Toronto Economic & Housing Market Outlook 2003

Transcription

1 Toronto Economic & Housing Market Outlook 2003 First Line Mortgage Group Presentation June 2003 Toronto Area Real Estate Moving into Balance Ted Tsiakopoulos BA MA Senior Economist Ontario Business Centre CMHC, Toronto

2 Toronto Housing Market Myths A housing bubble ready to burst Speculators are driving housing demand Toronto`s economy headed for recession Builders are overbuilding

3 Agenda Definition: What is a Bubble? Stock Market Correction: Is Real Estate Next? Factors Pulling Ownership/Rental Mkt into Balance Economic/Demographic Leading Indicators Resale/New Home Market Outlook

4 Speculative Bubble a continuous market overvaluation followed by a collapse

5 Characteristics of an Asset Bubble Magnitude: sharp increase in asset value Time: short duration Fundamentals: no underlying economic support

6 Late 90s Stock Market Bubble Index TSX Nasdaq S&P P/E Standard & Poor P/E Ratio Source: Statistics Canada, Shiller s Indices

7 Toronto Real Home Prices steady/sustainable price trend with longer duration Real Price SA 2002$ s cycle (3yrs) 88 Source: TREB, CMHC Seasonal /Inflation Adjustment s cycle (8yrs)

8 Share of HHld Income Ratio Real Estate P/E Ratio (A Proxy) on the rise but off late 80s peak F Source: Bank of Canada, Statistics Canada, TREB, CMHC Forecast * Assumes 25% dp, 25yr amort, taxes, 5yr rate, avg resale price

9 Healthy Housing Fundamentals Toronto Emp Growth 5yr mtg % (real mtg) Net Migration Cdn$ Avg Resale Price (real price) New Home Mkt Share Vacancy Rates , US $274K $375K 28% 0.4% , US $275K $275K 43% 2.5%

10 Real Home Price by Submarket (High-Low Chart)..still room for growth although Oakville area growth limited Real Home Price SA 2002$ Ajax-Pick Bramp Miss Oak Central East West York Region Source: TREB, CREA, CMHC Seasonal / Inflation Adjustment

11 Condo Apt Stock ( Rental Units) Investors Drawn to Real Estate..real estate offers steady long term returns F Source: CMHC Condominium Survey

12 Potential US Housing Bubbles Tacoma South Bend Albany Syracuse San Francisco San Jose Orange County San Diego Buffalo Boise Denver Topeka Colorado Springs Albuquerque El Paso Pittsburgh Springfield Dayton Springfield Little Rock Portland Boston Nassau Bergen-Passaic Newark Monmouth Jersey City Philadelphia Wilmington Baltimore Washington DC Highly underpriced Highly overpriced Corpus Christi Sarasota Ft. Myers Ft. Lauderdale Miami Naples Source: Economy.Com

13 Factors Pulling Real Estate into Balance Ownership Rental Shrinking pent-up demand Higher trending listings Rising carrying costs around the corner Labour,material and land constraints Anticipated condo rental/new home completons First time buyer led ownership market Landlords shift to preserve tenant mode

14 Toronto Employment Growth 6..slows in 2002, picks up in 2003 Annual Job Growth % Avg Emp Growth ( ) f -6 Source: Statistics Canada, CMHC Forecast

15 Mortgage Rates Mtg rate %..stronger C$, softer inflation put rate hikes on hold..for now yr Mtg 5yr Mtg f Source: Statistics Canada, CMHC Forecast

16 Net Migrants Toronto Net Migration geopolitical concerns reduces cross border traffic Net Mig Net Immig F 2003F Source: Statistics Canada, CMHC Annual Estimates / Forecast

17 Age Distribution of Recent Migrants 60% migration adds relief to aging population % of Net Migrants 50% 40% 30% 20% 10% 0% -10% Source: Statistics Canada Age

18 Toronto Demographic Projection household formation on the rise especially for move-up market Average Annual Household Growth Total Age Cohort Source: CMHC Potential Housing Demand Model, Statistics Canada Census Division

19 Resale Market Outlook sets the tone

20 Vacancy Rate 3+Apt units % Toronto Rental Vacancy Rates ownership vs rental rates trigger outflows f Source: CMHC Rental Market Survey

21 120 Who`s Buying? first time buyers looking for affordable product % of Intender Responses Owners Renters Source: CMHC Consumer Intentions to Buy & Renovate a Home Survey

22 MLS Sales SAAR Toronto MLS Sales.sales ease but second best on record Source: TREB, CMHC Seasonal Adjustment / Forecast F

23 Toronto Listings rise with equity gains, new home completions New Listings SA Source: TREB, CMHC Seasonal Adjustment

24 Sales to New Listings SA 90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Toronto Resale Market Classification fewer market imbalances in 2003 Buyers mkt sellers mkt Balanced mkt Source: TREB, CMHC Seasonal Adjustment

25 Toronto Resale Prices moderate increases in 2003 MLS Nominal Price SA F Source: TREB, CMHC Seasonal Adjustment / Forecast

26 Condo Price Growth Softens Toronto Condo Apartment Prices SA Average Aparmtent Prices SA Central Toronto (2003Q1) Trend Source: CREA, CMHC Seasonal Adustment

27 Toronto Sub Markets modestly priced submarkets should outperform Seller`s Market Boundary Oakville York Region Mississauga Brampton Toronto East Ajax Pickering Toronto West Toronto Central Sales to New Listings SA% (Q1' 03) Source: TREB, CMHC Seasonal Adjustment

28 Real Price Increases in Brampton Brampton home price & market classification $ Ratio M LS Price, SA Sales/new listings.40 buyers to balanced.55 balanced to sellers Source: TREB data. Seasonal adjustment by CMHC. Sales, SAAR Brampton sales & new listings MLS sales, SAAR TREB data. Seasonally adjusted by CMHC. New listings, SAAR New listings, SAAR Brampton, average monthly home payment 1800 $2002, sa Source: CREA average MLS price, CPI deflated, s.a Real Brampton home price $2002, sa Source: CREA average MLS price, CPI deflated, s.a.

29 2003 Buyer Profile: Brampton Most buyers(1/3) aged and serious 1/3 looking at $200K-$250K price range & home ranging between sq ft Pre-owned established neighbourhood most appealing Single detached home most popular(3/4) Half commit 5-24% dp Half fund dp from savings, RRSPs (HBP) Source: CMHC Consumer Intentions to Buy and Renovate a Home Survey

30 Summary Boom-bust/bubble patterns largely absent; fundamentals ensure healthy soft landing Stock market adds net support to real estate Slower pace in 2003 sales and home price growth Higher mortgage costs dampen more expensive housing in late 2003/2004

31 Forecast Summary Toronto Area f MLS Sales 67,612 74,759 72,000 MLS Prices $251,508 $275,371 $293,000 Housing Starts 41,017 43,805 44,000 Vacancy Rates 0.9% 2.5% 3.5% 5 yr Mtg Rate 7.4% 7.0% 6.5% Net Migration 95, ,000 F=forecast

32 Recent CMHC Housing Analysis 2003 Toronto Housing Market Outlook 2002 Rental Market Report & Outlook 2001 GTA Residential Land Inventory Survey To order a report visit our website or call