Tracking the Market Trends - Home - Hardlines · Tracking the Market Trends Economic Intelligence Nov 13th, 2018 Hardlines Conference, Niagara-on-the-Lake Peter Norman, VP & Chief

11/21/2018

1

Tracking the Market Trends

Economic Intelligence

Nov 13th, 2018Hardlines Conference, Niagara-on-the-Lake

Peter Norman, VP & Chief Economist, Economic Consulting

2altusgroup.com @altus_group @EconomistNorman

Today’s Agenda

• The State of the Economy

• International Trade Downs and Ups

• Our Love Affair with Residential Renovation

• Migration

• Pesky Interest Rates

• The Cannabis Question

• What’s Ahead for Housing Starts?

• Rental Renaissance?

11/21/2018

2


“Challenges to Steady Growth”

5.1

2.8

7.7

3.2

0.6

5.5

3.7

2.3

4.7

3.7

2.4

4.7

3.7

2.1

4.7

0.0

2.0

4.0

6.0

8.0

10.0

World Advanced Economies Emerging Economies

02-07 07-12 2014 2015 2016 2017 2018 2019

Real GDP Annual % Change

Source: Altus Economics based on IMF (April 2018)


Economic Outlook

* Annual average

Source: Historical - Statistics Canada and Bank of Canada Forecasts – Altus Group Economic Consulting

11/21/2018

3


Contributions to Canadian Economic Growth

(4.0)

(2.0)

-

2.0

4.0

6.0

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

HouseholdConsumption

GovernmentConsumption

Capital Investment

Net Exports

Total

Source: Altus Group based on Statistics Canada


Job Growth Has Come Off 2017 Highs

195

144133

337

200 210

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

10-y

r A

vg

2015

2016

2017

2018

2019

Year-over-year change in jobs (000s)

43

56

7

83

16 18

0.0

20.0

40.0

60.0

80.0

100.0

120.0

BC AB

MS

ON

QU

ATL

Q3 2018 Y/Y change in jobs (000s)

1.9%

0.6%

3.2%

2.0%

0.8%

1.2%

5.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

Van Cal

Edm

Win

Tor

Mtr

Hlx

By Major City

Oct 2018 Y/Y Change in jobs (%)

Canada By Province

Altus Forecast


11/21/2018

4


Net Migration Trends Strongly Boosting Ontario and Quebec

2015 2016 2017 2017 2018 05-14 2017

British Columbia 45.9 36.9 59.1 61.3 33.6 35.6 19% 17%

Alberta 56.3 29.5 21.3 23.8 9.1 17.9 23% 6%

Saskatchewan 7.5 6.1 10.4 7.2 4.2 2.0 3% 2%

Manitoba 7.7 10.8 16.0 13.6 8.0 4.8 3% 4%

Ontario 91.0 85.8 160.3 179.3 82.0 113.3 37% 49%

Quebec 37.9 24.8 45.5 68.1 35.8 43.9 15% 18%

Atlantic Canada 1.4 6.0 17.0 15.6 9.5 8.7 1% 4%

Canada* 247.6 199.9 330.0 369.5 183.1 226.3 100% 100%

* Includes Northwest Territories, Nunavut and Yukon.

Total Net Migration (Persons 000s) Percent

Average 2005-2014

DistributionJanuary-June



New Policy Will Increase Immigration Intake 20% in next three years

29%

14%

10%

7%

5%

4%

3%

2%

1%

1%

25%

0% 10% 20% 30% 40%

GTA

Montreal

Greater Vancouver

Calgary

Winnipeg

Edmonton

Ottawa-Gatineau

Saskatoon

Regina

Hamilton

Rest of Canada 100

150

200

250

300

350

400

199

5

199

7

199

9

200

1

200

3

200

5

200

7

200

9

201

1

201

3

201

5

201

7

201

9

Number of Immigrants, 000sTop Markets for Immigration (% of Total 2012-2017)

Target – 340,000 by 2020

Liberal Gov’t Plan

+20%

Source: Altus Group based on Statistics Canada, Citizenship and Immigration Canada

