Insights Into the Apartment Condominium Market in Eight Large Canadian Metropolitan Areas.

Insights Into the Apartment Condominium Market in Eight Large Canadian Metropolitan Areas. METROPOLITAN CONDO OUTLOOK WINTER 214

Metropolitan Condo Outlook: Insights Into the Apartment Condominium Market in Eight Large Canadian Metropolitan Areas by Jane McIntyre and Robin Wiebe About The Conference Board of Canada We are: The foremost independent, not-for-profit, applied research organization in Canada. Objective and non-partisan. We do not lobby for specific interests. Funded exclusively through the fees we charge for services to the private and public sectors. Experts in running conferences but also at conducting, publishing, and disseminating research; helping people network; developing individual leadership skills; and building organizational capacity. Specialists in economic trends, as well as organizational performance and public policy issues. Not a government department or agency, although we are often hired to provide services for all levels of government. Independent from, but affiliated with, The Conference Board, Inc. of New York, which serves nearly 2, companies in 6 nations and has offices in Brussels and Hong Kong. 214 The Conference Board of Canada* Published in Canada All rights reserved Agreement No. 46328 *Incorporated as AERIC Inc. The Conference Board of Canada and the torch logo are registered trademarks of The Conference Board, Inc. About Genworth Canada Genworth MI Canada Inc. (TSX: MIC) through its subsidiary, Genworth Financial Mortgage Insurance Company Canada (Genworth Canada), is the largest private residential mortgage insurer in Canada. The Company provides mortgage default insurance to Canadian residential mortgage lenders, making homeownership more accessible to first-time homebuyers. Genworth Canada differentiates itself through customer service excellence, innovative processing technology, and a robust risk management framework. For almost two decades, Genworth Canada has supported the housing market by providing thought leadership and a focus on the safety and soundness of the mortgage finance system. As at December 31, 213, Genworth Canada, had $5.6 billion total assets and $3. billion shareholders equity. Find out more at www.genworth.ca. Preface This report from The Conference Board of Canada and Genworth Canada offers an in-depth analysis of the condominium market for eight large Canadian census metropolitan areas (CMAs). The report covers a wide range of condominium market statistics, such as starts, completions, absorptions, and prices. The main goal of this publication is to analyze the recent trends in the condo market in each of the eight CMAs, as well as where each of the eight markets is heading over the next five years. The eight census metropolitan areas covered are Québec, Montréal, Ottawa, Toronto, Calgary, Edmonton, Vancouver, and Victoria. This report is published twice a year, in summer and winter. Forecasts and research often involve numerous assumptions and data sources, and are subject to inherent risks and uncertainties. This information is not intended as specific investment, accounting, legal, or tax advice.

Contents Overview...1 Metropolitan Insights...3 Québec... 3 Montréal.... 6 Ottawa... 9 Toronto.... 12 Calgary.... 15 Edmonton.... 18 Vancouver... 21 Victoria.... 24 Definitions and Concepts...27 Standard Geographical Classification (SGC) 26... 28

Overview Following a subpar performance in 212 and 213, Canada s real gross domestic product expansion is expected to hit 2.4 per cent in 214 and 2.6 per cent in 215, boosted by healthy export growth. But significant risks remain, including a relatively slow economic recovery in the United States and a fragile outlook in Europe. Canada s growth will also be held back by federal and provincial fiscal restraint. Still, employment is forecast to rise 1.4 per cent this year and 1.8 per cent next year, up from 1.2 per cent in 213. This will cut the unemployment rate to 7 per cent in 214 and 6.4 per cent in 215. Rival portraits of the Canadian housing market portray it either as an overvalued bubble about to burst or as being only slightly overheated but having basically sound economic underpinnings and thus likely to cool gently. We embrace the latter scenario because monthly mortgage payments, rather than house prices, are what matter to potential homebuyers. Ratios of these payments to incomes and rents are close to historical norms. These equivalencies could be derailed by a sharp increase in mortgage interest rates or a big employment drop, but for now, rates remain moderate and many homeowners are locked into longer term mortgages, which will give them time to adjust to rate hikes. There is only limited danger that a big fresh supply of housing will emerge from troubled mortgage portfolios in Canadian banks, thanks to the generally prudent underwriting in Canada, including this country s very small number of subprime loans. It was the souring of these mortgages that exacerbated the housing market s downturn in the United States. Apartment Condo Indicators Starts Resale sales Resale price ($)* 213 214f 215f 213 214f 215f 213 214f 215f Québec 1,634 1,155 1,183 1,487 1,546 1,626 225,341 228,948 236,9 35.4 29.3 2.5 13.8 4. 5.2 2. 1.6 3.1 Montréal 9,12 8,71 8,227 11,55 11,786 12,85 263,884 269,161 278,382 23.6 1.4 1.9 7.4 2. 2.5 1.2 2. 3.4 Ottawa 2,357 1,298 1,253 1,59 1,529 1,579 261,483 266,64 273,626 3.5 45. 3.5 2.4 1.3 3.3 3.6 2. 2.6 Toronto 15,844 16,737 17,169 2,28 2,276 2,478 38,387 313,751 319,18 42.2 5.6 2.6.. 1. 1. 1.7 1.7 Calgary 2,432 2,61 2,68 4,379 4,57 4,61 252,473 26,523 269,58 27.6 6.9 3. 1.4 2.9 2.1 3.3 3.2 3.4 Edmonton 3,168 2,16 2,186 2,817 2,883 2,957 217,424 222,943 229,435 59.7 31.8 1.2 12.1 2.3 2.6 3.3 2.5 2.9 Vancouver 8,828 8,758 9,284 11,67 11,159 11,473 367,112 372,734 382,479 8.2.8 6. 3.6.8 2.8.2 1.5 2.6 Victoria 513 55 592 1,43 1,431 1,447 269,32 277,72 288,72 15.6 7.1 7.7 9.4 2. 1.1.1 3. 4. *Average resale prices are used for Québec and Montréal; median resale prices are used for the rest of the metropolitan areas. Resale and average prices in Montréal and Québec include all condominium styles, not just apartments. Italics indicate percentage change. Sources: The Conference Board of Canada; CMHC Housing Time Series Database; Canadian Real Estate Association; Quebec Federation of Real Estate Boards.

