The Provincial Outlook: Whats Moving the Market

November 16 2011 16, Carol Frketich, BC Regional g Economist

Outline

1. Where Are We Now? 1 Wh A W N ? 2. Housing Demand Drivers

Mortgage Rates Economic and job growth Migration and Demographics

3. Cross Canada Comparison

BC Resale Market Balanced

MLS Sales to New MLS Listings ratio, per cent 100 80 60 40 20 0 2001 2003 2005 2007 2009 2011

Sellers Sellers Balanced Buyers

Sources: CREA, CMHC calculation

BC Average MLS Price to Move Back to Trend

$700,000

Balanced B l d

$600,000

$500,000

$400,000

$300,000 2007 2008 2009 2010 2011

Sources: CREA, CMHC calculation

Resale Market Conditions Vary Across BC

MLS Sales to New MLS Listings ratio, per cent 60 50 40 30 20 10 0

Sources: CREA October 2011 data, CMHC calculation

Housing Starts on Track with HOC Forecast

All Areas BC Housing Starts, thousands, SAAR 35 30 25 20 15 10 5 0
Jan
Source: CMHC

Forecast: 25,900

Feb

Mar

Apr

May Jun

Jul

Aug Sep

Oct

Nov Dec

Homes Under Construction Turns Up

In Areas with 50,000+ population 40,000 30,000 30 000 20,000 10,000 0
1992
Source: CMHC

1994

1996

1998

2000

2002

2004

2006

2008

2010

Housing Demand Drivers

Mortgage rates

Effective Interest Rates Low and Stable

Per cent
7 Household 6 5 4 3 2 05/01/2007 05/01/2008 05/01/2009 05/01/2010 05/01/2011
Source: Bank of Canada

Business B i

Monetary Conditions to Support Housing

1-year Percentage change
4

Bank f C d B k of Canada mandate renewal US Fed & US interest rate outlook C$ strength continues

Total CPI
3

Core CPI
0 2010
Source: Bank of Canada

2011

Mortgage Rates Stable and Low

Selected Interest Rates, Per cent
8 7

5-year posted
6

5.2 5.7% 5 2 to 5 7%
5 4 3 2007 2008 2009 2010 2011 2012 F
Source: Bank of Canada, CMHC Forecast

1-year posted y p
3.4 to 3.8%

Housing Demand Drivers

Mortgage rates Economic and job growth

Global Growth Moderating

Per Cent 12 10 8 6 4 2 0 -2 China Euro Area Japan United States Canada British Columbia

2010

2011F

2012F

Sources: Statistics Canada, Bank of Canada Monetary Policy Report October 2011, CMHC Forecasts for Canada and BC

BC Economic 2012 Outlook Summary

BC well positioned for global trade d Consumer pull-back slows growth this thi year, comes b k i 2012 back in Employment gains to spread next year; shift from part-time to f ll ear; art time fulltime continues Migration grows population population, generates demand for goods and services, including housing

BC Trade Pattern Shifts to Asia-Pacific

2001

United U it d States Japan People's p Republic of China South Korea Other

2011 YTD

United States Japan People's Republic p of China South Korea Other

Tourism Victoria

Source: BC Stats , CMHC calculation

Commodity Prices and Regional Impacts

All Commodities Index (2003=100)
250 200 150 100 50 0 20 15 10 5 0 -5

% Ch Change M h A Month Ago % Change Year Ago

Oil & Gas Metal & Forest Minerals Products

Source: BMO Capital Markets, October 2011

Businesses Investing in BC
Private and Public Capital Expenditures ($ millions)
50,000 40,000 30,000 20,000 10,000 10 000 0 2007 2008 2009 2010 2011
Sources: Statistics Canada, BC Ministry of Jobs, Tourism and Innovation

BC business planned investment to increase Major projects inventory $66.2B

Consumer Spending to Improve

BC Retail Sales $ millions

5,000

4,800

4,600

4,400

4,200 2008
Source: Statistics Canada

2009

2010

2011

Vancouver Job Growth is the Engine for BC

Employment index, 2008 monthly peak =100 106
104 102 100 98 96 94 92 2008 2009 2010 2011 2012

Vancouver British Columbia

Victoria

Sources: Statistics Canada, CMHC calculation, October 2011 latest data point

Where Are the BC Job Gains?

