Market According to Mercer October 2012

Market According to Mercer

Market Overview & Outlook: 2012/2013

October 2012

Presentation Outline

1. Economic Overview/Outlook

2. Trends and Outlook for TorontoMLS Sales

3. Trends and Outlook for TorontoMLS Average
Selling Price

4. Rental Market Overview

5. Summary

Toronto Real Estate Board Market According to Mercer, October 2012 1

GDP growing slowly
Canadian Real GDP, Quarterly
Annualized Quarter-Over-Quarter Per Cent Change
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
-10%

Source: Statistics Canada


Slow/uncertain jobs recovery
GTA Unemployment Rate
14%
12%
10%
8%
6%
4%
2%
0%

Jan-12(F)
Jan-13(F)
Jan-88

Jan-90
Jan-91

Jan-94
Jan-95

Jan-97
Jan-98

Jan-01
Jan-02

Jan-04
Jan-05

Jan-08
Jan-09

Jan-11
Jan-89

Jan-92
Jan-93

Jan-96

Jan-99
Jan-00

Jan-03

Jan-06
Jan-07

Jan-10
Source: Statistics Canada (Historic); TREB (Forecast)


Income growth creeping above inflation
Annual Growth Rate for Average Weekly Earnings
5%
4.7%

4%

4.4%
4.2%

3.6%
3%

3.2%
3.0%
2%

2.5%
2.5%

0.8%

2.1%
2.1%

2.0%
1.6%
1.3%

1.5%
1%

0%

-1%
-1.0%

-2%

Source: Statistics Canada (Historic); TREB (Forecast)


Income growth creeping above inflation
GTA Household Income
$120,000

$100,000

$106,500
$104,000
$80,000

$60,000

$40,000

$20,000

$0

Source: Statistics Canada; TREB Forecast


Little or no movement from Bank of Canada
Consensus Outlook for the Bank of Canada's Target for
the Overnight Lending Rate
7%
Bank of Canada Target for the Overnight Rate
6%
3-Month T-Bill (Forward Rates)
5%
4%
3%
2%
1%
0%

Source: Bank of Canada, Toronto Real Estate Board


Five-year mortgage could increase
Outlook for the Average Five-Year Fixed Mortgage Rate
10%

9%

8%

7%

6%

5%

4%

Source: Bank of Canada, Toronto Real Estate Board





Selling Price


5. Summary


Government Intervention
Changes to Mortgage Lending Guidelines

Recent Changes Include:

• Reduction of maximum amortization period to 25 years

• Maximum GDS set to 39 per cent

• Lower maximum borrowing amount when refinancing (80% vs. 85%)

City of Toronto’s Land Transfer Tax

• Additional upfront cost of home ownership in the City of Toronto

www.LetsGetThisRightToronto.ca


‘416’ sales well-below pre-recession peak
TorontoMLS Sales: City of Toronto
4,000 LTT

3,500

3,000

2,500

2,000
Reduction to 25-Year Amortization.
1,500

Source: Toronto Real Estate Board


‘905’ / ‘705’ sales have fared better
TorontoMLS Sales: TREB 905/705 Areas
5,500 LTT

5,000
4,500
4,000
3,500
3,000
2,500
Reduction to 25-Year Amortization.
2,000



2012/2013 TREB Sales Forecast
TorontoMLS Sales Outlook
95,000
90,000

89,666

88,000
85,000

84,500
80,000
75,000
70,000
65,000
60,000
55,000
50,000






Selling Price


5. Summary


Strong price growth continues
Average Annual Price Growth, Sept. 2012
TorontoMLS Average Price & MLS® HPI By Home Type
14%
TorontoMLS Average Prices
12%
12% MLS® HPI Benchmark Prices
10%
8%
8%
6% 7% 7%
6% 6%
4%
5%
2%
2%
0%
Detached Semi-Detached Townhouse Condominium
Source: Toronto Real Estate Board Apartment


Listings still below pre-recession levels
TorontoMLS Monthly Active Listings
30,000

25,000

20,000

15,000
Actual Active Listings
Trend
10,000



Months of Inventory tells the story
Months of Inventory & Average Annual Price Growth
5.0 25.0%