2 Metropolitan Condo Outlook Winter 214 Employment and population growth, which, along with mortgage interest rates, underpin housing demand, are solid in most markets and for Canada as a whole. We see a soft landing even in areas of higher risk, like Toronto. Granted, there are many condominium units under construction in Toronto, but not all will be completed at once, and the rental market, for which many are headed, is tight. The city has a decent economy and strong population growth. We also think that conditions of moderate oversupply in Montréal and Québec will be righted without big price drops. Between 214 and 218, Calgary is forecast to have the fastest average annual population growth, at 2.1 per cent, and Victoria the slowest, at.6 per cent. Population aging will continue to produce a growing share of condominium-loving empty-nesters aged 55 or more in all regional markets, with annual increases among people aged over 55 ranging from 4.4 per cent in Calgary to 2.4 per cent in Victoria. But Calgary will still have the smallest proportion and Victoria the largest. Decent local economies are providing favourable underpinnings. GDP increases will range from 1.4 per cent in Ottawa to 3.7 per cent in Calgary. Growth should remain generally stronger in the West: between 215 and 218, Edmonton and Calgary are both expected to post average annual expansion near 3 per cent, while Québec is forecast to see only 1.8 per cent. The employment picture is generally sound. The fastest job increase for 214 will be Calgary s 3.1 per cent rise and the slowest a.5 per cent gain in Edmonton. During the medium term, job growth is forecast to average 1 to 2 per cent annually in all markets. Sales of existing condominiums posted mixed results last year. They fell 14 per cent in Québec and 7 per cent in Montréal, but increased 12 per cent in Edmonton and 1 per cent in Calgary. In 214, sales are forecast to rise everywhere but Toronto, where they will remain stable. The largest 214 gain, 4 per cent, will be in Québec, as it rebounds from four consecutive annual drops. Active listings fell in all four Western cities last year, while rising in their Eastern counterparts. This supply rose 37 per cent in Québec, but fell 21 per cent in Calgary. For 214, we expect listings to decline in seven of eight cities, led by a 35 per cent drop in Ottawa. These variable sales and listings scenarios led to mixed changes in the sales-to-active-listing ratio, which fell 3.5 percentage points in Québec, but rose 1.5 percentage points in Calgary. We expect this ratio to rise in all markets in 214, led by a 6.9 percentage point rise in Ottawa. Despite the increases, buyers markets will prevail in Québec and Montréal in 214 and generally balanced markets elsewhere. Calgary could flirt with sellers conditions. This widespread market balance will keep house values rising relatively moderately. Price changes will remain temperate, between 1.5 and roughly 3 per cent in all cities for 214. The new construction market is expected to be mixed. Absorptions, a measure of demand, rose relatively strongly in five cities last year, but dropped in Québec, Montréal, and Victoria. In 214, absorptions are forecast to decline in four cities, particularly Québec. By contrast, absorptions are projected to rise 55 per cent in Toronto. This will not prevent Toronto from suffering a 3 per cent rise in its supply of unsold units. Ottawa will also see inventories rise. But stocks are predicted to fall sharply in Québec. A varied outlook is thus expected for condominium starts: big drops are expected for Québec, Edmonton, and Ottawa, but small gains are forecast in Toronto and Calgary. Across-the-board price gains will boost mortgage charges in all markets, but limited interest rate changes will combine with rising household incomes to leave affordability relatively unchanged in 214. Indeed, measured as a proportion of income, carrying costs will actually fall in Toronto and Vancouver. Vancouver remains our report s least affordable city, though, since these charges eat up 2 per cent of household income. By contrast, this bite is forecast to remain just below 1 per cent in both Alberta cities.

3 Metropolitan Condo Outlook Winter 214 Québec Share of Population by Age Cohort 15 24 25 39 4 54 55 74 75+ 3 25 2 15 1 5 1994 26 218f A stronger economy is expected to boost unit sales of existing apartment condominiums in Québec this year and next. Sales are forecast to increase by 4 per cent in 214 and 5.2 per cent in 215. On the other hand, the new apartment condominium market is expected to see starts fall for the second straight year in 214, down by nearly 3 per cent following a 35.4 per cent decline last year. Lower inventories will bring builders back to the new market next year, however, with starts forecast to rise 2.5 per cent. Unit sales of resale apartment condominiums in Québec reached a record 1,82 units in 27, thanks to healthy population gains, especially among the over-55 age group. However, since 28, a weaker economy, tax increases, tighter mortgage rules, and years of strong price growth have all deterred buyers. As a result, demand in the Québec resale apartment condominium market has been on a downward slide for the past six years. Indeed, sales of apartment condominiums declined 1.1 per cent on an average annual basis from 28 to 212, and dropped a further 13.8 per cent last year, falling back down to 1,487 units. Despite the drop in sales, Québec s resale apartment condominium market was still characterized as a sellers market, given that unit sales outweighed active listings by at least two to one up until 211. Sources: The Conference Board of Canada; Statistics Canada. Apartment Condo Construction Apartment condo starts (left) Condo starts as a share of multiple starts (right) 3, 2,5 2, 1,5 1, 5 1999 1 3 5 7 9 11 13f 15f 17f (starts, units; share, per cent) Sources: The Conference Board of Canada; CMHC Housing Time This persistent sellers market helped to keep growth in resale apartment condominium prices strong over the past decade. Average resale condominium prices rose by an average of 9.5 per cent per year from 22 to 212. But sellers, perhaps finally encouraged by these higher prices, more than doubled active listings from 21 to 213, to a record 2,1 units last year, even as demand faltered. Accordingly, the sales-to-activelistings ratio fell to 5.9 per cent, its lowest level in 13 years moving the resale apartment condominium 5 4 3 2 1