Change in Employment
Oct '11 from Dec '10 YTD Oct

Full-time Part-time

Service sector Goods sector

-10,000 10,000 0 10,000 20,000 30,000 40,000 50,000

Source: Statistics Canada, Labour Force Survey

Employment to Expand in 2012

Per cent 4 3 2 1 0 -1 2010 2011F 2012F
Source: Statistics Canada, Labour Force Survey, CMHC Forecast

Alberta Alb

Ontario O

BC

Vancouver V

Housing Demand Drivers

Mortgage rates Economic and job growth Migration and demographics

Housing Starts Track Household Formation

Thousands

50 40 30 20 10 0 1990 1994

Housing Starts

Household Formation

1998

2002

2006

2010

Sources: CMHC Starts and Completions Survey and Forecast, BC Stats, P.E.O.P.L.E. 36

Migration Trends to Improve in 2012

People 30,000 25,000 20,000 15,000 10,000 5,000 0 -5,000 International

YTD 2010

YTD 2011

2012F

Interprovincial

Total Net Migration

Source: Statistics Canada, CMHC Q4 2011 Forecast

The Next Home Buyers

Within six months of arrival 17% of new immigrants were f i i homeowners At four years, more than half of new Canadians were homeowners

25

Immigration from Asia-Pacific to BC

Number of Permanent Residents Landing in BC g 20,000

1991 Tiananmen Incident y Early 2000s 1997 98 Asian economies gathered Asian Financial Crisis momentum

15,000
1984 Announced H A d Hong Kong K handover in 1997

10,000 10 000

Hong Kong Taiwan Mainland China

5,000

0 1981 1986 1991 1996 2001 2006

Source: BC Statistics, Citizenship and Immigration Canada

BC Attracts Investor Immigrants

Investor: $1 6m $1.6m personal wealth, $800K investment Just under half of new immigrant landings in BC 70% from China China, 14% from Taiwan
Source: Statistics Canada

Q2 2011
Canada
Tourism BC Victoria

Q2 2010

1,000 1 000

2,000 2 000

3,000 3 000

Vancouver Attracts Younger People

Per cent of net migration by age 60 BC 50 40 30 20 10 0 0-17 years 18-24 years 25-44 years 45-64 years
Source: Statistics Canada

Vancouver

65+ years

Interprovincial Migration Trends Favour BC

BC tends to gain from Ontario and Alberta BC s BCs lower unemployment rate than Ontario points to migration gains Vancouver captures 50% or more of migrants from Ontario Vancouver share from Alberta is 30% and rising
Source: Statistics Canada

Per cent 60 50 40 30 20 10 0

From AB

From ONT

Vancouver

Non-CMA BC

Vancouver is a Destination and a Source

Rest of BC
Kelowna Kamloops Penticton Victoria Nanaimo Duncan

BC: 34,000 New Households Each Year

134

458

BC 34,216

244

706 4,189 5,467 ,

Sources: BC Stats, P.E.O.P.L.E. 36, CMHC calculation average annual growth in households 2011 - 2015

22,186 ,

833

19,000 New Households Each year

Vancouver CMA + 18,728
West Van +268 Downtown D t +680 W Side +72 E Side +2,377 Vancouver Burnaby +1,912 +3,129 Richmond +2,134 Delta +651 New West +522 Surrey +3,020 +3 020 White Rock +615 North Van +892 Coquitlam q +2,667 Maple Ridge/ P Meadows +1,161 +1 161 Abbotsford CMA +1,932

Langley +1,757

Sources: BC Stats, P.E.O.P.L.E. 36, CMHC calculation average annual growth in households 2011 - 2015

Vancouver to Lead New Home Construction

2012F: 28,500

Vancouver V Victoria 1,850 Kelowna 1,125 Nanaimo 775 Abbotsford 650

Kamloops 625 p Prince George 190

Housing Starts to Increase in 2012

Thousands 40 30 20 10 0 2002 2004 2006 2008 2010 2012F Single-Detached Multiple-Family

Source: CMHC, Q4 2011 Forecast

Cross-Canada Housing Market Comparison

Western Canada to Lead Growth

Per Cent 4 3 2 1 0 British Columbia
Source: CMHC Q4 2011 Forecast

2011F 3.5 2.7 27

2012F

2.0 1.6

Alberta

Ontario

Quebec

BC Existing Home Sales to Pick Up

2010 BC 74,640 % -12.2 ALTA 49,723 Sales as % of Housing Stock % 15% -13.6 , ONT 195,591 10% % -0.1 QUE 80,033 5% % 1.2 12 0% CANADA 446,484 1996 1998 2000 2002 2004 % -3.9 2011F 2012F

77,200 81,900 3.4 6.1 52,800 53,900 6.2 2.1 Total MLS 195,900 , 195,900 , 0.2 0.0 76,900 79,300 -3.9 39 3.1 31 450,000 457,600 2006 2008 2010 2012F 1.7 0.8

Sources: CREA, Landcor, CMHC calculations and Q4 2011 Forecast

BC Housing Starts Expected to Increase

2010 BC % ALTA % ONT % QUE % CAN % 26,479 64.7 27,088 33.5 , 60,433 20.0 51,363 18.3 18 3 189,930 27.4 2011F 26,600 0.5 25,325 -6.5 67,399 , 11.5 48,000 -6.5 65 190,800 0.5 2012F 28,500 7.1 29,200 15.3 62,400 , -7.4 44,500 -7.3 73 185,900 -2.6

Risks to the Outlook

Global financial developments Provincial tax changes Migration trends

Whats Moving the Market in 2012?

Demand drivers stable in 2011, pick up in 2012 p p Low interest rate environment More full-time jobs in more parts of the M f ll b f h province People moving to BC and Vancouver