Market According to Mercer October 2012

Market According to Mercer

Market Overview & Outlook: 2012/2013

October 2012

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

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

Market According to Mercer, October 2012 Toronto Real Estate Board 2

GDP growing slowly

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

Source: Statistics Canada

Canadian Real GDP, QuarterlyAnnualized Quarter-Over-Quarter Per Cent Change

Market According to Mercer, October 2012 Toronto Real Estate Board 3

Slow/uncertain jobs recovery

0%

2%

4%

6%

8%

10%

12%

14%

Jan

-88

Jan

-89

Jan

-90

Jan

-91

Jan

-92

Jan

-93

Jan

-94

Jan

-95

Jan

-96

Jan

-97

Jan

-98

Jan

-99

Jan

-00

Jan

-01

Jan

-02

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

(F)

Jan

-13

(F)

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

GTA Unemployment Rate

Market According to Mercer, October 2012 Toronto Real Estate Board 4

Income growth creeping above inflation

-1.0

%

4.7

% 4.2

%

2.5

%

1.3

%

0.8

%

3.0

%

3.6

%

3.2

%

2.1

%

4.4

%

1.5

%

1.6

%

2.1

%

2.0

%

2.5

%

-2%

-1%

0%

1%

2%

3%

4%

5%

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

Annual Growth Rate for Average Weekly Earnings

Market According to Mercer, October 2012 Toronto Real Estate Board 5

Income growth creeping above inflation $104,0

00

$106,5

00

$0

$20,000

$40,000

$60,000

$80,000

$100,000

$120,000

Source: Statistics Canada; TREB Forecast

GTA Household Income

Market According to Mercer, October 2012 Toronto Real Estate Board 6

Little or no movement from Bank of Canada

0%

1%

2%

3%

4%

5%

6%

7%

Source: Bank of Canada, Toronto Real Estate Board

Consensus Outlook for the Bank of Canada's Target for the Overnight Lending Rate

Bank of Canada Target for the Overnight Rate

3-Month T-Bill (Forward Rates)

Market According to Mercer, October 2012 Toronto Real Estate Board 7

4%

5%

6%

7%

8%

9%

10%

Source: Bank of Canada, Toronto Real Estate Board

Outlook for the Average Five-Year Fixed Mortgage Rate

Five-year mortgage could increase

Market According to Mercer, October 2012 Toronto Real Estate Board 8

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

Market According to Mercer, October 2012 Toronto Real Estate Board 9

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

Market According to Mercer, October 2012 Toronto Real Estate Board 10

1,500

2,000

2,500

3,000

3,500

4,000

Source: Toronto Real Estate Board

TorontoMLS Sales: City of TorontoLTT

Reduction to 25-Year Amortization.

‘416’ sales well-below pre-recession peak

Market According to Mercer, October 2012 Toronto Real Estate Board 11

‘905’ / ‘705’ sales have fared better

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

Source: Toronto Real Estate Board

TorontoMLS Sales: TREB 905/705 AreasLTT

Reduction to 25-Year Amortization.

Market According to Mercer, October 2012 Toronto Real Estate Board 12

2012/2013 TREB Sales Forecast

89

,66

6

88

,00

0

84

,50

0

50,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

90,000

95,000

Source: Toronto Real Estate Board

TorontoMLS Sales Outlook

Market According to Mercer, October 2012 Toronto Real Estate Board 13

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

Market According to Mercer, October 2012 Toronto Real Estate Board 14

8%

12%

6% 6%7% 7%

5%

2%0%

2%

4%

6%

8%

10%

12%

14%

Detached Semi-Detached Townhouse Condominium ApartmentSource: Toronto Real Estate Board

Average Annual Price Growth, Sept. 2012TorontoMLS Average Price & MLS® HPI By Home Type

TorontoMLS Average Prices

MLS® HPI Benchmark Prices

Strong price growth continues

Market According to Mercer, October 2012 Toronto Real Estate Board 15

Listings still below pre-recession levels

10,000

15,000

20,000

25,000

30,000

Source: Toronto Real Estate Board

TorontoMLS Monthly Active Listings

Actual Active Listings

Trend

Market According to Mercer, October 2012 Toronto Real Estate Board 16

Months of Inventory tells the story

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Ave

rage A

nn

ual P

rice G

row

thM

on

ths

of I

nve

nto

ry

Source: Toronto Real Estate Board

Months of Inventory & Average Annual Price Growth

Average Price Growth

MOI Trend

Market According to Mercer, October 2012 Toronto Real Estate Board 17

Condo price growth has been lagging.

