HALIFAX PARTNERSHIP QUARTERLY ECONOMIC REPORT
Housing starts in Halifax increased by 37.4% in the first half of 2017. Labour force participation continues to decrease, down 1% compared to 2016. The Port of Halifax continues to build on last year s record numbers with containerized cargo increasing by 16.7% and total cruise ship passengers increasing by 22.1%. Economic Indicators for Halifax Period YTD 2016 YTD 2017 % Change Labour Markets Real GDP at basic prices (2007 $ millions) Annual 18,507 18,842(f) 1.8% Population (Thousands) Annual 426.0 434.0(f) 1.9% Employment (Thousands) Jan-Jun 224.9 225.1 0.1% Unemployment rate (%) Jan-Jun 6.6% 6.5% -0.1 Labour force (Thousands) Jan-Jun 240.7 240.6-0.1% Participation rate (%) Jan-Jun 68.4% 67.4% -1.0 Consumer Markets Average weekly earnings (Current $) Jan Jun 887 878-1.0% Consumer price index (2002 = 100) Jan Jun 129.4 130.8 1.3 Retail sales (Current $ millions) Jan May 2,996 3,125 4.3% Aircraft Passengers (Thousands) Jan-Jun 1,824 1,898 4.1% Cruise ship passengers (Thousands) Apr-Jun 24.9 30.4 22.1% Containerized Cargo (Thousands TEUs) Jan-Jun 235.4 274.7 16.7% Housing and Construction Markets Housing starts Jan Jun 939 1,290 37.4% Housing resales Annual 5,100(f) 5,200(f) 2.0% Value of building permits (Current $ millions) Jan May 253.7 358.7 41.4% Non residential construction (2007 $ millions) Jan-Jun 165.6 110.0-33.6% (f) Forecasted Data Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Conference Board of Canada, Halifax International Airport Authority, Port of Halifax At the halfway point of 2017, Halifax is gaining momentum due to increases in aircraft passengers, cruise ship passengers, and containerized cargo from the Halifax Gateway, a boom in housing starts, and a significant increase in building permit values. However, non-residential construction continues to be slower than 2016, weekly earnings are decreasing, and labour force participation rates continue to decline. The Conference Board of Canada s Spring Metropolitan Outlook reported that GDP will grow in 2017 by 1.8%, down from the 2.2% GDP growth that was forecasted in the Winter Metropolitan Outlook. Halifax s ranking amongst 13 major CMAs dropped from 6th in 2016 to 11th in 2017. Halifax s GDP growth is being driven by growth in the manufacturing sector. Increasing immigration, including new arrivals via the Atlantic Immigration Pilot, should also propel growth. 2
Labour Force Halifax s labour force continues to tighten. The labour force decreased by 0.1% for the first half of 2017 compared to 2016 and overall employment only increased by 0.1%. This caused the unemployment rate to decrease from 6.6% to 6.5%. The labour force continues to experience a decreasing participation rate, dropping from 68.4% in the first half of 2016 to 67.4% in the first half of 2017. Since Q2 of 2012, the labour force participation rate has decreased from 70.5% to 67.4%. A similar trend is happening across Nova Scotia, with the largest decreases in labour force participation coming from those with post-graduate education and high school education. The large decline in labour force participation for post-graduate workers is coming from the 55+ age group, as participation rates have declined from 52.8% in 2012 to 40.8% in 2017. This is likely due to people leaving the labour force for retirement. For the high school education group, a seven-percentage point drop in labour force participation in the 55+ age group may be due to employees electing to retire from physically demanding jobs. The overall drop in high school education labour force participation could be a function of increasing discouragement among this group about employment prospects. Halifax experienced employment gains in the following industries: retail trade (+4,900), transportation and warehousing (+700), and other services (+500). There were significant employment drops in high wage industries such as: health care and social assistance (-1,800), construction (-1,500), and business, building and other support services (-1,500). As mentioned in April s Economic Report, public sector employment has grown, while private sector employment declined over the past five years. The opposite occurred during the second quarter of 2017, as job losses occurred in health care and social assistance and retail trade had a large increase in employment. 3
