Housing Market Update Keith Stewart, Senior Market Analyst September 2017
Agenda Economic Fundamentals The Rental Market The Ownership Market 2
New Households drive housing demand 5,000 4,000 3,000 2,000 10.6% 4.6% 5-year Average Annual change 2016-2021 Vancouver CMA: 9.1% 8.7% 8.3% 9.8% 10.7% 9.7% 5.4% 5-year avg annual chg 16k 5-year total % chg - 7.5% 1,000 0 3.9% 2.8% Source: BC Stats PEOPLE 2017 3
Immigration is the main contributor to household growth 50,000 Net Vancouver CMA Migration 40,000 30,000 20,000 10,000 0-10,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 International Interprovincial Intraprovincial Source: Statistics Canada 4
Job creation has been strong and job quality is good 100 Year-over-year job creation (000s), Vancouver CMA 80 60 40 20 0-20 -40 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Full-time Part-time Source: Statistics Canada 5
Income growth continues, but has moderated 8% Vancouver CMA - Annual Nominal Per Capita Income Growth 6% 4% 2% 0% -2% -4% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: Conference Board of Canada 6
Falling bond yields have drawn down mortgage rates 7 6 5 10-Year Government of Canada Bond Yield and Average 5-Year Discounted Mortgage Rate (%) 5-Year Average Discounted Mortgage 4 3 2 1 10-Year Government of Canada Bond Yield 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source: Bank of Canada 7
Mortgage funding is cheap and has defied expectations 7 Consensus Forecasts for 10-Year Government of Canada Bond Yield (%) 6 5 4 3 2 Actual 1 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Sources: Department of Finance, Bank of Canada 8
BC households have taken advantage of lower rates % Change Number of Refinances Average Refinanced Mortgage Balance 2015-2016 2015 2016 % Chg Canada 4% $230,484 $249,892 8% Toronto 4% $329,333 $363,163 10% Abbotsford-Mission 44% $282,758 $337,605 19% Vancouver 26% $379,156 $440,196 16% Victoria 32% $315,436 $349,785 11% Source: Equifax, CMHC calculations 9
Rental Market
Rent increases were the highest in 25 years in 2016 Same-Sample Rent Changes by Area (%) New Westminster 5.1 Burnaby 6.8 Surrey 7.4 City of Vancouver 7 Vancouver CMA 6.4 Source: CMHC 0 1 2 3 4 5 6 7 8 11
Rising rents and incentives have attracted new investment Starts and Completions 500 400 300 200 100 Rental Construction Activity Under Construction 10,000 8,000 6,000 4,000 2,000 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Under Construction - City of Vancouver Under Construction - Non-City of Vancouver Starts (Smoothed) Completions (Smoothed) Source: CMHC 12
Multiple factors have drawn down rental vacancy Rising interprovincial migration New households to a region tend to rent for a period of time High cost of purchase Longer duration of renting for future buyers More households looking to rent long-term Increased short-term rentals drawing units out of the secondary rental market (condos, suites, etc.) Increased pressure on the primary rental market (purpose-built rental buildings) 13
Ownership Market
New ownership stock to begin hitting market in 2018 Starts and Completions 2,000 1,500 1,000 500 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: CMHC Under Construction - City of Vancouver Starts (Smoothed) Ownership Construction Activity Under Construction 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Under Construction - Non-City of Vancouver Completions (Smoothed) 15
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Completions and household formations align in the long run Household Formations versus Housing Completions - Vancouver CMA 25,000 20,000 15,000 10,000 5,000 0 Source: BC Stats, CMHC Projected Household Gain Completions 16
Sale of singles remain low, apartment and attached high Seasonally Adjusted Sales - Vancouver CMA 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Single Attached Apartment Source: CREA, CMHC Calculations 17
The share of sales of high-end homes surged over 2015-2016 Index (Jan 2014=1) 4 Seasonally Adjusted Sales by Price Segment, Vancouver CMA 3.5 3 2.5 2 1.5 1 0.5 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 <500k 500-750k 750k-1 mill 1mill-2 mill 2mill-4 mill 4mill+ Source: CREA, CMHC Calculations 18
Inventories of re-sale homes remain low 20 Months of Supply, All Types 15 10 5 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Months of Supply GVREB Total Months of Supply FVREB Source: REBGV and FVREB 19
Active listings have been drawn down due to a surge in sales Sales and New Listings 6,000 5,000 4,000 3,000 2,000 Total Resale Market Conditions, REBGV - SA Active Listings 16,000 14,000 12,000 10,000 8,000 1,000 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Active Listings SA (Smoothed) Total Sales SA (Smoothed) Total New Listings SA (Smoothed) Source: REBGV, CMHC Calculations 6,000 20
Overall market is near balanced 100% Sales to New Listings Ratio, All Types 80% 60% 40% 20% 0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Total Sales to New Ratio SA - REBGV Total Sales to New Ratio SA - FVREB Source: REBGV and FVREB 21
but two-speed market remains Jan 2015=1 1.6 1.5 1.4 1.3 HPI - REBGV $1.6 mill $616k 1.2 BC HOME 1.1 Foreign Buyers Tax Program 1 Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Source: CREA Single Detached Apartment 22
Top and bottom five annualized price changes, to July 2017 1 Year 10 Year North Delta Apartment 54.4% Vancouver West Detached 9.2% Surrey (Combined) Apartment 36.8% Vancouver East Detached 9.1% Langley Apartment 34.0% Richmond Detached 8.8% Abbotsford Apartment 32.5% Burnaby South Detached 8.8% Mission Apartment 31.0% Burnaby North Detached 8.0% Burnaby North Detached -1.2% Abbotsford Apartment 3.5% Ladner Apartment -1.2% Ladner Apartment 3.4% Richmond Detached -2.1% Tsawwassen Apartment 3.0% Ladner Detached -2.3% Abbotsford Attached 2.8% West Vancouver Detached -5.7% Maple Ridge Apartment 1.5% Source: REBGV, FVREB 23
Vancouver housing market summary Supply of re-sale homes are at an all-time low Strong in-migration and local economic fundamentals means demand remains elevated Market remains in two speed mode Starts are strong, but there are constraints in construction capacity 24
Looking ahead Headwinds Mortgage policy changes Uninsured stress test for federal lenders Increasing mortgage rates Provincial policy changes/uncertainty Affordability Tailwinds Strong local economic fundamentals 25
Housing Observer Online Look for CMHC s: Housing Market Outlook (HMO) Housing Market Assessment (HMA) Out week of October 23 26
Housing Market Information Portal Snapshots of Local, Regional, and National data. Compare statistics for multiple locations. Comprehensive tables, map and charts. Current and archived CMHC publications. cmhc.ca/hmiportal 27
Thank You Canada Mortgage and Housing Corporation www.cmhc.ca Keith Stewart Senior Market Analyst kstewart@cmhc.ca 28