4 Metropolitan Condo Outlook Winter 214 Affordability and Apartment Condo Sales (share, per cent; sales, units) 24 2 16 12 8 4 Share of household income spent on mortgage (left) Existing apartment condo sales (right) 2 2 4 6 8 1 12f 14f 16f 18f 3, 2,5 2, 1,5 1, 5 Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards. Sales to Active Listings and Price Change 3 25 2 15 1 5 Sales-to-active-listings ratio (left) Average price growth (right) 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards. 2 15 1 5 5 1 Ratio of Condominium Starts to Population Growth (starts per one person increase in population).35.3.25.2.15.1.5 Current year 2 year average 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. Employment Growth 2 1 1 2 3 4 5 6 7 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Statistics Canada. market back into balanced territory and, in turn, slowing price growth. Last year, resale condominium prices increased a more modest 2 per cent. With slower price growth, buyers returned to the resale market in the fourth quarter of 213, raising unit sales once more. An improving economy is expected to lead to further increases in demand through 214 as well. Real gross domestic product is forecast to grow by 2 per cent annually both this year and next, up from just.8 per cent in 213. In total, unit sales of apartment condominiums are expected to rise by 4 per cent in 214 and an additional 5.2 per cent in 215. Average condominium price growth is forecast to reach just 1.6 per cent this year, before accelerating to 3.1 per cent next year. Growth in unit sales of apartment condominiums is expected to be moderate over the rest of the forecast, averaging 1.7 per cent on an average annual basis from 216 to 218, in line with softer economic growth. Active listings are expected to fall from their record high in the coming years. This will lead to a modest rise in the sales-to-active-listings ratio through the medium term, bringing it to 1.7 per cent by 218. Average price growth for resale condominiums will, in turn, rise to 4.4 per cent annually through 216 18.

5 Metropolitan Condo Outlook Winter 214 Resale Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Unit sales 1,794 1,725 1,487 1,546 1,626 1,666 1,68 1,714.3 3.8 13.8 4. 5.2 2.4.8 2. Active listings 1,197 1,533 2,13 1,785 1,589 1,445 1,328 1,329 45.7 28. 37.3 15.2 1.9 9.1 8.1.1 Months supply 8. 1.7 17. 13.9 11.7 1.4 9.5 9.3 Average price ($) 25,631 22,86 225,341 228,948 236,9 245,675 258,5 268,974 3.7 7.4 2. 1.6 3.1 4.1 5. 4.3 Italics indicate percentage change. Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards; CMHC Housing Time Series Database. New Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Starts 1,967 2,53 1,634 1,155 1,183 1,28 1,24 1,271 17.4 28.6 35.4 29.3 2.5 2.1 2.7 2.5 Under construction 1,452 1,664 1,591 1,362 1,358 1,358 1,362 1,366 58. 14.5 4.3 14.4.3..3.3 Completions 1,51 2,62 1,672 1,214 1,179 1,26 1,236 1,266 16.7 73.5 36.2 27.4 2.8 2.3 2.5 2.4 Complete and not absorbed 335 64 711 424 238 179 185 213 31.1 91.3 11.1 4.3 43.8 24.7 2.8 15.7 Absorptions 1,423 2,53 1,994 1,473 1,31 1,234 1,218 1,235 9.6 44.2 2.8 26.1 11.1 5.8 1.3 1.4 Months supply 2.8 3.7 4.3 3.5 2.2 1.7 1.8 2.1 Italics indicate percentage change. Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards; CMHC Housing Time Series Database. A sellers market in Québec s resale apartment condominium market prompted builders to increase new condominium starts at a rapid pace from 28 until 212. Starts increased an average of 28.9 per cent per year during this period, to reach a record 2,53 units in 212. Absorptions of new units also rose at the same time, but at a slower rate than starts. As a consequence, inventories crept up. This prompted builders to take a step back from the market in 213, reducing starts more than 35 per cent. Despite the cut in starts, inventories continued to climb, reaching a record of 711 units last year. Thus, we expect starts to fall a further 29.3 per cent in 214. Although absorptions are also expected to fall this year, the decline in starts will be larger, and as a result, inventories are forecast to move lower in 214. Starts will then rise by an annual average of 2.5 per cent from 215 to 218, to reach 1,27 units in 218 still well below the 212 peak.

6 Metropolitan Condo Outlook Winter 214 Montréal Share of Population by Age Cohort 3 25 2 15 1 5 15 24 25 39 4 54 55 74 75+ 1994 26 218f Sources: The Conference Board of Canada; Statistics Canada. Thanks to stronger economic growth and decent employment gains, Montréal s resale apartment condominium market is expected to see a 2 per cent increase in unit sales this year. Following a decline last year, average prices are forecast to grow modestly in 214, rising by 2 per cent. However, apartment condominium starts are forecast to fall for the third year in a row in 214, as builders try to get inventories under control. Demand for resale apartment condominiums in Montréal faltered over the past two years, after an exceptional period of growth that lasted for more than a decade (save for a slight pause in sales during the 28 recession). For much of the 2s, demand was driven by a growing population, particularly in the over-55 age group, strong foreign investment, and an increase in the number of people wanting to live downtown. But by 212, a slower economy, little growth in employment, tax increases, and tighter mortgage rules all conspired to stifle demand. In addition, rising vacancy rates also discouraged buyers, both foreign and domestic, who were looking for investment opportunities. In total, unit sales of apartment condominiums fell by nearly 1 per cent through 212 and 213. Apartment Condo Construction (starts, units; share, per cent) 15, 12, 9, 6, 3, Apartment condo starts (left) Condo starts as a share of multiple starts (right) 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. The solid demand seen over much of the 2s fuelled healthy apartment condominium price growth. In fact, condominium price growth averaged 7.9 per cent on an annual basis between 22 and 212. In level terms, average resale prices topped $25, in 211. These higher prices helped to encourage a surge in active listings from 211 to 213. This jump in supply coincided 8 7 6 5 4 3