Halifax Gateway Retail Sales Halifax Gateway is building momentum on last year s record performance. The start of cruise ship season saw five additional vessels calling at the Port of Halifax, while the number of passengers increased from 25,000 to 30,500, an increase of 22.4%. Halifax Stanfield International Airport had an increase in passengers of 4.1% or 1.9 million passengers for the first half of 2017. Halifax Stanfield likely will have over four million passengers for the first time in 2017. Container throughput at Halifax Port Authority facilities continues to increase year over year, with total TEU throughput increasing by 16.7%, which represents an additional 40,000 TEUs. Halifax experienced growth in retail sales of 4.3% year-to-date (May). Growth was driven by higher gasoline prices and increased sales in home furnishing, appliances and building materials. Consumer prices as measured by the Consumer Price Index increased by 1.3 points or 1%. Average weekly earnings decreased by 1% from January to June. The average Canadian experienced a wage increase of 0.9% and the average Nova Scotia resident experienced a wage increase of 2.6% during the same time period. One of the contributing factors to the decrease in wages in Halifax is the increase in retail trade jobs and the loss of construction and health care jobs. Typically, construction and health care jobs have a higher wage than retail trade positions. Halifax experienced a 4.3% growth in retail sales. 4
Housing & Construction Halifax s growth in building permits continued, increasing by 41.4% yearto-date. Housing starts are up 37.4%. The majority of housing starts were apartment unit starts, which increased by 50.1% from 611 to 917, but there also was growth in single-detached unit starts, which increased by 25.7% from 230 to 289. Housing starts are up 37.4% in the first half of 2017. Although non-residential investment increased slightly in the second quarter of 2017, it is down 44% year-todate compared to 2016. This is due to major projects such as the Nova Centre and The Big Lift nearing completion. The majority of Halifax s current major investment projects are in shipbuilding or residential real estate. 5
Real Estate Halifax is one of the best kept real estate secrets in Canada. Currently, housing prices in Vancouver and Toronto are significantly higher than the national average. When comparing Halifax to these cities and the national average, the average home in Halifax is anywhere from $200,000 to $750,000 less expensive. In addition to homes being cheaper, Halifax has shorter average commute times according to the 2011 Census; new commuting data from the 2016 Census will be available this fall. Toronto and Vancouver are forecasted to have declines in home sales in 2017 and 2018, while Halifax is forecasted to remain steady over the next three years according to CMHC Housing Market Outlook. When comparing Halifax to the national average, the average home is anywhere from $200,000 to $750,000 less expensive. The Halifax real estate market does have some issues, such as its high office vacancy rate and the extremely low apartment vacancy rate. Halifax s office vacancy rate was twice that of Greater Toronto and Vancouver in the first quarter of 2017. Comparing the downtown cores of these major cities, the results worsen: the Central Business District of Halifax has a vacancy rate about five times larger than Downtown Toronto and about three times larger than Downtown Vancouver. 6
According to CMHC s Rental Market Survey, the vacancy rate for apartments in Halifax was 2.6% in 2016, down from 3.4% in 2015 and is forecasted to decrease further as a major supply of new rental units is not expected until 2018. The largest decreases in vacancy rates occurred in affordable units with prices ranging from less than $700 and from $700- $849. The combination of high office vacancy rates, low rental vacancy rates, and delays to large real estate developments, creates the opportunity for office real estate holders to convert their vacant office spaces into residential rental units. Looking at the vacancy rates below, it is apparent that the class B and C vacancy rates are higher than the class A. The changes in rental rates over the same time period do not appear to reflect the changes in vacancy rates, as they have been relatively unchanged from 2010 to 2017. The low rental rates in Halifax do give Halifax a competitive advantage to attract new businesses and businesses are currently able to pick from an expansive inventory of office space ranging from Class C to A without a large fluctuation in price. Most of the major real estate research companies have been mentioning the concept of converting vacant office spaces into residential rental units based on the high vacancy rates and unchanged rental rates. Converting these vacant office spaces to residential apartments would meet the immediate need for residential apartments in Halifax. In the long term, office vacancies are expected to slowly decrease, but not at a rate that would stop real estate holders from converting their class B and C offices into apartment units. The addition of new affordable residential units for newcomers, seniors, and young professionals would help reduce the shortage in affordable rental units that is currently in the market. 7
The Halifax Partnership is Halifax s economic development organization. We help keep, grow and get business, talent and investment. We do this through leadership on economic issues, our core programs, our partnerships across all sectors, and by marketing Halifax to the world. If you have any questions or concerns about this document, its methodology, or how its indices are measured, please contact the Partnership at info@halifaxpartnership.com for further details.