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


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


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


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


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


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)


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







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

http://www.letsgetthisrighttoronto.ca/


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


‘905’ / ‘705’ sales have fared better

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500


TorontoMLS Sales: TREB 905/705 AreasLTT

Reduction to 25-Year Amortization.


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


TorontoMLS Sales Outlook







5. Summary


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


Listings still below pre-recession levels

10,000

15,000

20,000

25,000

30,000


TorontoMLS Monthly Active Listings

Actual Active Listings

Trend


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


Months of Inventory & Average Annual Price Growth

Average Price Growth

MOI Trend


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


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


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


TorontoMLS Active ListingsHigh-Rise Trend

Decade Low

Decade High


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)


1

2

3

4

5


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


Strong price growth continues…

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

$550,000

$600,000


TorontoMLS Average Selling Prices

All Types

Condominium Apartments

Low Rise


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


TorontoMLS Average Price Outlook


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.


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







5. Summary


Rental market better supplied in Q2/Q3

-10%

0%

10%

20%

30%


Rental Condo Apartments Listed & RentedAverage Annual Per Cent Change

Listed Rented

More Balanced Tightening Market Conditions


Slower average annual rent growth

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%


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


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







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.