11/21/2018

5


Existing Home Prices Stabilizing

*Composite of eleven major markets

Source: Altus Group, MLS® HPI

Y/Y % Change in Price, Monthly

0.0

5.0

10.0

15.0

20.0

25.0

Jan

2016

Mar

201

6

May

201

6

Jul 2

016

Sep

2016

Nov

201

6

Jan

2017

Mar

201

7

May

201

7

Jul 2

017

Sep

2017

Nov

201

7

Jan

2018

Mar

201

8

May

201

8

Jul 2

018

Sep

2018

Nov

201

8

Canada


Recent Price Change, Existing Homes

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Canada Vancouver Calgary Regina Toronto Ottawa Montreal Moncton Guelph Oakville

*Composite of eleven major markets

Source: Altus Group, MLS® HPI

27-month price history (Sept. 2016-Aug. 2018)Sept. 2018 Y/Y price

Y/Y % Change in Price, Monthly

11/21/2018

6


Government Bond and Mortgage Rates

0.0

2.0

4.0

6.0

8.0

10.0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

5-Year Government Bond

5-Year Mortgage

Percent

5.2

3 5.6

25

.54

4.1

74

.10

3.8

63

.30

3.5

13

.31

2.8

32

.77

3.0

5

2.9

42

.80

2.7

4 3.3

7

3.4

43

.44

3.6

43

.84

0.0

2.0

4.0

6.0

8.0

10.0

2006

2008

2010

2012

2014

2016 Q

2

Q4

Q1

Q3

Actual Market 5-Yr Mortgage Rates (Chartered…

Percent

Source: Altus Group based on data from Bank of Canada/ Major Financial Institutions/ Bloomberg

20182017 2020??

4.0

0 4.5

0 5.0

0


Household Balance Sheet Factors

80

100

120

140

160

180

200

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

Debt to Personal DisposableIncome

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

Debt Service Ratio*

0

2

4

6

8

10

12

14

16

18

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

Savings Rate

% % %

*Interest only Source: Altus Economics based on Statistics Canada

11/21/2018

7


Residential Renovation Spending Surged Ahead in Early 2018

0.0

50.0

100.0

150.0

200.0

250.0

Q1

199

8

Q4

199

9

Q3

200

1

Q2

200

3

Q1

200

5

Q4

200

6

Q3

200

8

Q2

201

0

Q1

201

2

Q4

201

3

Q3

201

5

Q2

201

7

2002=100 (constant dollars)Q/Q Annualized % Ch.

6.5%

1.4%

0.9%

8.2%

5.0%

9.6%

-4.3

%

-1.2

%

4.2%

12.2

%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

201

6 I

201

6 II

201

6 II

I

201

6 IV

201

7 I

201

7 II

201

7 II

I

201

7 IV

201

8 I

201

8 II

140.0

150.0

160.0

170.0

180.0

190.0

200.0

210.0

Q1

201

0

Q1

201

1

Q1

201

2

Q1

201

3

Q1

201

4

Q1

201

5

Q1

201

6

Q1

201

7

Q1

201

8



Residential Renovations – Our Love Affair Continues

Source: Altus Group Economic Consulting based on Statscan Data

77.7

0

10

20

30

40

50

60

70

80

90

199

21

993

199

41

995

199

61

997

199

81

999

200

02

001

200

22

003

200

42

005

200

62

007

200

82

009

201

02

011

201

22

013

201

42

015

201

62

017

201

82

019

202

0

Residential Renovation Spending, Canada

Billions 2017$

Spending on New Dwellings

$58.1(43%)

Alterations/ Improvements/ Conversions

$59.1

Repairs$18.6

Spending on Renovations

$77.7(57%)

11/21/2018

8


Lots of Opportunity for Renovators on Homes Built After WWII and Before 1981

15.0%

12.8%

10.1%

8.5%

7.3%

5.3%

4.4%

3.5%

2.3%

1.4%

0.9%

1920 or before

1921 to 1945

1946 to 1960

1961 to 1970

1971 to 1980

1981 to 1990

1991 to 1995

1996 to 2000

2001 to 2005

2006 to 2010

2011 to 2016

% of Units in Need of Major Work

114

88

170

148

179

105

40

30

22

15

9

Number of Units in Need of Major Work (000s)



Renovation Intentions Up in Ontario and Nationally

* Agree completely plan to undertake renovations of $5k or more in next year (4Q average)

4Q* Renovation intentions trend index (2002=100) % of homeowners planning to renovate*

0

4

8

12

16

20

BC Alta Man/Sask

Ont Que Atl Canada

Spring 2017 Spring 2018

70

85

100

115

130

145

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Source: Altus Group FIRM Survey

