Canada s Economy Strengthens

Transcription

1 Dr. Sherry Cooper Chief Economist Dominion Lending Centres The Title of the presentation Second line if needed Third line if needed Canada s Economy Strengthens Today s date Location of presentation June 8, 2017

2 Global Economic Growth Up Slightly In 2017 Canada and US Lead China Slows Europe Stable at 1.6% Growth Oil Prices Under $50 US

3 Global Growth Edges Upward in 2017 Real GDP (year/year % change) World Forecast Forecast = IMF World Economic Outlook, Update, January 2017 Source: IMF World Economic Outlook Database

4 U.S. Economy Accelerates From Last Year Business Investment Improves Residential Construction Strong Retail Stores Consolidate Unemployment Low Fed Reduces Liquidity Fiscal Uncertainty

5 US Growth 2.2% Real GDP (year/year % percent) Canada U.S Canada Forecast United States Forecast = BMO Capital Markets Economics Source: Haver Analytics, Statistics Canada, Bureau of Economic Analysis

6 Unemployment Rate Very Low (percent) % 10.0% U.S. Forecast year Low 5.9% Canada 6.5% 5 4.4% 4.3% Source: Haver Analytics, Statistics Canada, Bureau of Labor Statistics

7 Canadian Economy Strengthening Overall Job Growth Strong Exports Trend Higher Alberta Begins Recovery NAFTA Uncertainty Housing Concerns

8 Canadian Growth Improves In 2017 Real GDP (Q/Q at annual rate, percent change) Forecast Year/Year Forecast = BMO Capital Markets Economics Source: Haver Analytics, Statistics Canada, Royal Bank of Canada Economics

9 Canada Leads G7 In Population Growth G7 Population Growth (annual average growth from , percentage change) Canada U.S. U.K. Italy France Germany Japan Source: Scotia Bank Economics

10 Immigration Dominates Canadian Population Growth Annual Population Growth (annual average growth, percentage change) Natural Increase Net Immigration Source: Scotia Bank Economics, Statistics Canada, Haver Analytics

11 Business Investment Surge in Canada Real Non-Residential Business Investment (year/year % percent) United States Canada Forecast Forecast = BMO Capital Markets Economics Source: Haver Analytics, Statistics Canada, Bureau of Economic Analysis

12 B.C. on Top As Alberta Climbs Back Canada: Real GDP Provincial Forecast (year/year % change) BC AB ON CA MB QC SK NS PEI NB BC AB MB ON SK CA QC PEI NS NB NL -2.5 NL Forecast = BMO Capital Markets Economics

13 BoC On Hold... While Fed Hikes Rate Overnight Rate (percent) U.S. Forecast 3 Canada Record Lows 0%-0.25% 0.5% until Forecast = Sherry Cooper Assoc. Source: Haver Analytics, Bank of Canada, Federal Reserve Board

14 Long Yields Edge Upward On Fed Rate Hikes 10-year Bond Yields (percent) U.S. As of June 6 U.S. = 2.15% Canada = 1.39% Forecast % % 1 0 Canada Forecast = BMO Capital Markets Source: Bank of Canada, Federal Reserve Board

15 Mortgage Rates Have Bottomed Canadian Conventional 5-Year Mortgage Rate (percent, smoothed 6-month moving average, as of June 2 ) Source: Haver Analytics

16 Loonie Under Downward Pressure Oil Price Edges Back Under $50 US Export Duties Home Capital Banks Downgraded Bank of Canada On Hold

17 Oil Price And The Loonie (as of June 6, 2017) C$ Parity C$¹ (rhs) Forecast WTI Crude Oil¹ (lhs) $ Forecast = BMO Capital Markets ¹ (US$/bbl) ² (US /C$) Source: Haver Analytics, Bank of Canada, Bloomberg, U.S. Energy Information Administration

18 Lower Canadian Dollar Exports Respond Canadian Dollar (US /C$, rhs) Total Exports (6-month annualized % change, lhs) Source: Haver Analytics, Statistics Canada

19 NAFTA Renegotiation A Risk To The Economy

20 Housing Looms Large... Canada (percent) 8.0 Construction Jobs/Total Housing/GDP Source: Haver Analytics, Statistics Canada

21 Canadian Homeownership At A Record High Homeowners as a % of all Canadian Households (percent) % of Households Own Their Own Homes Source: Statistics Canada, Censuses of Population, 1971 to 2006 and National Household Survey, 2011

22 Job Creation Strongest in Vancouver and Toronto Employment Level (index: January 2015 = 100) Vancouver Toronto Montreal Canada Calgary Source: Haver Analytics, Statistics Canada

23 People Left Oil-Torn Provinces For Ontario and B.C. Interprovincial Migrants (level, 4-quarter moving average) 9,000 8,000 7,000 British Columbia 6,000 5,000 4,000 3,000 2,000 Ontario Source: Haver Analytics, Statistics Canada

24 Greenbelt and Intensification Plan

25 Housing Supply Make-Up In Toronto Changing Dramatically Toronto (000s units) 60 Condos Single-Detached Homes Source: CMHC, Haver Analytics

