TD starts the week off when a 20+ page report on the Canadian housing market. They have revised their over-valuation of Canadian real estate to 8% -down from 10%- due to rising personal income and weaker price growth. However, the outlook varies greatly from city to city. Below is a quick recap starting with our city:
Calgary: TD is forecasting Calgary average home prices will increase 3.8% in 2014 – the highest increase across all of Canada.
Momentum is starting to pick up moderately in Calgary’s housing market. Existing home sales were less impacted by tighter mortgage insurance rules, given a relatively healthier balance in the market at the time they were introduced.
However, Calgary’s housing market has shifted into a seller’s market, as evidenced by the current level of the sales-to-new listings ratio. As a result, home prices have come under some upward pressure in recent months, rising by 9-12% on an annual basis over the first three months of 2013 – outperforming every other major Canadian metropolitan area.
Growth in Calgary home prices is likely to moderate from the current pace, but should remain slightly positive over the forecast horizon. Furthermore, home sales are likely to continue to grow moderately and housing construction ought to occur at the pace of household formation.
Source: TD
Edmonton: the housing market should remain a star player among Canada’s largest markets throughout the forecast horizon. Most importantly, Edmonton home prices are likely to continue to grow moderately over the next few years, in contrast to the mild contractions expected in some other major markets.
Vancouver: Home prices are likely to remain under moderate downward pressure over the next few years given a high inventory of homes on the market. Overall, Vancouver home prices are likely to have fallen 15% by the time the correction is over in early-2014. This means that they are just over halfway in their home price correction journey.
(Mike`s note: TD is saying that Vancouver is only halfway through their 15% correction..but the chart above is showing 1.9 & 1.4% price increases in 2013/2014?)
Regina: Canada`s top performing market. Home values will continue to appreciate over the next few years – by 4% per year – a pace that is more sustainable and in line with income growth.
Saskatoon: Home prices are likely to continue to grow at around 4% over 2013 and 2014, a pace that is more in line with household income growth for the region yet outpacing national average home price growth.
Toronto: Existing home prices are expected to fall 6% peak-to-trough by early 2014 relative to where they are now. Housing starts are likely to track in an annual range of 25,000 to 30,000 over the next two years– about half the pace recorded in 2012
Winnipeg: Housing sales are likely to stabilize at their current lower levels, while existing home prices are expected to remain flat.
Ottawa: Looking forward, prices are likely to continue to correct
over the next two years. The Ottawa housing market has been recording a soft landing since 2010, which will likely continue through the next few years.
Montreal: Expected to endure a moderate price correction over the next few years. Sales are likely to stabilize at current levels, after declining by 7% in 2012, while prices are expected to fall 5% from current levels by mid-2014.
Quebec City: TD expects to see moderate downward pressure on prices in Québec City over the next two years. Prices are likely to fall by 6% peak-to-trough, or by an average of 2% per year over 2013 and 2014, underperforming most markets with the exception of Toronto and Vancouver.
Halifax: Overall, the Halifax market is likely to outperform othermajor Canadian markets in 2013 and 2014. Prices are anticipated to grow by an annual average rate of 1.5% over the next two years and construction activity will likely remain relatively stable.
St John: likely to stabilize after five years of contraction as an improvingeconomic backdrop and attractive affordability offsets the demographic headwinds
To download and read the entire report, click here
Meanwhile,
Canadian May housing starts suggest boost for economy
* Groundbreaking for homes rose to 200,178 units annualized in May
* Economists forecast starts at 178,100 starts
* Gains led by condo building in cities
* Latest economic report to suggest firmer Q2 economy
By Jeffrey Hodgson
TORONTO, June 10 (Reuters) – Canadian housing starts jumped much more than expected in May from April, the Canada Mortgage and Housing Corp said on Monday, in the latest sign that the broader economy is gaining momentum in the second quarter.
The seasonally adjusted annualized rate of housing starts was 200,178 units in May, an increase from 175,922 in April. The April figure was revised upward.
Analysts polled by Reuters had expected 178,100 starts in May.
The housing starts data was the most recent report to suggest Canadian economic growth is picking up after struggling in the second half of 2012. A separate report on Friday showed the economy added 95,000 jobs in May, the second-biggest gain in 37 years.
With the pickup in starts, residential construction may contribute to Canadian economic growth in the second quarter for the first time in four quarters, wrote Krishen Rangasamy, senior economist with National Bank.
MORTGAGE RULE CHANGES BITE
The six-month trend level in housing starts was 182,756 units, little changed from a month earlier, suggesting the downward slope inhomebuilding since the middle of 2012 may be starting to level off.
“Multi-unit housing starts came storming back in May after falling precipitously through the winter months. Still, the 6-month trend in overall Canadian housing starts sits very close to demographic demand, further hinting at a soft landing,” Robert Kavcic, a senior economist with BMO Capital Markets, wrote in a note to clients.
Canada’s post-recession housing boom, fueled by record low borrowing costs, began to cool last year after Canada’s Conservative government tightened mortgage lending rules in July.
Those changes, prompted by fears a property bubble could be building, were the fourth such move since the financial crisis.
But the data on Monday showed segments of the market are still robust. The number of housing starts in cities increased by 14.6 per cent in May. Urban starts were led by a 22.2 per cent rise in multiple starts to a seasonally adjusted annualized rate 114,346 units. Condominiums are included in the multiple category.
The number of single homes started in cities increased by 3.0 per cent to 62,888 units in May.
The prospect of stronger growth gave a boost to the Canadian dollar, which firmed to C$1.0181 the U.S. dollar, or 98.22 U.S. cents immediately after the data.
Still, economists warned that given the extent of the post-crisis boom, tighter mortgage rules and the prospect of higher borrowing costs, the longer-term outlook for Canada’s housing sector was still tepid.
“With the 6-month moving average now more in line with the rate of household formation, May’s sharp jump in the pace of new home construction is unlikely to be sustained,” Dina Ignjatovic, an economist with Toronto-Dominion Bank, wrote in a research note.
“The overbuilding that has taken place over the last ten years could lead to new home construction falling below this demographic need for a period of time. This should, however, help to prevent further overbuilding and a consequential sharp correction in the housing market.”
S, it’s all good now ?
Whaddaya Say?