11/21/2018

9


5% Per Year

Source: Altus Insite


Rising Interest Rates and Commercial Real Estate

5.33

2.5

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Q1 2003

Q1 2004

Q1 2005

Q1 2006

Q1 2007

Q1 2008

Q1 2009

Q1 2010

Q1 2011

Q1 2012

Q1 2013

Q1 2014

Q1 2015

Q1 2016

Q1 2017

Q1 2018

Q1 2019

Q1 2020

Downtown Class "AA"Office

10‐Year Canada Bond

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

Q1 2003

Q3 2003

Q1 2004

Q3 2004

Q1 2005

Q3 2005

Q1 2006

Q3 2006

Q1 2007

Q3 2007

Q1 2008

Q3 2008

Q1 2009

Q3 2009

Q1 2010

Q3 2010

Q1 2011

Q3 2011

Q1 2012

Q3 2012

Q1 2013

Q3 2013

Q1 2014

Q3 2014

Q1 2015

Q3 2015

Q1 2016

Q3 2016

Q1 2017

Q3 2017

Q1 2018

Q3 2018

Spread15-year Average: 3.5%

Source: Altus Group based on Bank of Canada and Altus Insite

Consensus Forecast +.65pp

11/21/2018

10


Economic Impact?

20Altus Group Limited | altusgroup.com/datasolutions

3.0

0.1 0.2

3.4

0.80.2

7.6

2.72.1

0.1

1.9

0.1 0.3

7.2

British Columbia Alberta Saskatchewan Ontario Quebec New Brunswick National0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0Existing Next 5 years

“Growing Op” Fast: Cannabis Facilities Across Canada

SQ

. F

T. (

MIL

LIO

NS

)

Source: Altus Group

11/21/2018

11


Imports and Exports of Building Materials, Canada

0

10

20

30

40

50

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2017

2018

Exports Elsewhere Imports Elsewhere Exports U.S. Imports U.S.

Jan.‐Jun.

Source: Altus Group based on Industry Canada data

$Cdn. 2017 (Billions)


Exports from Canada, Merchandise and Building Products, Canada, 1998-2018

60,000

80,000

100,000

120,000

140,000

160,000

180,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7Building Products Sector Exports (Left) Total Merchandise Exports (Right)

$ Millions $ Millions

Source: Altus Group based on Statistics Canada and Industry Canada data

11/21/2018

12


Recent Trends in Building Products Trade

‐5 0 5 10 15 20

Electrical

Plastics and Rubber

Masonry and Aggregate

Wood

All Building Materials

HVAC & Appliances

Paint

Petrochemical & Asphalt

Steel

Tools and Machinery

Year‐Over‐Year % Change

1. Jan-Jun. Source: Altus Group, Industry Canada

0

5

10

15

20

25

U.S. China All Other

Exports from CanadaImports to Canada

Changes in Canadian Exports of Selected Building Materials by Type, 20181

2017 Trade in Building Products with Canada, Selected Areas

$Cdn. 2017 (Billions)


Construction Cost Trends: Trades Escalation

Source: Altus Group Cost Consulting

11/21/2018

13


Gross Mismatch of Supply and Demand

• Government Policy and

Legislation

• Industry

Consolidation/Transformation

• Globalization

• Affordability0 20 40 60 80

Singles

Semi/Row

ApartmentRecent HousingStarts, BigCities

DemographicNeed in Next15 Years

Percent

Source: Altus Group based on Statistics Canada, CMHC


Residential Investment Still Lagging

% of GDP Chronically Weak Investment in New Residential Since Recession is Troubling

Typically, Look For About 3.2% of GDP as a SustainableRate of Investment

Source: Altus Economics based on Statistics Canada

2.4

2.6

2.8

3.0

3.2

3.4

3.6

3.8

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

8

11/21/2018

14


Moderating Housing Starts Forecast Ahead12

9.0

157.

0

157.

0

127.

0

101.

0

125.

0

114.

0

118.

9

109.

4

110.

4

100.

9

107.

6

117.

2

105.

3

111.

3

41.0

71.0

72.0

84.0

48.0

65.0

80.0

95.9

78.5

79.0

94.6

90.3

102.

6

111.