26 Prices Surge In Toronto MLS Home Price Index (HPI) (year/year % change: as of April 2017) Toronto: Single Family Toronto: Condos Canada Victoria Vancouver: Condos Vancouver: Single Family Halifax-Dartmouth* Moncton Winnipeg* Ottawa Montreal Regina Calgary Saskatoon St.John s* *Using average home prices Source: Canadian Real Estate Association (CREA) Average Home Price $975k $450k $606k $589k $554k $1.517M $306k $164k $303k $347k $320k $293k $435k $296k $275k

27 More Than 25% Of GTA Sales Above $1 Million Share of GTA Home Sales Above $1 Million (percentage) Source: Realosophy

28 GTA Average Home Price Growth Still Below Late 80s Greater Toronto Area Average Home Price (year/year % change, as of April 2017) Period From 1985 to Source: CREA

29 Toronto and Vancouver Prices Lag Global Cities Buyer price per square meter, Apartment (US$/square meter) Source: Sherry Cooper Assoc. Hong Kong London, UK Singapore Tokyo Tel Aviv Beijing SanFrancisco New York Sydney Paris Stockholm Rome Oslo Vancouver Helsinki Auckland Moscow Copenhagen Los Angeles Toronto Madrid 5,633 5,561 5,257 5,139 4,357 7,333 6,867 6,670 10,163 9,340 8,653 12,029 11,985 11,891 10,487 10,362 15,078 14,876 18,095 17,524 25,672

30 Canadian Housing-to-Income Disconnect (seasonally adjusted: January 1995 = 100) Average Home Prices Wages & Salaries Source: Haver Analytics, CREA, Statistics Canada

31 Rising Risks: Record High Debt-to-GDP Household Debt as a Percentage of GDP (March 2005 = 100) Canada Australia United States Germany Source: Bloomberg, International Monetary Fund (IMF)

32 Share of First-Time Home Buyers With Low Credit Scores FICO <620 and Beacon <660 (percent) United States And 40% of Canadian Homeowners Are Mortgage-Free 5 0 Canada Source: Globe and Mail ( Housing Bubble, Mortgage Trouble: Chill, Canada Isn t 2006 America by Michael Babad, May 30, 2017)

33 Investors or Speculators Buying In GTA Surges Percentage of GTA Home Purchased by Investors (percent) Source: Realosophy

34 Greater Than Normal Uncertainty in Housing (June 6, 2017: C$) lrg title 1 lrg title + 1 subtitle 1 lrg title + 2 subtitles 5 0 May. 16 Jul. 16 Sep. 16 Nov. 16 Jan. 17 Mar. 17 May sml + 3 lrg 2 sml + 1 lrg 2 lrg 1 sml +1 lrg; 3 sml 2 sml Home Capital Group Inc. Stock Price Ontario Budget Actions Foreign Buyer s Tax Expanded Rent Controls Coming To GTA? Vacant Property Tax Flipping Tax Home Capital Meltdown Banks Downgraded Source: Google Finance Unintended Consequences Impact Psychology

35 The Cooling Vancouver Price Gains Vancouver Composite Home Price Index (year-over-year % change) Aug. 2, 2016: 50 BC s Foreign Buyers Tax Oct. 2016: Federal action: 1) qualify at posted rate and, 2) no principal residence exemption for nonresidents Source: Haver Analytics, CREA, Statistics Canada

36 Vancouver Sales Plummet After Foreign Tax Existing Home Sales (% change from a year ago, YTD April 2017) AB ON QC Canada Atlantic SK MB BC Source: Canadian Real Estate Association, Haver Analytics

37 Value of Existing Home Transactions Existing Home Sales (C$ millions) Ontario British Columbia Source: Haver Analytics, CREA

38 Toronto Housing Slowdown In May Active listings surged 43% y/y Sales plunged 20% y/y Buyers more cautious Mortgage lending slowed Fewer homebuyers qualify Sharp drop in CMHC insurance volumes Average selling price dropped 6.2% from April But, still 14.9% y/y Preliminary data Toronto Real Estate Board

39 Listings Surge 43% in GTA in May Number of Active Listings (000s units, May) Toronto Vancouver Source: Toronto Real Estate Board, Real Estate Board of Greater Vancouver, Sherry Cooper Assoc.

40 GTA Sales Decline Residential Sales: May 2017 (year/year % percent) City of Toronto Surrounding Area Detached Semi Townhouse Condo Source: Toronto Real Estate Board (TREB)

41 A Cooling Housing Market in Toronto Sales-to-New Listings GTA (ratio) Seller s Market Average = Buyer s Market May Estimate Source: CREA, Haver Analytics

42 Canadian Home Price Inflation Needs To Slow House Price Index: Composite 11 (year/year % change) White bars indicate forecasts. Forecast provided by Royal LePage and RBC Research Source: Teranet/National Bank, Haver Analytics

43 The Title of the presentation Second line if needed Third line if needed Follow Me On Linkedin.com/in/DrSherryCooper Today s date Location of presentation June 8, 2017 Facebook.com/DrSherryCooper