BMO: Kitchener-Waterloo Boasts Favourable Housing Affordability

KITCHENER, ONTARIO--(Marketwire - March 1, 2013) - The housing market in Kitchener-Waterloo-Cambridge appears firmly balanced with reasonable affordability, according to a new commentary released today by BMO Capital Markets Economics.

The commentary forms part of a larger report on the region, the first in a series of economic, housing and business overviews for various cities and regions across Canada that will be published by BMO throughout the year.

"The region's sales-to-new listings ratio - a good proxy of market balance - has started 2013 in balanced territory, almost right in-line with the long-run average," said Robert Kavcic, Senior Economist, BMO Capital Markets. "This compares to the very strong sellers' market seen during the early 2000s, and is much healthier than the extreme buyers' market of the early 1990s."

"There is a significant demand for residential housing, both in condominiums and single detached-homes," said Janet Peddigrew, District Vice-President, Mid Western Ontario, BMO Bank of Montreal. "The diversified regional economy continues to perform relatively well, and our community will benefit from the long-term construction of the $818 million LRT connecting Cambridge, Kitchener and Waterloo."

"Income gains and a significant decline in mortgage rates have left Canadian housing affordability at a historically-normal level, and homes in Kitchener-Waterloo-Cambridge remain cheaper relative to income compared to those in Toronto," said Mr. Kavcic. "Affordability should remain reasonable in the region thanks to price growth curbing closer to income growth."

Real Estate

• Existing home sales were 2.4 per cent below year-ago levels in the three months through January which was more moderate than the 11.6 per cent y/y decline seen nationally and a -15.4 per cent y/y in Toronto. The decline brought 2012 sales in-line with the decade average of just over 6,300 units per year.
• Average transaction price ended 2012 at $316,990, up 4 per cent year-over-year.
• Non-residential building cooled after above-average levels of aggressive government stimulus spending.

Home Building

• Homebuilding moderated after a strong post-recession bounce with 2,600 units sold in the last 12 months, which trails the 4,000 units/year built in the early 2000s.
• Condo building has taken a prominent role over detached homes in recent years - Kitchener-Waterloo has more than 2,200 apartment units under construction versus just 236 single-detached homes.
• The increase in condo development was due in part to higher density requirements under the Places to Grow Act and various demographic factors (i.e., demand for student housing and downsizing by baby boomers).

The full report is available upon request.

About BMO Financial Group

Established in 1817 as Bank of Montreal, BMO Financial Group is a highly diversified North American financial services organization. With total assets of $542 billion as at January 31, 2013, and more than 46,000 employees, BMO Financial Group provides a broad range of retail banking, wealth management and investment banking products and solutions.