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October 2012. Review and Forescast of our Real Estate Market
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The Economic & Real Estate Outlook
Craig AlexanderSenior Vice President and Chief Economist
October 2012
-6
-4
-2
0
2
4
6
Canada France Germany Italy Japan UK US
Source: Haver Analytics
GDP change since pre-recession peak, %
CANADA HAS OUTPERFORMEDCANADA HAS OUTPERFORMED
-2
-1
0
1
2
3
4
5
6
2004-2007 2008-2011 2012-2015
Business Investment and Exports
Consumers, Governments and Residential Investment
Source: Statistics Canada, Haver AnalyticsF. by TD Economics as of September 2012
Average annual contribution to real GDP growth, %
Forecast
CONSUMERS & GOVERNMENTS CAN NO LONGER BE THE ENGINE OF GROWTHCONSUMERS & GOVERNMENTS CAN NO LONGER BE THE ENGINE OF GROWTH
MODERATE BUT UNEVEN GROWTH ACROSS THE COUNTRYMODERATE BUT UNEVEN GROWTH ACROSS THE COUNTRY
Real GDP growth by region, %
2.1
1.9
2.2
2.1
2.3
2.9
3.0
2.2
1.2
0.9
1.7
1.9
1.9
2.9
2.8
1.8
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5
Atlantic
Québec
B.C.
Ontario
Manitoba
Sask.
Alberta
Canada
2012F
2013-14F (average)
Source: Statistics Canada / Haver AnalyticsForecast by TD Economics as at September 2012
CANADIAN EXPORTS TO PICK UP MODERATELY IN 2013-14CANADIAN EXPORTS TO PICK UP MODERATELY IN 2013-14
-25
-20
-15
-10
-5
0
5
10
15
2001 2003 2005 2007 2009 2011 2013
Resources
Other Goods and Services
Source: Statistics Canada/Haver AnalyticsF. by TD Economics as of September 2012
ForecastReal exports, y/y% change
CANADIAN DOLLAR – COMPETITIVE CHALLENGE GOING FORWARDCANADIAN DOLLAR – COMPETITIVE CHALLENGE GOING FORWARD
0.60
0.70
0.80
0.90
1.00
1.10
2002 2004 2006 2008 2010 2012 2014
US$/C$
Forecast
Source : Bank of Canada; Forecast by TD Economics as at September 2012
INTEREST RATES TO REMAIN LOWER FOR LONGERINTEREST RATES TO REMAIN LOWER FOR LONGER
0
1
2
3
4
5
6
7
2000 2002 2004 2006 2008 2010 2012 2014
US Federal Funds Target Rate
Source: Bank of Canada/Haver AnalyticsForecasted by TD Economics as of September 2012
%
Forecast
BoC Overnight Rate
METRICS POINT TO SOME DEGREE OF OVERVALUATION IN HOUSING MARKETMETRICS POINT TO SOME DEGREE OF OVERVALUATION IN HOUSING MARKET
0
10
20
30
40
50
60
1980 1985 1990 1995 2000 2005 2010
30yr Average
Source: Haver Analytics, Canadian Real Estate Association, Statistics Canada.Note: Assumes 25% down, 5 year fixed posted rate, 25 year amortization.Floor in mortgage rate such that rate <7% set equal to 7%.
Mortgage payment as a % of household PDI
Overvaluation approximately 10%
REGIONAL HOUSING MARKET STORY IS VERY DIFFERENTREGIONAL HOUSING MARKET STORY IS VERY DIFFERENT
0.0
2.0
4.0
6.0
8.0
10.0
12.0
1988 1991 1994 1997 2000 2003 2006 2009 2012
Canada Vancouver Toronto
Source: Canadian Real Estate Association, Statistics Canada, Haver Analytics.
Average resale house price divided by household income
HOW SALES HAVE PERFORMED IN 2012 ACROSS THE COUNTRYHOW SALES HAVE PERFORMED IN 2012 ACROSS THE COUNTRY
2012 existing home sales by region, % Chg.
13.9
12.3
5.9
4.0
1.9
1.3
0.9
-8.5
SK
AB
ATL
QC
CAN
ON
MB
BC
Forecast by TD Economics as at September 2012Source: Canadian Real Estate Association, TD Economics
REGIONAL DIFFERENCES NOTED FOR PRICES AS WELLREGIONAL DIFFERENCES NOTED FOR PRICES AS WELL
2012 existing home prices by region, % Chg.
6.3
5.3
5.3
4.6
3.4
2.2
0.3
-8.9
QC
SK
ON
MB
ATL
AB
CAN
BC
Forecast by TD Economics as at September 2012Source: CREA, TD Economics
EVIDENCE OF A SLOWDOWN IN TORONTO?EVIDENCE OF A SLOWDOWN IN TORONTO?
-60
-40
-20
0
20
40
60
80
100
120
140
2007 2008 2009 2010 2011 2012
Prices Sales
Source: Canadian Real Estate Association
Y/Y % Change
PRICE GAINS STILL MANAGING TO HOLD ONPRICE GAINS STILL MANAGING TO HOLD ON
0
1
2
3
4
5
6
7
8
9
10
Y/Y % Composite Single Family Condo
-------------MLS® HPI Y/Y %--------------
%
Source: Canadian Real Estate Association, Toronto Real Estate Board.
