Ontario Rental Market Overview & Outlook

Transcription

1 Ontario Rental Market Overview & Outlook FRPO & GTAA Rental Market Update Breakfast February 2018 Ted Tsiakopoulos Regional Economist, CMHC CANADA MORTGAGE AND HOUSING CORPORATION

2 KEY TAKEAWAYS Ontario & BC Remain Tightest Rental Markets Tightest Rental Markets in Ontario South East Tightening Demand Shifting to Less Expensive Housing Vacancy Rates Still Have Room To Fall - Rents Will Grow Demand Supply Imbalances Will Narrow But Composition of New Supply a Bigger Question National Housing Strategy To Play Important Role CANADA MORTGAGE AND HOUSING CORPORATION 2

3 Ontario Rental Vacancy Rates Among the Lowest Rental Apartment Vacancy Rates - Overall BC ALTA ONT QUE NFLD CAN Source: CMHC Rental Market Survey CANADA MORTGAGE AND HOUSING CORPORATION 3

4 Eastern Ontario Vacancies Decline N. Ontario Vacancies Still Elevated Rental Apartment Vacancy Rates - Overall Source: CMHC Rental Market Survey CANADA MORTGAGE AND HOUSING CORPORATION 4

5 Demand Growing More At Lower End Growth in Rental Demand* 2016 vs % 8% 6% 4% 2% 0% -2% -4% -6% -8% Low End High End Toronto Ottawa Kitchener Hamilton London Sudbury Source: CMHC Rental Market Survey *Demand measured as change in occupied stock at 20th(low end) and 80 th (high end) rent percentiles CANADA MORTGAGE AND HOUSING CORPORATION 5

6 Southern Ontario Rents Grow Faster vs North & East Same Sample Overall Apt Rent - % chg Source: CMHC Rental Market Survey CANADA MORTGAGE AND HOUSING CORPORATION 6

7 Factors Impacting Ontario Vacancy Rates FACTORS Job Market D D Demographics D D Cost Gap (Own vs Rent) D D Expectations/Psychology N D New Rental Supply U U Net Effect D D D=Downward Pressure U=Upward Pressure N=Neutral Source: CMHC Rental Market Survey, Statistics Canada, Social Media Data CANADA MORTGAGE AND HOUSING CORPORATION 7

8 Downtrend in Rental Vacancy Rates Will Continue Ontario Rental Apartment Vacancy Rates - Overall Source: CMHC Rental Market Survey, CANADA MORTGAGE AND HOUSING CORPORATION 8

9 How Low Can Ontario Vacancy Rates Go? 12 Historical Annual Rental Apartment Vacancy Rates (Post 1988) - Overall 10 8 Historical Hi Historical Low Fall Source: CMHC Rental Market Survey, CANADA MORTGAGE AND HOUSING CORPORATION 9

10 Rental Market Benefits From Being Pro- Cyclical Unemployment & Rental Vacancy Rates % - Ontario Forecast UNEMRT VACRT f Source: Statistics Canada, CMHC Rental Market Survey, CMHC forecast(f) CANADA MORTGAGE AND HOUSING CORPORATION 10

11 Ontario Economy Growing Faster vs Rest of Canada Since 2015 GDP Index (2009=100) Rest of Canada GDP Ontario GDP Q1 2009Q1 2011Q1 2013Q1 2015Q1 2017Q1 Source: Statistics Canada Economic Accounts, Ontario Ministry of Finance, CMHC calculation CANADA MORTGAGE AND HOUSING CORPORATION 11

12 But Will Grow At Slower Rate Especially vs Pre Recession Period Best Years For Ontario Economy Likely Behind Us GDP % chg Emp % chg e 2018f 2019f Pre 2008 Source: Statistics Canada Economic Accounts, Statistics Canada LFS, CMHC Forecast (f) CANADA MORTGAGE AND HOUSING CORPORATION

13 Consumer Sector More Vulnerable Due to Rising Debt, Higher Rates Household Debt to Disposable Income % - Canada Q Q Q Q Source: Statistics Canada CANADA MORTGAGE AND HOUSING CORPORATION 13

14 Some Sectors Will Benefit From Rotation of Growth Accelerating Decelerating IT RETAIL HEALTH & GOVT FINANCE NATURAL RESOURCES HOUSING Source: Statistics Canada, CMHC CANADA MORTGAGE AND HOUSING CORPORATION 14

15 Bigger Dip in Millennial Ownership Rates Blip or New Downtrend? 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Owner Hlds-ONT 2006 Owner Hlds-Ont 2011 Owner Hld-Ont 2016 Renter Hlds-Ont 2006 Renter Hlds-Ont 2011 Renter Hld-Ont to 24 years 25 to 34 years 35 to 44 years 45 to 54 years 55 to 64 years 65 to 74 years 75 to 84 years 85 years and over Source: Statistics Canada Census Ontario data CANADA MORTGAGE AND HOUSING CORPORATION 15

16 Eroding Affordability To Dampen First Time Buyer Demand First time buyer* (FTB) share % 80% 70% 60% 50% 40% 30% Forecast Affordability** 160% 140% 120% 100% 80% 60% 20% 10% FTB share Affordability* 40% 20% 0% (f) 2019(f) 0% Source: Statistics Canada, CREA, CMHC * Based on CMHC high and low ratio data **Required income as a share of actual household income to buy average resale home, Ontario CANADA MORTGAGE AND HOUSING CORPORATION 16

