 2, Active listings 4,32 3,39 3, 3,97 3,8 4,41 4,49 4, Months supply Median price ($) 214,29 247, ,37 314, , ,116 32,8 36, Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 8,42 9,291 8,93 8,78 7,923 8,2 8,23 8, Under construction 1,2 12,382 14,46 14,831 12,8 1,892 1,7 9, Completions 4,8 6,96 8,12 8,77 8,288 8,22 8,372 8, Complete and not absorbed ,193 1, Absorptions 4,93 6,91 8,143 8,39 7,99 7,976 8,117 8, Months supply The Conference Board of Canada /Genworth Financial Canada 17

20 Victoria Balanced markets are in the offing for both new and resale apartment condominiums in Victoria following several very strong years. Nice weather and the area s natural beauty make it a desirable place to retire, and retirees frequently choose condominiums. Apartment condominium starts soared 68 per cent to 1,439 units in Victoria last year, an all-time high for this market and more than triple the 423-unit average of the previous 1 years. This activity has been abetted by strong absorptions, which hit their third-highest level in over 1 years last fall. Absorptions are expected to drop this year and next as recent hikes in resale supply compete for consumers attention. This will result in an upswing in the number of complete and unoccupied apartment condominiums, causing apartment condominium starts to fall both this year and next before stabilizing in our forecast s later stages. Victoria s resale apartment condominium market is also easing to a more sustainable pace after several strong years of sellers conditions. Last year, resale volumes fell for the first time in three years, although resale price growth remained almost as high as 2 s strong pace. A balanced market appears in store later this year. Sales fell by 6 per cent last year but remained near 2,2 units, still high for this market. Meantime, the volume of active listings has run up quickly, averaging just under 8 units in the latest four quarters, up sharply from an average of roughly 47 units in the prior four. Accordingly, the resale sales-to-active-listings ratio has hovered under 3 per cent during each of the past five quarters, a big drop from the upper 4 per cent range during 2. This has cut growth in Victoria s median apartment condominium price to under 12 per cent, at an annual rate, in each of the latest two quarters, after growth averaged close to 2 per cent in the prior eight. Sales of existing Victoria apartments will rebound 14 per cent this year, although the recent listings increase will slice this year s price growth to about 6 per cent. Sales increases will be relatively brisk in the medium term, although price hikes will moderate to the 3 4 per cent range. Victoria features the most favourable demographics for apartment condominiums of any of this report s eight cities. Potential condominium inhabitants aged or over account for 3 per cent of Victoria s population, higher than the other seven cities, even though the area s 21.7 per cent increase over the decade ending 26 was relatively modest. As in Vancouver, a relatively high share of Victoria s population was above years old in 1986, likely because of the climate s attractiveness to retirees. This proportion then dipped temporarily in the mid-199s. Affordability for resale apartment condominiums is relatively poor in Victoria and presents a mild forecast risk. In the 12 months leading up to the end of March 27, Victoria s median apartment condominium price jumped rose 11.8 per cent, Chart 1 Share of Population by Age Cohort f Sources: The Conference Board of Canada; Statistics Canada. 1,8 1,6 1,4 1,2 1, Chart 2 Apartment Condo Construction Apartment condo starts (units left) Starts as a per cent of multiple starts (right) f 1f Sources: The Conference Board of Canada; Canada Mortgage and Housing Corporation The Conference Board of Canada /Genworth Financial Canada

21 and the average five-year mortgage rate nudged up 18 basis points. As a result, the monthly principle and interest charge on Victoria s average condominium rose to just over $1,6 in the first quarter, the highest on record and up 13.6 per cent from the same period a year earlier. Since Victoria s average household income grew only 3.6 per cent, this mortgage payment is now equivalent to 21.9 per cent of average household income, up from 2 per cent a year earlier. These ratios were the highest since 1994, so they present a moderate forecast risk. Chart 3 Affordability and Apartment Condo Sales Chart 4 Sales to Active Listings and Price Change Per cent of household income spent on mortgage (left) Existing apartment condo sales (units right) f 9f 11f, 4, 3, 2, 1, Sales-to-active-listings ratio (units left) Median price growth (per cent right) f 1f Table 1 Resale Condominium Apartment Market f 28f 29f 21f 211f Unit sales 2,39 2,37 2,176 2,47 2,97 3,323 3,633 3, Active listings Months supply Median price ($) 179,93 213,9 248, , ,98 28,71 293,79 32, Table 2 New Condominium Apartment Market f 28f 29f 21f 211f Starts 1,8 86 1, Under construction 8 1,181 1,49 1, Completions Complete and not absorbed Absorptions Months supply The Conference Board of Canada /Genworth Financial Canada 19

22 Definitions and Concepts 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. Under construction Units started but not completed. Completions Units where all the proposed construction work has been performed or, in some cases, where 9 per cent of construction work has been completed and the structure is fit for occupancy. Complete and not absorbed Newly completed units that remain unoccupied. Absorptions Newly completed units sold or rented. Units pre-sold or pre-leased are not included until the completion stage. Months supply (new condos) The number of months needed to absorb units that are completed but not absorbed. Unit sales The number of exiting condo apartments sold on the multiple listing service (MLS). Active listings The number of condo apartments for sale on the MLS. Sales-to-active-listings ratio The number of condo apartments sold divided by the number of active condo apartment listings. Months supply (resale) The number of months needed to sell the current supply of active listings, based on an average of recent months sales volumes. Median resale price The median resale price is found by arranging all the sales prices for resale condo apartments in a particular city from lowest value to highest value and picking the middle one. Average resale price The average resale condo apartment price in a particular city. Data do not generally include figures for new construction sales. 2 The Conference Board of Canada /Genworth Financial Canada