2

98.9

0

50

100

150

200

Avg

. 199

5-20

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

f

2019

f

Single-Family Apartment

000s Units

170

227

228

211

149

190

194

215

188

189 196

198

220

216

210

206

199

0

50

100

150

200

250

300

Avg

. 199

5-20

05

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

f

2019

f

2020

f

2021

f

000s Units

Source: Altus Economics based on CMHC

Historical Forecast


Forecast by Province

0.0

10.0

20.0

30.0

40.0

50.0

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

(f)

2019

(f)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

(f)

2019

(f)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

(f)

2019

(f)


000s Units

BC Alberta Man/Sask


11/21/2018

15


Forecast by Province

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

(f)

2019

(f)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

(f)

2019

(f)

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

(f)

2019

(f)


000s Units

Ontario Quebec Atlantic



Housing Starts, Toronto CMA

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

Jan-

17F

eb-

17M

ar-

17A

pr-1

7M

ay-

17

Jun-

17Ju

l-17

Aug

-17

Sep

-17

Oct

-17

No

v-1

7D

ec-

17

Jan-

18F

eb-

18M

ar-

18A

pr-1

8M

ay-

18

Jun-

18Ju

l-18

Aug

-18

Sep

-18

Housing Starts Housing Starts, Monthly Annualized

11/21/2018

16


Renters More than Half of Household Growth in Last Census Period – Expect Less Growth Going Forward

223

142

205

160149

175 176151

180 177

81

4873

39

2

‐5

41

7953

40

53%

‐25%

0%

25%

50%

75%

‐50

0

50

100

150

200

250

300

1976‐1981 1981‐1986 1986‐1991 1991‐1996 1996‐2001 2001‐2006 2006‐2011 2011‐2016 2016‐2021 2021‐2026

Total Household Growth (Left Side)

Rental Household Growth (Left Side)

Rental as % of Total Growth (Right Side)

Net New HouseholdsAnnual Average (000s)

Rental as Percent of Total Household Growth (Line)

Source: Altus Group Economic Consulting based on data from Statistics Canada Census


Vacancy Rates Rose 2011-2016 But Have Tightened Since

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2011

2012

2013

2014

2015

2016

2017

Vacancy Rates, Percent, Canada

Source: Altus Group Economic Consulting based on data from CMHC

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Van

couv

er

Cal

gary

Edm

onto

n

Tor

onto

Otta

wa

Mon

trea

l

Hal

ifax

Primary Condo

Percent, Oct 2017, Metropolitan Areas

11/21/2018

17


Private Purpose-built Rental Apartment Starts & Rental Apartment Starts

14.9 14.2 13.0

14.9 15.7 17.7

19.0 20.3

30.4 30.0

36.7

25.9

28.3

0

5

10

15

20

25

30

35

40

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

201

6

201

7

201

7

201

8

Vancouver Calgary Edmonton Saskatoon Regina Winnipeg Toronto Ottawa Montreal Halifax

Medium Term ** Short Term ***

*Centres 50,000+ ** 2017 over 2015 *** Jan-Sep 2018 Y./Y

Source: Altus Group Economic Consulting based on data from CMHC

Private Purpose-built Rental Apartment Starts, Canada*, (000s units)

Recent Momentum in Rental Apartment Starts by CMA

Jan-Sept


Where Have Recent Renters Been Accommodated?

11,122

28,264

28,930

11,155

0 20,000 40,000

Secondary Suites

Single Family Homes

Condominium ApartmentUnits

Purpose Built ApartmentUnits 14

Average Annual Change in Households, 2011-2016, Canada

Total Growth 79,400

17,656

32,05936,728

0

10,000

20,000

30,000

40,000

50,000

Average AnnualPurpose Built

Completions 2011-2015

Average AnnualPurpose Built

Completions 2016-2017

Purpose Built Starts,past 12 Months

Units, Canada*

305.0

804.1

Renter Occupied

Owner Occupied

Condominium Apartments (000s of Units) in Canada*

* Major centres 50k+

Source: Altus Group Economic Consulting based on data from Statistics Canada Census and CMHC

11/21/2018

18


Want to Stay Ahead of the Competition?

Altus Group Housing Provides the Little Numbers Behind the Big Picture

Thank you.

Peter NormanVice President & Chief Economist

[email protected]

@economistnorman@altus_group

416-698-4653

National Economic Advisory

33 Yonge St., Toronto, Suite 500

2020 - 4th Street SW, Calgary, Suite 310

1055 West Georgia Street, Vancouver, Suite 2500

Documents

Tracking the Market Trends - Home - Hardlines · Tracking the Market Trends Economic Intelligence Nov 13th, 2018 Hardlines Conference, Niagara-on-the-Lake Peter Norman, VP & Chief