FEWER LISTINGS HAVE BROUGHT TORONTO CLOSE TO BALANCED TERRITORYFEWER LISTINGS HAVE BROUGHT TORONTO CLOSE TO BALANCED TERRITORY
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
1.10
2006 2007 2008 2009 2010 2011 2012
Canada
Toronto
Vancouver
Source: Canadian Real Estate Association.
Sellers' Market
Buyers' Market
Balanced Market
Sales-to-New Listings Ratio
CONDOS NOT JUST A NEW HOUSING MARKET STORY IN THE GTA ANYMORECONDOS NOT JUST A NEW HOUSING MARKET STORY IN THE GTA ANYMORE
15%
20%
25%
0%
5%
10%
15%
20%
25%
30%
1995 2005 2011
Source: Canadian Real Estate Association and Canada Mortgage and Housing Corporation.
Condo sales share of MLS® in the GTA
CONDO SUPPLY IN THE GTA IS ONE AREA FOR CONCERNCONDO SUPPLY IN THE GTA IS ONE AREA FOR CONCERN
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
1973 1977 1981 1985 1989 1993 1997 2001 2005 2009
Under Construction Completions (Annualized)
Apartment Dwelling Units, GTA
Source: Canada Mortgage and Housing Corporation.
HOUSING MARKET SET TO SLOW GRADUALLYHOUSING MARKET SET TO SLOW GRADUALLY
0
100,000
200,000
300,000
400,000
500,000
600,000
2000 2002 2004 2006 2008 2010 2012 2014
0
100,000
200,000
300,000
400,000
500,000
sales (left axis)
prices (right axis)
Source: CREA; Forecast by TD Economics as at September 2012
Existing home sales (units) Average price ($)
Forecast*
REAL ESTATE SUMMARY
Mortgage insurance rule tightening and OSFI guidelines will temper real estate over the next quarter or two
The market will then likely stabilize, and may even regain some momentum in the Spring of 2013
Ultimately interest rates will rise, leading to renewed softening in real estate – but correction will be limited because the level of rates will remain low
There is no catalyst for a major correction – which would require sharply higher interest rates or sharply higher unemployment
There is concern in some regions over future mismatch in supply-demand for condos
TD Economics
www.td.com/economics
This report is provided by TD Economics for customers of TD Bank Group. It is for information purposes only and may not be appropriate for other purposes. The report does not provide material information about the business and affairs of TD Bank Group and the members of TD Economics are not spokespersons for TD Bank Group with respect to its business and affairs. The information contained in this report has been drawn from sources believed to be reliable, but is not guaranteed to be accurate or complete. The report contains economic analysis and views, including about future economic and financial markets performance. These are based on certain assumptions and other factors, and are subject to inherent risks and uncertainties. The actual outcome may be materially different. The Toronto-Dominion Bank and its affiliates and related entities that comprise TD Bank Group are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered.
Shinning the Shinning the Spotlight on Spotlight on
VANCOUVERVANCOUVER
SHINING THE SPOTLIGHT ON GREATER VANCOUVERSHINING THE SPOTLIGHT ON GREATER VANCOUVER
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2004 2005 2006 2007 2008 2009 2010 2011 2012
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
Price Sales
Note: Greater Vancouver figures presented. Source: Canadian Real Estate Association.
Average Residential Home Price, $ Sales Activity
NOT SIMPLY A WEST VAN STORYNOT SIMPLY A WEST VAN STORY
1 Month Change
1 Year Change
5 Year Change
Burnaby North $509,500 -0.50% -2.30% 8.40%Richmond $569,200 -1.40% -3.60% 17.90%Greater Vancouver $606,100 -0.60% -0.80% 11.90%Vancouver East $609,400 -0.70% 2.00% 21.60%Vancouver West $792,900 -1.20% -3.10% 14.20%West Vancouver $1,568,600 -2.00% 3.00% 16.50%Source: September Data, Greater Vancouver Real Estate Board, October 2, 2012
MLS® HPI - GREATER VANCOUVER AND SUB-REGIONS
%Benchmark
Price
…OR A LUXURY HOME STORY…OR A LUXURY HOME STORY
-3.00
-2.50
-2.00
-1.50
-1.00
-0.50
0.00
0.50
1.00
Composite Single FamilyDetached
Townhouse Apartment
Y/Y % Change M/M % Change
%
Source: September Data, Greater Vancouver Real Estate Board, October 2, 2012.
SIZEABLE HOUSING MARKET SWINGS NOT UNUSUAL FOR VANCOUVER…SIZEABLE HOUSING MARKET SWINGS NOT UNUSUAL FOR VANCOUVER…
-100
-50
0
50
100
150
200
250
300
2004 2005 2006 2007 2008 2009 2010 2011 2012
Source: Canadian Real Estate Association
Y/Y % Change in Sales