23 Standard Geographical Classification (SGC) 26 Metropolitan areas with their component census subdivisions Name Type Name Type Québec Beaumont Boischatel Château-Richer Fossambault-sur-le-Lac Lac-Beauport Lac-Delage Lac-Saint-Joseph L Ancienne-Lorette L Ange-Gardien Parish ( of) Lévis Notre-Dame-des-Anges Parish ( of) Québec Saint-Augustin-de-Desmaures Sainte-Brigitte-de-Laval Sainte-Catherine-de-la-Jacques-Cartier Sainte-Famille Parish ( of) Sainte-Pétronille Saint-François-de-l Île-d Orléans Saint-Gabriel-de-Valcartier Saint-Henri Saint-Jean-de-l Île-d Orléans Saint-Lambert-de-Lauzon Parish ( of) Saint-Laurent-de-l Île-d Orléans Saint-Pierre-de-l Île-d Orléans Shannon Stoneham-et-Tewkesbury United ships ( of) Wendake Montréal Baie-d Urfé Beaconsfield Beauharnois Beloeil Blainville Boisbriand Bois-des-Filion Boucher Brossard Candiac Carignan Chambly Charlemagne Châteauguay Coteau-du-Lac Côte-Saint-Luc Delson Deux-Montagnes Dollard-des-Ormeaux Dorval Cité Gore ship ( of) Hampstead Hudson Kahnawake Kanesatake Indian settlement Kirkland La Prairie L Assomption Laval Lavaltrie L Épiphanie Parish ( of) L Épiphanie Léry Les Cèdres Les Coteaux L Île-Cadieux L Île-Dorval L Île-Perrot Longueuil Lorraine Mascouche McMaster Mercier Mirabel Montréal Montréal-Est Montréal-Ouest Mont-Royal Mont-Saint-Hilaire Notre-Dame-de-l Île-Perrot Oka Otterburn Park Pincourt Pointe-Calumet Pointe-Claire Pointe-des-Cascades Repentigny Richelieu Rosemère Saint-Amable Saint-Basile-le-Grand Saint-Bruno-de-Montar Saint-Colomban Saint-Constant Sainte-Anne-de-Bellevue Sainte-Anne-des-Plaines Sainte-Catherine Sainte-Julie Sainte-Marthe-sur-le-Lac Sainte-Thérèse Saint-Eustache Saint-Isidore Saint-Jérôme Saint-Joseph-du-Lac Saint-Lambert Saint-Lazare Saint-Mathias-sur-Richelieu Saint-Mathieu Saint-Mathieu-de-Beloeil Saint-Philippe Saint-Placide Saint-Sulpice Saint-Zotique Senneville Terrasse-Vaudreuil Terrebonne Varennes Vaudreuil-Dorion Vaudreuil-sur-le-Lac Verchères Westmount Ottawa Clarence-Rockland Ottawa Russell Toronto Ajax Aurora Bradford West Gwillimbury Brampton Caledon Chippewas of Georgina Island First Nation East Gwillimbury Georgina Parish ( of) Parish ( of) Parish ( of) ship The Conference Board of Canada /Genworth Financial Canada 21

24 Standard Geographical Classification (SGC) 26 Name Type Name Type Halton Hills King Markham Milton Mississauga Mono New Tecumseth Newmarket Oakville Orangeville Pickering Richmond Hill Toronto Uxbridge Vaughan Whitchurch-Stouffville Calgary Airdrie Beiseker Calgary Chestermere Cochrane Crossfield Irricana Rocky View No. 44 Tsuu T'ina Nation 14 (Sarcee 14) Edmonton Alexander 134 Beaumont Betula Beach Bon Accord Bruderheim Calmar Devon Edmonton Fort Saskatchewan Gibbons Golden Days Itaska Beach Kapasiwin Lakeview Leduc Leduc County Legal Morinville New Sarepta Parkland County Point Alison Redwater Seba Beach Spring Lake Spruce Grove St. Albert Stony Plain Stony Plain 13 Strathcona County Sturgeon County Sundance Beach Thorsby Wabamun Wabamun 133A Wabamun 133B Warburg ship ship Municipal district Summer village Summer village Summer village Summer village Summer village County (municipality) County (municipality) Summer village Summer village Specialized municipality Municipal district Summer village Vancouver Anmore Barnston Island 3 Belcarra Bowen Island Burnaby Burrard Inlet 3 Capilano Coquitlam Coquitlam 1 Coquitlam 2 Delta Greater Vancouver A Katzie 1 Katzie 2 Langley Langley Langley Lions Bay Maple Ridge Matsqui 4 McMillan Island 6 Mission 1 Musqueam 2 Musqueam 4 New Westminster North Vancouver North Vancouver Pitt Meadows Port Coquitlam Port Moody Richmond Semiahmoo Seymour Creek 2 Surrey Tsawwassen Vancouver West Vancouver White Rock Whonnock 1 Victoria Becher Bay 1 Capital H (Part 1) Central Saanich Cole Bay 3 Colwood East Saanich 2 Esquimalt Esquimalt Highlands Langford Metchosin New Songhees 1A North Saanich Oak Bay Saanich Sidney Sooke South Saanich 1 T'Sou-ke 1 (Sooke 1) T'Sou-ke 2 (Sooke 2) Union Bay 4 Victoria View Royal Island municipality Regional district electoral area Regional district electoral area 22 The Conference Board of Canada /Genworth Financial Canada

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