Average Annual Price Growth
4.5 20.0%
Average Price Growth
Months of Inventory

4.0 MOI Trend 15.0%
3.5 10.0%
3.0 5.0%
2.5 0.0%
2.0 -5.0%
1.5 -10.0%



Strong price growth continues
Average Annual Price Growth, Sept. 2012
TorontoMLS Average Price & MLS® HPI By Home Type
14%
TorontoMLS Average Prices
12%
12% MLS® HPI Benchmark Prices
10% Condo price growth has
been lagging.
8%
8%
6% 7% 7%
6% 6%
4%
5%
2%
2%
0%
Detached Semi-Detached Townhouse Condominium
Source: Toronto Real Estate Board Apartment


Dichotomy between low and high-rise listings
TorontoMLS Active Listings TorontoMLS Active Listings
Low-Rise Trend High-Rise Trend
Decade High
20,000 6,500

18,000 6,000

5,500
16,000
5,000
14,000
4,500
Decade Low
12,000 4,000

10,000 3,500
Jan-05

Jan-07

Jan-09

Jan-05

Jan-07

Jan-09
Jan-03
Jan-04

Jan-06

Jan-08

Jan-10
Jan-11
Jan-12

Jan-03
Jan-04

Jan-06

Jan-08

Jan-10
Jan-11
Jan-12
Source: Toronto Real Estate Board Source: Toronto Real Estate Board


Many more condo listings
Toronto CMA Condominium Apartment Completions
(Annualized, 12-Month Moving Average)
20,000
18,000
16,000
14,000
12,000
10,000
8,000
6,000
4,000
2,000
0

Source: CMHC; TREB Adjustment


Months of Inventory tells the story
Months of Inventory Trend Average Spread: 0.6 Months
Low-Rise vs. Condo Apartments
5 MOI Low-Rise (Trend)

MOI Condo (Trend)

4 3.7 Months

3

2
2.2 Months
1



Strong price growth continues…
TorontoMLS Average Selling Prices
$600,000
All Types
$550,000
Condominium Apartments
$500,000
Low Rise
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000



2012/2013 Average Price Forecast
TorontoMLS Average Price Outlook
$550,000
$500,000

515,000
500,000
$450,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000



Affordability remains the key
TREB Affordability Indicator
Share of Average Household Income Used for Mortgage Principal and Interest,
Property Taxes and Utilities on the Average Priced GTA Resale Home

55%
39% Upper limit codified in
50% latest mortgage lending
guideline changes.
45%
40%
35%
30%
25%

Assumptions: Minimum allowable down payment, average 5-year fixed mortgage rate,
maximum permitted amortization period.
Source: Toronto Real Estate Board Data and Calculation; Statistics Canada


Lowest default rate in 20 years
Share of Mortgages in Arrears Three or More Months
Province of Ontario
0.8%
0.7%
0.6%
0.5%
0.4%
0.3%
0.2%
0.1%

Source: Canadian Bankers Association





Selling Price


5. Summary


Rental market better supplied in Q2/Q3
Rental Condo Apartments Listed & Rented
Average Annual Per Cent Change
Tightening Market Conditions More Balanced
30%

20% Listed Rented

10%

0%

-10%



Slower average annual rent growth
TorontoMLS Condo Apartment Rent Growth
Weighted Average for 1-Bdrm. & 2-Bdrm. Units
6%
5%
4%
3%
2%
1%
0%
-1%
-2%
-3%



Condo vacancy rate remains very low
GTA Condominium Apartment Vacancy Rate
1.8%
1.6%
1.6%
1.4%
1.4%
1.2%
1.0% 1.1%
0.8% 0.9%
0.8% 0.8%
0.6% 0.7%
0.4%
0.4% 0.4% 0.4%
0.2% 0.1%
0.0%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source: Canada Mortgage and Housing Corporation





Selling Price


5. Summary


Summary
1. Home sales in the GTA have been impacted
government policy and, to a lesser extent, by
mediocre economic growth.

2. While sales are down, price growth is expected
to continue through 2013, as market
conditions remain tight, especially for low-rise
home types

3. The ownership and rental markets will be
better supplied in 2013, which will result in
more moderate rates of price and rent growth.

Market According to Mercer October 2012

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