7 Metropolitan Condo Outlook Winter 214 Affordability and Apartment Condo Sales (share, per cent; sales, units) 22 2 18 16 14 12 1 Share of household income spent on mortgage (left) Existing apartment condo sales (right) 2 2 4 6 8 1 12f 14f 16f 18f 16, 14, 12, 1, 8, 6, 4, Sales to Active Listings and Price Change Sales-to-active-listings ratio (left) Average price growth (right) 35 3 25 2 15 1 5 1999 1 3 5 7 9 11 13f 15f 17f 25 2 15 1 5 5 Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards. Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards. Ratio of Condominium Starts to Population Growth (starts per one person increase in population).35.3.25.2.15.1.5 Current year 2 year average 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. Employment Growth 4 3 2 1 1 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Statistics Canada. with weakening demand, however, resulting in a falling sales-to-active-listings ratio, which averaged 8.1 per cent last year, its lowest level in 15 years. Accordingly, average resale condominium prices began to fall, slipping by 1.2 per cent in total last year. This was the first annual price decline for Montréal s resale condominium market in recorded history. Unit sales of apartment condominiums are expected to continue to weaken through the first half of this year, before picking up in the second half, in line with a strengthening economy (real gross domestic product is forecast to grow by 2.2 per cent in 214, compared with an average of 1.5 per cent per year over 212 and 213), and solid employment growth (2.3 per cent versus a.1 per cent decline in 212 and a 1.4 per cent increase last year). Overall, unit sales are anticipated to increase by 2 per cent in 214 and an additional 2.5 per cent in 215. At the same time, with prices falling last year, sellers are expected to take a break, reducing active listings this year. The sales-to-active-listings ratio will therefore rise slightly, up to 8.5 per cent by 215. In turn, price growth will resume, at 2 per cent this year and 3.4 per cent next year. Through the medium term, moderate growth in unit sales, averaging 1.1 per cent annually from 216 to 218, will keep the sales-to-

8 Metropolitan Condo Outlook Winter 214 Resale Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Unit sales 12,757 12,47 11,55 11,786 12,85 12,252 12,363 12,476.8 2.2 7.4 2. 2.5 1.4.9.9 Active listings 8,3 9,86 11,897 11,652 11,789 11,669 11,547 11,431 21.5 18.8 2.7 2.1 1.2 1. 1. 1. Months supply 7.8 9.5 12.4 11.9 11.7 11.4 11.2 11. Average price ($) 256,811 267,173 263,884 269,161 278,382 288,32 296,629 36,161 3.7 4. 1.2 2. 3.4 3.6 2.9 3.2 Italics indicate percentage change. Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards; CMHC Housing Time Series Database. New Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Starts 12,582 11,81 9,12 8,71 8,227 8,357 8,447 8,51 22.2 6.2 23.6 1.4 1.9 1.6 1.1.6 Under construction 1,583 13,12 12,836 12,791 12,759 12,755 12,719 12,676 35.6 22.9 1.4.3.3..3.3 Completions 9,425 1,361 9,62 8,12 8,218 8,383 8,485 8,543 31. 9.9 7.2 15.6 1.2 2. 1.2.7 Complete and not absorbed 1,374 1,663 1,862 1,645 1,632 1,677 1,722 1,749 11.4 21.1 12. 11.7.8 2.8 2.7 1.5 Absorptions 8,896 1,275 9,475 8,298 8,2 8,332 8,448 8,523 14.7 15.5 7.8 12.4 1.2 1.6 1.4.9 Months supply 1.9 1.9 2.4 2.4 2.4 2.4 2.4 2.5 Italics indicate percentage change. Sources: The Conference Board of Canada; Quebec Federation of Real Estate Boards; CMHC Housing Time Series Database. active-listings ratio at around 9 per cent, leading to average price growth in resale condominiums of 3.2 per cent per year. Spillover demand from the resale market led to a very active new apartment condominium market in Montréal over 21 and 211, as builders increased starts of apartment condominiums more than 6 per cent to reach a record 12,6 units. But in spite of rising absorptions, inventories quickly climbed, and so by 212, builders began pulling back from the market. Starts of apartment condominiums fell 6.2 per cent in 212 and 23.6 per cent last year, back down to 9, units. At last year s level, starts of apartment condominiums remain above both their long-term average and demographic requirements. At the same time, inventories averaged 1,86 units last year, their highest level in six years. Accordingly, builders are expected to continue to retreat from the market this year, reducing starts a further 1.4 per cent. But reduced inventories and stable population growth are anticipated to lead to modest increases in starts over the rest of the forecast period. Starts of apartment condominiums are forecast to grow by 1.9 per cent next year and then by an average of 1.1 per cent per year from 216 to 218.

9 Metropolitan Condo Outlook Winter 214 Ottawa Share of Population by Age Cohort 3 25 2 15 1 5 15 24 25 39 4 54 55 74 75+ 1994 26 218f Sources: The Conference Board of Canada; Statistics Canada. Sales in Ottawa s resale apartment condominium market are expected to post modest growth this year, despite challenges from public sector job cuts. Unit sales are expected to increase by 1.3 per cent, the first increase in four years. But the new apartment condominium market will weaken this year and next, as builders try to reduce record inventories of completed but unoccupied units. Starts of apartment condominiums are forecast to fall by a total of nearly 5 per cent over 214 and 215. Ottawa buyers pushed sales of existing apartment condominiums to a record 1,8 units in 21, buoyed by the global recovery, healthy population growth, and low interest rates. It also marked the fourth time in five years that sales posted double-digit growth. Price growth was strong over the entire decade. Indeed, from 21 to 21, median apartment prices rose at an average annual rate of 1 per cent, increasing from just under $1, in 2 to above $25, by 21. However, demand in Ottawa s resale apartment condominium market has been weakening since 211. Unit sales fell by an average of 6.2 per cent from 211 to 213, back down to 1,5 units last year, as Ottawa buyers have been feeling the impact of tighter mortgage rules, as well as slower economic growth (real gross domestic product averaged growth of just.4 per cent annually through 212 13) and tepid employment, the Apartment Condo Construction (starts, units; share, per cent) Apartment condo starts (left) Condo starts as a share of multiple starts (right) 3, 2,5 2, 1,5 1, 5 1999 1 3 5 7 9 11 13f 15f 17f 42 36 3 24 18 12 6 Sources: The Conference Board of Canada; CMHC Housing Time Series Database. latter two due to fiscal restraint and public sector layoffs in the region. Meanwhile, partly because sellers were also hurt by the economic slowdown, active listings increased from 211 to 213. This combined with lower sales to drive down the sales-to-active-listings ratio from 35.6 per cent in 29 to 12.3 per cent last year. Accordingly, the rising supply of apartment condominiums for sale led to a moderation in house price inflation. In fact, median apartment prices rose by just.5 per cent per year between 211 and 213, including a 3.6 per cent decline last year.

