The Title of the presentation

Second line if needed

Third line if needed

Today’s date

Location of presentation

June 16, 2017

Canada’s Housing Market

Dr. Sherry Cooper

Chief Economist

Dominion Lending Centres

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4.5

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81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17

Housing Looms Large ... Canada (percent)

Source: Haver Analytics, Statistics Canada

Construction Jobs/Total

Housing/GDP

Homeowners as a % of all Canadian Households (percent)

60.3

61.8 62.162.4

62.6

63.6

65.8

68.4

69.0

1971 1976 1981 1986 1991 1996 2001 2006 2011

Canadian Homeownership At A Record High

Source: Statistics Canada, Censuses of Population, 1971 to 2006 and National Household Survey, 2011

70% of

Households Own

Their Own Homes

97

98

99

100

101

102

103

104

105

106

107

108

15 16 17

Job Creation Strongest in Vancouver and Toronto Employment Level (index: January 2015 = 100)

Canada

Calgary

Montreal

Source: Haver Analytics, Statistics Canada

Vancouver

Toronto

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

90 92 94 96 98 00 02 04 06 08 10 12 14 16

People Left Oil-Torn Provinces For Ontario and B.C.

Source: Haver Analytics, Statistics Canada

Interprovincial Migrants

(level, 4-quarter moving average)

British Columbia

Ontario

Greenbelt and Intensification Plan

Housing Supply Make-Up In Toronto Changing Dramatically Toronto (000s units)

Source: CMHC, Haver Analytics

0

10

20

30

40

50

60

80 85 90 95 00 05 10 15

Condos

Single-Detached Homes

-2.8-1.6

0.13.03.6

4.34.44.6

6.17.0

17.817.9

19.528.3

31.8

-8 -4 0 4 8 12 16 20 24 28 32 36

Prices Surge In Toronto MLS® Home Price Index (HPI) (year/year % change: as of May 2017)

*Using average home prices Source: Canadian Real Estate Association (CREA)

Average Home Price

Toronto: Single Family

Toronto: Condos

Victoria

Canada

Vancouver: Condos

Halifax-Dartmouth*

Moncton

St.John’s*

Ottawa

Winnipeg*

Montreal

Vancouver: Single Family

Calgary

Regina

Saskatoon

$982k

$465k

$606k

$614k

$571k

$316k

$168k

$313k

$352k

$302k

$321k

$1.56mln

$439k

$293k

$298k

More Than 25% Of GTA Sales Above $1 Million

Share of GTA Home Sales Above $1 Million (percentage)

Source: Realosophy

-20

-10

0

10

20

30

40

50

60

1980 1985 1990 1995 2000 2005 2010 2015

GTA Average Home Price Growth Still Below Late ’80s

Greater Toronto Area Average Home Price

Source: CREA

(year/year % change, as of May 2017)

Period From 1985 to 1989

Toronto and Vancouver Prices Lag Global Cities Buyer price per square meter, Apartment (US$/square meter)

Source: www.numbeo.com, Sherry Cooper Assoc.

4,357

5,139

5,257

5,561

5,633

6,670

6,867

7,333

8,653

9,340

10,163

10,362

10,487

11,891

11,985

12,029

14,876

15,078

17,524

18,095

25,672

Madrid

Toronto

Los Angeles

Copenhagen

Moscow

Auckland

Helsinki

Vancouver

Oslo

Rome

Stockholm

Paris

Sydney

New York

SanFrancisco

Beijing

Tel Aviv

Tokyo

Singapore

London, UK

Hong Kong

50

100

150

200

250

300

350

88 90 92 94 96 98 00 02 04 06 08 10 12 14 16

Canadian Housing-to-Income Disconnect

Source: Haver Analytics, CREA, Statistics Canada

(seasonally adjusted: January 1995 = 100)

Average Home Prices

Wages & Salaries

Rising Risks: Record High Debt-to-GDP

Household Debt as a Percentage of GDP

Source: Bloomberg, International Monetary Fund (IMF)

(March 2005 = 100)

Canada

Australia

United States

Germany

0

5

10

15

20

25

30

1999 2001 2003 2005 2007 2009 2011 2013 2015

Share of First-Time Home Buyers With Low Credit Scores FICO <620 and Beacon <660 (percent)