8%

12%

6% 6%7% 7%

5%

2%0%

2%

4%

6%

8%

10%

12%

14%

Detached Semi-Detached Townhouse Condominium ApartmentSource: Toronto Real Estate Board

Average Annual Price Growth, Sept. 2012TorontoMLS Average Price & MLS® HPI By Home Type

TorontoMLS Average Prices

MLS® HPI Benchmark Prices

Strong price growth continues

Market According to Mercer, October 2012 Toronto Real Estate Board 18

Dichotomy between low and high-rise listings

10,000

12,000

14,000

16,000

18,000

20,000

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Source: Toronto Real Estate Board

TorontoMLS Active ListingsLow-Rise Trend

3,500

4,000

4,500

5,000

5,500

6,000

6,500

Jan

-03

Jan

-04

Jan

-05

Jan

-06

Jan

-07

Jan

-08

Jan

-09

Jan

-10

Jan

-11

Jan

-12

Source: Toronto Real Estate Board

TorontoMLS Active ListingsHigh-Rise Trend

Decade Low

Decade High

Market According to Mercer, October 2012 Toronto Real Estate Board 19

Many more condo listings

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

Source: CMHC; TREB Adjustment

Toronto CMA Condominium Apartment Completions(Annualized, 12-Month Moving Average)

Market According to Mercer, October 2012 Toronto Real Estate Board 20

1

2

3

4

5

Source: Toronto Real Estate Board

Months of Inventory TrendLow-Rise vs. Condo Apartments

MOI Low-Rise (Trend)

MOI Condo (Trend)

Months of Inventory tells the story

3.7 Months

2.2 Months

Average Spread: 0.6 Months

Market According to Mercer, October 2012 Toronto Real Estate Board 21

Strong price growth continues…

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

$550,000

$600,000

Source: Toronto Real Estate Board

TorontoMLS Average Selling Prices

All Types

Condominium Apartments

Low Rise

Market According to Mercer, October 2012 Toronto Real Estate Board 22

2012/2013 Average Price Forecast 5

00

,00

0

51

5,0

00

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

$550,000

Source: Toronto Real Estate Board

TorontoMLS Average Price Outlook

Market According to Mercer, October 2012 Toronto Real Estate Board 23

Affordability remains the key

25%

30%

35%

40%

45%

50%

55%

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

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

39% Upper limit codified in latest mortgage lending

guideline changes.

Market According to Mercer, October 2012 Toronto Real Estate Board 24

Lowest default rate in 20 years

0.1%

0.2%

0.3%

0.4%

0.5%

0.6%

0.7%

0.8%

Source: Canadian Bankers Association

Share of Mortgages in Arrears Three or More MonthsProvince of Ontario

Market According to Mercer, October 2012 Toronto Real Estate Board 25

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

Market According to Mercer, October 2012 Toronto Real Estate Board 26

Rental market better supplied in Q2/Q3

-10%

0%

10%

20%

30%

Source: Toronto Real Estate Board

Rental Condo Apartments Listed & RentedAverage Annual Per Cent Change

Listed Rented

More Balanced Tightening Market Conditions

Market According to Mercer, October 2012 Toronto Real Estate Board 27

Slower average annual rent growth

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

Source: Toronto Real Estate Board

TorontoMLS Condo Apartment Rent GrowthWeighted Average for 1-Bdrm. & 2-Bdrm. Units

Market According to Mercer, October 2012 Toronto Real Estate Board 28

Condo vacancy rate remains very low

0.1%0.4%

1.4%

0.8%0.9%

0.4%

0.7%

0.4%

0.8%

1.6%

1.1%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Canada Mortgage and Housing Corporation

GTA Condominium Apartment Vacancy Rate

Market According to Mercer, October 2012 Toronto Real Estate Board 29

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

Market According to Mercer, October 2012 Toronto Real Estate Board 30

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.