1 Metropolitan Condo Outlook Winter 214 Affordability and Apartment Condo Sales (share, per cent; sales, units) 2 16 12 8 4 Share of household income spent on mortgage (left) Existing apartment condo sales (right) 2 2 4 6 8 1 12f 14f 16f 18f Sources: The Conference Board of Canada; Canadian Real Estate Association. 2,5 2, 1,5 1, 5 Sales to Active Listings and Price Change 8 6 4 2 Sales-to-active-listings ratio (left) Median price growth (right) 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Canadian Real Estate Association. 3 2 1 1 Ratio of Condominium Starts to Population Growth (starts per one person increase in population) Employment Growth.35.3.25.2.15.1.5 Current year 2 year average 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 3 2 1 1 2 3 4 5 6 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Statistics Canada. Apartment condominium sales are set to fall again in the first quarter of 214, before rising through the rest of the year. Economic growth is expected to pick up this year, although it will remain modest, at 1.4 per cent, as government cutbacks continue. Still, growth in the economy is expected to improve employment prospects, with job growth forecast to reach 1.3 per cent this year, following a 2.2 per cent decline in 213. These factors are expected to slowly bring buyers back to the resale apartment condominium market. For 214 as a whole, sales of apartment condominiums are forecast to increase by 1.3 per cent. A stronger economy is then expected to keep demand on the upswing, boosting sales by 3.3 per cent next year and by 2.8 per cent per year from 216 to 218. Sellers finally began to pull back from the resale market near the end of last year, as active listings reached record levels. Declines in active listings are expected over 214, boosting the sales-to-active-listings ratio to 19.1 per cent, and setting the stage for modest price growth of 2 per cent. Active listings are expected to fall again in 215 and 216, reaching levels more closely aligned with their long-term average. This will push the

11 Metropolitan Condo Outlook Winter 214 Resale Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Unit sales 1,741 1,546 1,59 1,529 1,579 1,628 1,665 1,7 5.1 11.2 2.4 1.3 3.3 3. 2.3 2.1 Active listings 7 881 1,26 666 486 465 471 494 25. 25.8 16.5 35.1 27.1 4.4 1.4 4.9 Months supply 4.8 6.8 8.2 5.2 3.7 3.4 3.4 3.5 Median price ($) 261,442 271,331 261,483 266,64 273,626 282,715 294,259 37,681 1.4 3.8 3.6 2. 2.6 3.3 4.1 4.6 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. New Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Starts 1,354 2,277 2,357 1,298 1,253 1,36 1,34 1,354 1.3 68.2 3.5 45. 3.5 4.2 2.6 1.1 Under construction 1,91 2,663 3,334 3,329 3,18 3,52 3,53 3,33 3.9 4.1 25.2.2 6.6 1.8..7 Completions 1,363 1,458 1,753 1,642 1,396 1,319 1,348 1,376 5.5 7. 2.3 6.3 15. 5.5 2.1 2.1 Complete and not absorbed 157 165 281 383 334 313 317 35 21.9 4.6 7.6 36.6 12.9 6.4 1.4 1.3 Absorptions 1,37 1,337 1,663 1,591 1,449 1,38 1,367 1,351 6.4 2.4 24.4 4.4 8.9 9.7 4.5 1.2 Months supply 1.4 1.5 2. 2.9 2.8 2.9 2.8 3.1 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. sales-to-active-listing ratio up, resulting in resale apartment condominium prices accelerating from 2.6 per cent next year to 4.6 per cent by 218. In spite of a weakening resale market, apartment condominium starts increased by a total of over 7 per cent from 212 to 213, reaching a record 2,36 units last year. But at the same time, completions outpaced absorptions, as buyers were held back by the weak economy. As a consequence, inventories rose sharply through 212 13, with the number of completed but unoccupied units hitting record levels last year. To get these inventories under control, builders are expected to retreat from the market. Starts of apartment condominiums are forecast to decline 45 per cent in 214 and a further 3.5 per cent in 215, lowering them to 1,25 units next year. Still, modest economic growth means that absorptions will continue to weaken over the next couple of years, and so inventories will be slow to move back down, only beginning to fall in 215. A more stable economy and decent population growth should then help bring builders back to the new apartment condominium market. Starts are forecast to rise to 1,35 units by 218, averaging growth of 2.6 per cent per year from 216 to 218.