Source: Globe and Mail (“Housing Bubble, Mortgage Trouble: Chill, Canada Isn’t 2006 America” by Michael Babad, May 30, 2017)

Canada

United States

And 40% of Canadian

Homeowners Are

Mortgage-Free

Debt Free, 33%

<$5k, 12%%5k<$25k, 13%

$25k<$50k, 8%

$50k<$75k, 4%

$75k<$100k, 4%

$100k<$150k, 7%

$150k<$200k, 6%

$200k+, 13%

Last Year, One Third of Households In Canada Were Debt-Free

Source: Ipsos Reid Canadian Financial Monitor, RBC Economics Research

9.6

17.0

6.34.7

13.9

8.3

29.6

9.6

5.7

18.4

8.9 9.68.2

6.8

1.9

4.83.0 3.8

5.3 4.65.7

0.9 1.6

8.3

4.6 4.8

1.6 2.3

2012

2016

Investors or Speculators Buying In GTA Surges

Percentage of GTA Home Purchased by Investors

Source: Realosophy

(percent)

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2 lrg

1 sml +1 lrg; 3 sml

2 sml

Greater Than Normal Uncertainty in Housing

Unintended Consequences Impact Psychology

Ontario Budget Actions

• Foreign Buyer’s Tax

• Expanded Rent Controls

Coming To GTA?

• Vacant Property Tax

• Flipping Tax

Home Capital Meltdown

Banks Downgraded 0

5

10

15

20

25

30

35

40

May. 16 Jul. 16 Sep. 16 Nov. 16 Jan. 17 Mar. 17 May. 17

(June 14, 2017: C$)

Home Capital Group Inc. Stock Price

Source: Google Finance

-20

-10

0

10

20

30

40

50

13 14 15 16 17

The Cooling Vancouver Price Gains

Source: Haver Analytics, CREA, Statistics Canada

Vancouver Composite Home Price Index

(year-over-year % change) Aug. 2, 2016: BC’s Foreign Buyers’ Tax

Oct. 2016: Federal action: 1) qualify at posted rate and, 2) no principal residence exemption for nonresidents

Vancouver Sales Plummet After Foreign Tax Existing Home Sales (% change from a year ago, YTD May 2017)

11.8

6.3 6.0

2.3

-0.3-1.3

-5.1

-21.1-25

-20

-15

-10

-5

0

5

10

15

Source: Canadian Real Estate Association, Haver Analytics

AB ON QC Canada MB Atlantic SK BC

0

5

10

15

20

25

30

90 92 94 96 98 00 02 04 06 08 10 12 14 16

Value of Existing Home Transactions

Source: Haver Analytics, CREA

Existing Home Sales

(C$ millions)

British Columbia

Ontario

Listings Surge 43% in GTA in May Number of Active Listings (000s units, May)

Source: Toronto Real Estate Board, Real Estate Board of Greater Vancouver, Sherry Cooper Assoc.

Toronto Vancouver

468

10121416182022242628

0

2

4

6

8

10

12

14

16

18

GTA Sales Decline Residential Sales: May 2017 (year/year % percent)

Source: Toronto Real Estate Board (TREB)

-26.1

-14.1

-24.3

-4.3

-26.4 -27.1

-15.9

-11.1

-30

-25

-20

-15

-10

-5

0

Detached Semi Townhouse Condo

City of Toronto

Surrounding Area

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2000 2004 2008 2012 2016

A Cooling Housing Market in Toronto Sales-to-New Listings – GTA (ratio)

Source: CREA, Haver Analytics

Average = 0.61

Seller’s Market

Buyer’s Market

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0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

2000 2004 2008 2012 2016

Still A Seller’s Market In Vancouver Sales-to-New Listings – Greater Vancouver (ratio)

Source: CREA, Haver Analytics

Average = 0.63

Seller’s Market

Buyer’s Market

Canadian Home Price Inflation Needs To Slow House Price Index: Composite 11 (year/year % change)

White bars indicate forecasts. Forecast provided by Royal LePage and RBC Research Source: Teranet/National Bank, Haver Analytics

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The Title of the presentation

Second line if needed

Third line if needed

Today’s date

Location of presentation

June 16, 2017

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