17 Higher Share of Renters Under Age of 44 & Carrying Most of the Debt 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% % of renters by age % of total debt held by age Under 44 45to Source: Statistics Canada Survey of Financial Security, & Census 2016 Ontario data CANADA MORTGAGE AND HOUSING CORPORATION 17

18 Ontario Migration Easing But Remains Above Decade Average International Migration Impacted By Global Conditions International Interprovincial (F) 18 Source: Statistics Canada, CMHC Estimate(e) CANADA MORTGAGE AND HOUSING CORPORATION

19 Demand/Supply Balance Calls For More Rental Supply New Rental Completions*(Supply) Growth in Renter Households (Demand) - CMHC Forecast ( ) Actual Growth in Rental Households (2016 Census) (f) Source: CMHC Starts & Completions Survey, Statistics Canada Census Annual Averages *Does not include condominiums completed and available for rent CANADA MORTGAGE AND HOUSING CORPORATION 19

20 Only 18% of Renter Households Can Access Newly Constructed Units 33% Newer Units Distribution of Renter Household Income - Ontario 35% 30% 25% 20% $65K required for newer existing rental unit occupancy (33%) earning>$60k $83K required for newly constructed units (18%) earning >80K 15% 10% 5% 0% Less Than $20,000 $20,000 to $39,999 $40,000 to $59,999 $60,000 to $79,999 $80,000 to $99,999 $100,000 And Over Source: Statistics Canada Census, CMHC RMS calculations CANADA MORTGAGE AND HOUSING CORPORATION 20

21 Rents To Grow But Some Downside Risks To Growth 920 Inflation Adjusted Rents 2 Bed Apt. - Ontario Source: CMHC Rental Market Survey, CANADA MORTGAGE AND HOUSING CORPORATION 21

22 Rental Market Turnover Will Remain Low Rental Unit Turnover Rate** Toronto St. Catharines Ottawa Sudbury Hamilton ONTARIO Kitchener Brantford Peterborough Guelph Oshawa London Thunder Bay Kingston Windsor Belleville* Barrie FACTORS? 1. Rent Controls 2. Eroding Affordability 3. Population Aging Source: CMHC Rental Market Survey *Data suppressed **Share of rental units changing occupancy last 12 months CANADA MORTGAGE AND HOUSING CORPORATION 22

23 Risks To Ontario Vacancy Rates 2018/19 Risks Exerting Upward Pressure Much Slower Pace of Business Investment/Hiring (Trump effect, Minimum Wage) Elevated Household Debt Among Younger Adults Risks Exerting Downward Pressure Stronger Youth Job Market & Release of Pent-Up Demand Stronger US Economy vs Forecast More Significant Erosion of Ownership Affordability Stronger International Migration Policy Induced (Rent Control, Minimum Wage) CANADA MORTGAGE AND HOUSING CORPORATION 23

24 GTA Rental Market Overview 8 th February 2018 Dana Senagama Principal, Market Analysis (GTA) CANADA MORTGAGE AND HOUSING CORPORATION

25 Record Low Vacancy Rates in the GTA 4.3% 3.8% 3.7% Vacancy Rate 3.2% 3.2% 3.1% 2.5% 2.1% 2.0% 1.6% 1.4% 0.9% 0.8% 0.9% 0.8% 0.7% 1.8% 1.8% 1.7% 1.7% 1.6% 1.6% 1.4% 1.4% 1.3% 1.2% 1.1% 1.1% 1.0% 0.7% 0.4% 0.4% 0.4% 0.1% Condo Rental Apartment Purpose- Built Rental Apartment Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION

26 The Current Housing Market High Demand Low Supply CANADA MORTGAGE AND HOUSING CORPORATION

27 Accelerated Rent Growth Due to Lack of Supply Rent Growth * 5.0% 4.2% 4.0% 3.0% 2.0% 1.8% 1.9% 2.8% Millennials 3.0% 2.7% 3.3% 3.2% 1.0% 0.0% **GTA fixed sample two-bedroom apartment rent Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION

28 Recent Upswing in Rental Construction No Match for Condos Condominium Apartment Completions Rental Apartment Completions Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION

29 Flat Purpose- Builts, Increasing Condo Rentals Rental Apartment Universe 350, , , , , ,000 50,000 Purpose-Built Condominium Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION

30 Higher Domestic Investment in Condos Share of the GTA Condominium Apartments Rented 40% 30% 25.7% 28.9% 30.1% 32.6% 32.7% 20% 19.2% 18.8% 10% 0% Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION

31 Homeownership Not a Viable Option in Future CANADA MORTGAGE AND HOUSING CORPORATION

32 Supply Is Slow to Respond.. Average Length of Construction for Rental Apartments, Dec 2017 Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION

33 Demand for Other Secondary Rentals Will Increase CANADA MORTGAGE AND HOUSING CORPORATION

34 Rents in New Purpose-Built Units Are More Expensive Average 2- Br Rent for Rental Apartment in GTA $2, $2, $1, $1,368 Pre 1960 $1,309 $0 $500 $1,000 $1,500 $2,000 $2,500 Source: CMHC CANADA MORTGAGE AND HOUSING CORPORATION

35 Contact Information Dana Senagama Principal, Market Analysis (GTA) Phone: (416) CANADA MORTGAGE AND HOUSING CORPORATION