12 Metropolitan Condo Outlook Winter 214 Toronto Share of Population by Age Cohort 3 25 2 15 1 5 15 24 25 39 4 54 55 74 75+ 1994 26 218f Sources: The Conference Board of Canada; Statistics Canada. Unit sales in Toronto s resale apartment condominium market are forecast to remain flat for the second year in row in 214, before posting modest gains over the rest of the forecast period, in line with stronger economic activity. In the new apartment condominium market, starts fell by more than 4 per cent last year as builders faced higher inventories. Rising absorptions will encourage builders to return to the market this year, pushing starts up by 5.6 per cent. Apartment condominiums in Toronto have become so popular that sales in the resale apartment condominium market reached a record 22,9 units in 211, threeand-a half times greater than sales in 1993. Demand has been growing for several reasons: strong population growth, low mortgage rates, poor affordability of single-detached homes, traffic congestion that has made living downtown or near public transportation lines more appealing, and government policies aimed at limiting the supply of single-detached homes to control suburban sprawl. This increase in demand led to robust average price growth of 7.8 per cent per year between 29 and 211. Median prices in Toronto s resale apartment condominium market topped $3, in 211. In turn, higher prices have encouraged sellers to enter the resale market. Active listings rose nearly 2 per cent in 21 11, reducing the sales-to-active-listings ratio below 3 per cent for the first time in six years. Apartment Condo Construction (starts, units; share, per cent) Apartment condo starts (left) Condo starts as a share of multiple starts (right) 3, 25, 2, 15, 1, 5, 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. In 212, tighter mortgage rules, along with more modest economic growth, weakened demand in the resale apartment condominium market. Combined with continued growth in active listings, this pushed the sales-to-activelistings ratio down to 27.4 per cent, holding growth in the median resale price to just 1.5 per cent. Growth in resale apartment condominium sales remained flat last year as the economy continued to struggle. Meanwhile, active listings edged up.5 per cent for the year, and so median resale price growth weakened further, down to 1 per cent. 75 65 55 45 35 25 15

13 Metropolitan Condo Outlook Winter 214 Affordability and Apartment Condo Sales (share, per cent; sales, units) 18 16 14 12 1 8 Share of household income spent on mortgage (left) Existing apartment condo sales (right) 2 2 4 6 8 1 12f 14f 16f 18f Sources: The Conference Board of Canada; Canadian Real Estate Association. 25, 22, 19, 16, 13, 1, Sales to Active Listings and Price Change 45 4 35 3 Sales-to-active-listings ratio (left) Median price growth (right) 25 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Canadian Real Estate Association. 12 9 6 3 Ratio of Condominium Starts to Population Growth Employment Growth Current year 2 year average.3.25.2.15.1.5 1999 1 3 5 7 9 11 13f 15f 17f (starts per one person increase in population) Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 5 4 3 2 1 1 2 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Statistics Canada. With growth in Toronto s real gross domestic product expected to accelerate to 2.8 per cent this year a full percentage point improvement over 213 demand in the resale apartment condominium market should improve as well. However, a slow start to the year will leave unit sales relatively unchanged on an annual basis for one more year. Continued demand growth, helped by healthy economic activity and solid population growth, is forecast to boost unit sales by 1 per cent on an average annual basis from 215 to 218. Sellers are expected to take a breather this year, lowering active listings by 2 per cent. The resulting increase in the sales-to-active-listings ratio will push price growth up, albeit to a still modest 1.7 per cent. A steady sales-to-active-listings ratio in the coming years is anticipated to hold median apartment price growth to an average annual rate of 1.8 per cent from 215 to 218. Activity in Toronto s new apartment condominium market has also been strong. Absorptions increased from just 1,2 units in 1993 to nearly 18, units in 211.

14 Metropolitan Condo Outlook Winter 214 Resale Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Unit sales 22,94 2,274 2,28 2,276 2,478 2,685 2,921 21,119 5.6 11.5.. 1. 1. 1.1.9 Active listings 5,159 6,133 6,164 6,44 6,17 6,453 6,38 6,183 1.3 18.9.5 2. 2.1 4.6 1.1 3.1 Months supply 2.7 3.6 3.6 3.6 3.6 3.7 3.7 3.5 Median price ($) 3,946 35,35 38,387 313,751 319,18 325,134 33,571 336,371 7.3 1.5 1. 1.7 1.7 1.9 1.7 1.8 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. New Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Starts 19,195 27,413 15,844 16,737 17,169 17,614 18,53 18,465 65.7 42.8 42.2 5.6 2.6 2.6 2.5 2.3 Under construction 32,685 44,213 5,653 46,528 42,533 41,487 4,96 4,26.6 35.3 14.6 8.1 8.6 2.5 1.4 1.7 Completions 17,878 12,389 15,95 23,779 19,27 18,243 18,666 19,213 19.6 3.7 21.8 57.5 19.2 5. 2.3 2.9 Complete and not absorbed 724 829 999 1,297 1,75 642 48 494 4.2 14.4 2.6 29.8 17.1 4.3 25.2 2.8 Absorptions 17,793 12,333 15,45 23,312 19,815 18,462 18,873 19,68 23.1 3.7 22. 54.9 15. 6.8 2.2 1. Months supply.5.8.8.7.7.4.3.3 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. As a result, starts hit 27,4 units in 212 by far their highest level in recorded history, as numerous projects were launched across the city. But absorptions tumbled 3.7 per cent in 212, in line with the tighter mortgage rules and a slowing economy. This caused inventories of completed and unoccupied units to climb. In response, builders eased off last year, reducing starts by 42.2 per cent. However, several projects that were already under way wrapped up in 213, further adding to the number of completed and unoccupied units (raising them to record levels), despite an increase in absorptions. As economic growth improves this year, demand for new apartment condominiums should rise again. Indeed, absorptions are expected to jump 55 per cent this year. Faster growth in absorptions than completions will help provide some relief to the current level of inventories. Accordingly, builders are expected to increase starts of apartment condominiums in the second half of this year, leading to 5.6 per cent growth for 214 as a whole. Between 215 and 218, a healthier economy and continued solid population growth are expected to lead to modest increases in starts, up by an average of 2.5 per cent per year.

Calgary 15 Metropolitan Condo Outlook Winter 214 Share of Population by Age Cohort 15 24 25 39 4 54 55 74 75+ 3 25 2 15 1 5 1994 26 218f A buoyant economy, healthy population growth, and excellent affordability underpin brisk residential demand in Calgary. Sales of existing apartment condominiums have rebounded smartly and are forecast to keep increasing, albeit more gently, over the next few years. The market is strongly balanced, although price growth remains moderate. Healthy demand will also lift apartment condominium starts following a pullback in 213 that was at least partly due to flooding. Calgary s economy continues to post solid economic and employment growth as the city recovers from the 213 floods. Population growth hit 3.4 per cent in 213, the highest since 26. This is boosting prospects for both the overall housing market and its condominium segment. Sales of existing apartments rose in doubledigit percentage terms in each of the past two years, lifting volumes to their highest level since the prerecession boom. While a fresh boom is unlikely, healthy housing market activity is expected to continue, both in 214 and over the following few years. We think sales will continue to rise over the next few years, albeit more modestly, starting with a 3 per cent rise in 214. Rising sales and flooding in 213 cut the supply of active listings 21 per cent in 213, although their average last year of just under 1, units was near the 1-year average. Much of the drop occurred in the third Sources: The Conference Board of Canada; Statistics Canada. Apartment Condo Construction (starts, units; share, per cent) Apartment condo starts (left) Condo starts as a share of multiple starts (right) 7, 6, 5, 4, 3, 2, 1, 1999 1 3 5 7 9 11 13f 15f 17f 9 8 7 6 5 4 3 2 Sources: The Conference Board of Canada; CMHC Housing Time Series Database. quarter, just after the floods hit, undoubtedly damaging some units, but listings also trailed year-earlier levels in each of the three previous quarters. Withdrawal of this supply jolted the sales-to-active-listings ratio to 41 per cent in the third quarter, the highest since 27 and a level consistent with a sellers market in many cities. The ratio averaged 37 per cent for 213 on the whole, the highest since the last boom year in 27. We expect sales to rise slightly faster than listings during the

16 Metropolitan Condo Outlook Winter 214 Affordability and Apartment Condo Sales (share, per cent; sales, units) 13 11 9 7 Share of household income spent on mortgage (left) Existing apartment condo sales (right) 2 2 4 6 8 1 12f 14f 16f 18f Sources: The Conference Board of Canada; Canadian Real Estate Association. 6, 4, 2, Sales to Active Listings and Price Change Sales-to-active-listings ratio (left) Median price growth (right) 13 11 9 7 5 3 1 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Canadian Real Estate Association. 5 4 3 2 1 1 Ratio of Condominium Starts to Population Growth (starts per one person increase in population) Employment Growth.2.16.12.8.4 Current year 2 year average 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 1 8 6 4 2 2 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Statistics Canada. medium term, placing their ratio at 39 per cent by 218. This reading points to, at a minimum, strongly balanced market conditions. The tightening market prompted a slight acceleration in median price growth during 213, particularly in the third quarter, when buyers bid up the price among undamaged condominium apartments. Thus, while the median price eased on a year-over-year basis during the fourth quarter, the full-year price gain was still 3.3 per cent. This is the most since the boom ended, although it remains below the 2-year average hike. We expect a similar 3.2 per cent price increase in 214, then moderate annual advances averaging 2.6 per cent between 215 and 218. Since Calgary has the highest average household incomes among our report s eight cities, housing affordability in the city is excellent. Moreover, Calgary apartments are not particularly expensive; their median price near $252,5 in 213 was below that in Montréal, Toronto, Ottawa, Vancouver, and Victoria. Accordingly, mortgage carrying costs on the median-priced apartment condominium consumed only about 9.3 per cent of average household income, the lowest among this

17 Metropolitan Condo Outlook Winter 214 Resale Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Unit sales 3,444 3,967 4,379 4,57 4,61 4,662 4,733 4,817 5.6 15.2 1.4 2.9 2.1 1.3 1.5 1.8 Active listings 969 1,263 994 999 1,1 1,37 1,37 1,26 24.7 3.4 21.3.5 1.1 2.7. 1.1 Months supply 3.4 3.8 2.7 2.7 2.6 2.7 2.6 2.6 Median price ($) 237,354 244,362 252,473 26,523 269,58 276,182 281,547 288,252 2.3 3. 3.3 3.2 3.4 2.5 1.9 2.4 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. New Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Starts 1,886 3,36 2,432 2,61 2,68 2,714 2,755 2,81 77.4 78.2 27.6 6.9 3. 1.3 1.5 1.7 Under construction 3,17 4,344 4,39 4,574 4,663 4,69 4,52 4,45 6.4 37..8 6.1 1.9 1.2 1.9 2.5 Completions 681 1,648 2,71 2,382 2,675 2,782 2,854 2,928 75.4 142. 63.9 11.8 12.3 4. 2.6 2.6 Complete and not absorbed 468 297 244 211 183 157 147 132 19.2 36.4 17.8 13.6 13.5 14.2 6.1 1.2 Absorptions 978 1,671 2,772 2,373 2,711 2,83 2,873 2,933 61.4 7.8 65.9 14.4 14.3 3.4 2.5 2.1 Months supply 5.7 2.1 1.1 1.1.8.7.6.5 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. report s eight cities. While gently rising interest rates and house prices are forecast to lift this bite to 11.4 per cent by 218, it will remain the lowest. Strong condominium demand is similarly buoying new construction. New-unit absorptions have come back strongly over the past two years, with gains of 71 per cent in 212 and 66 per cent in 213. Last year s 2,77-unit take-up was the most since 28 and likely would have been even stronger were it not for the floods. Accordingly, the inventory of newly completed and unoccupied apartments fell to 244 units a marked improvement from inventories of nearly 6 units in 21. Absorptions are forecast to pull back in 214, but remain strong at nearly 2,4 units. Modest absorption gains during the medium term are forecast to keep trimming inventories: they will dip below their 2-year average in the projection s outer years. Falling inventories will give builders the confidence to boost housing starts, following a 28 per cent flood-soaked pullback to 2,432 units in 213. We expect 2,6 units in 214. This will be followed by modest annual increases culminating in 2,8 starts by 218.

18 Metropolitan Condo Outlook Winter 214 Edmonton Share of Population by Age Cohort 3 25 2 15 1 5 15 24 25 39 4 54 55 74 75+ 1994 26 218f Sources: The Conference Board of Canada; Statistics Canada. Edmonton s apartment condominium market is benefiting from the city s healthy economy, solid population growth, and good affordability. Sales of existing apartments have risen decently since the recession, and we expect moderate gains to continue during the medium term. The resale market is balanced, and price growth has turned positive. Good demand is also bolstering the new construction market, although apartment condominium starts are forecast to pull back in 214 following outsized increases in 212 and 213. Edmonton s robust output and employment growth is proving magnetic, boosting population growth to a seven-year high of 3 per cent in 213. Such conditions underpin good housing demand. We do not expect a replay of the past decade s boom, but think decent conditions will persist over the next few years. Apartment Condo Construction (starts, units; share, per cent) 4, 3, 2, 1, Apartment condo starts (left) Condo starts as a share of multiple starts (right) 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 6 5 4 3 2 The good news begins with existing apartment sales, which rose 12 per cent in 213, more than offsetting a 2.7 per cent decline in 212. Last year s volume of just over 2,8 units was the most since the boom ended with the 29 recession. We think sales gains will persist, but at a more moderate pace throughout the forecast period, including a 2.3 per cent rise in 214. These sales gains were an important contributor to the 12.5 per cent decline in the supply of active listings in 213. Indeed, last year s average supply near 1,1 units was the lowest since 26. Declines were spread throughout the year, but accelerated toward the year s end. This supply rundown lifted the sales-to-active-listings ratio to just over 23 per cent by the fourth quarter,

19 Metropolitan Condo Outlook Winter 214 Affordability and Apartment Condo Sales (share, per cent; sales, units) 15 13 11 9 7 5 Share of household income spent on mortgage (left) Existing apartment condo sales (right) 2 2 4 6 8 1 12f 14f 16f 18f Sources: The Conference Board of Canada; Canadian Real Estate Association. 5, 4, 3, 2, 1, Sales to Active Listings and Price Change 12 1 8 6 4 2 Sales-to-active-listings ratio (left) Median price growth (right) 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Canadian Real Estate Association. 5 4 3 2 1 1 Ratio of Condominium Starts to Population Growth (starts per one person increase in population) Employment Growth.2.15.1.5 Current Year 2 Year average 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; CMHC Housing Time Series Database. 7 6 5 4 3 2 1 1 1999 1 3 5 7 9 11 13f 15f 17f Sources: The Conference Board of Canada; Statistics Canada. the highest since 27 and consistent with a balanced market. The ratio clocked in at roughly 22 per cent for 213 on the whole, the highest since 27. We expect sales to rise slightly faster than listings over the next few years, lifting this ratio to 25 per cent by 218 a level consistent with balanced market conditions. This tightening market prompted the median price to rise 3.3 per cent in 213. This was the first yearly increase since 27, although annual declines between 28 and 212 averaged less than 2 per cent. Last year s gain was still less than half of the 6.4 per cent average increase in the 19 years to 212, let alone the string of double-digit jumps during the pre-recession boom. We expect a further 2.5 per cent price rise in 214, and then slightly faster annual increases of 2.8 per cent on average between 215 and 218. These increases will push Edmonton s median price above its 27 peak by 216. Edmonton s strong housing affordability starts with its high average household income, which trails only Calgary among eight cities in this report. Edmonton also had the lowest median apartment condominium price $217,424 in 213. As a result, mortgage carrying costs on the median-priced apartment condominium consumed only about 9.3 per cent of average household income, only (fractionally) above Calgary.

2 Metropolitan Condo Outlook Winter 214 Resale Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Unit sales 2,584 2,514 2,817 2,883 2,957 3,12 3,38 3,1 4.4 2.7 12.1 2.3 2.6 1.9.9 2.1 Active listings 1,23 1,248 1,91 1,39 1,19 1,19 1,24 1,33 13.4 1.5 12.5 4.8 2...5.9 Months supply 5.7 6. 4.6 4.3 4.1 4.1 4. 4. Median price ($) 213,22 21,577 217,424 222,943 229,435 236,192 242,718 249,138 1.9 1.2 3.3 2.5 2.9 2.9 2.8 2.6 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. New Condominium Apartment Market 211 212 213 214f 215f 216f 217f 218f Starts 1,392 1,983 3,168 2,16 2,186 2,22 2,255 2,286 4.9 42.5 59.7 31.8 1.2.7 2.4 1.4 Under construction 2,955 2,964 4,83 4,594 4,37 4,217 4,79 3,975 13.7.3 62. 4.3 4.9 3.5 3.3 2.5 Completions 1,37 1,475 1,611 2,79 2,339 2,367 2,374 2,389 1.1 12.9 9.2 68.2 13.7 1.2.3.6 Complete and not absorbed 664 529 345 38 378 345 34 397 3. 2.4 34.7 1..6 8.7 1.2 16.6 Absorptions 1,338 1,594 1,762 2,644 2,347 2,417 2,361 2,322 7.5 19.1 1.5 5. 11.2 3. 2.3 1.7 Months supply 6. 4. 2.4 1.7 1.9 1.7 1.7 2.1 Italics indicate percentage change. Sources: The Conference Board of Canada; Canadian Real Estate Association; CMHC Housing Time Series Database. While moderate interest rate increases and gentle house price rises are forecast to push this share to 11.8 per cent by 218, it will still be the secondlowest among our eight cities. Healthy demand has similarly buoyed the market for new condominium apartments. New-unit absorptions rose a brisk 19 per cent in 212 and another 11 per cent in 213. Last year s 1,762-unit take-up was the highest since 29. Accordingly, builders unsold backlogs fell to a five-year low of 345 units well below average inventories of 654 units during 21 and 211. Absorptions are forecast to rise again in 214, this time to over 2,6 units, but pull back to about 2,35 units in 215, generally stabilizing thereafter. Although builder inventories are forecast to rise modestly in 214, they will drop thereafter and approach their 2-year average in the projection s outer years. Easing inventories underpinned a 6 per cent rise in total starts in 213, following a 43 per cent gain in 212. Such jumps are unsustainable, and so we expect a 32 per cent drop to 2,16 units in 214. Subsequent years will see small annual increases leading to nearly 2,3 starts by 218.