Canada's Condominium Magazine
Ontario’s business community, especially the auto industry, is not feeling very confident about the economy these days, according to the Ontario Chamber of Commerce. The OCC has released a report on the state of the economy going into 2016, and, ironically, the sector expressing the greatest confidence is the energy/petroleum industry. The auto industry, which just came out of a record-breaking year for production and sales in Ontario, is least confident in its future. Businesses in the construction, engineering, infrastructure and transportation sector are almost as pessimistic.
Nevertheless, despite low confidence in certain industries, the OCC’s economic update for 2016 is mainly positive. It says that economic prospects are in fact improving, aided by that familiar trio of “positive externals,” the low dollar, US growth and low interest rates. Low oil prices will also help certain businesses.
One of the main drivers of the economy in 2015 was housing activity, and that will continue in 2016, OCC says, in all regions of the province, but especially in Toronto. There will be no slowdown in housing activity, the OCC predicts, until the next global economic recession.
Regional housing markets will continue on their expansion phase during the next two years. The low interest rate environment is a strong stimulus to all regional housing markets. No recession in Ontario’s housing market is foreseen until the next global economic recession and regional markets will expand reflecting their own local economic circumstances. Housing markets in stronger economies and with higher population growth outperform those with weaker demand conditions.
Residential construction will increase during the next two years. Non-residential building will also increase, with 2017 “considerably more active” than 2016. Some of that construction will be the result of promised federal government infrastructure spending.
This OCC take on the housing market aligns with the latest review of the GTA new home market in 2015 released by real estate services company Altus Group. Its review indicates a “resilient” housing market, in which residential land transactions, including low- and high-density residential-oriented investments, grew by 49 per cent in 2015, to $4.2 billion. This growth indicates “strong industry confidence” in the future of residential development, according to Altus Group vice president and chief economist Peter Norman. In a statement, Norman said that commercial and residential real estate is “a mature market that continues to grow.” While the Canadian economy faces headwinds, the GTA economy is “picking up steam,” a fact that is reflected in the new home sales data for 2015.
Notable among that data is the performance of the low-rise sector, which Norman said is “one to watch” in 2016. Sales of single-family housing starts are continuing to recover from “a long drought,” he said. Low-rise home sales in 2015 were 15 per cent above the ten-year average. Pent-up demand for low-rise homes in the GTA is driving this construction surge, as well as home prices. The gap between the price of the average GTA low-rise home and the average condo was roughly $376,000 at the end of 2015.
The condominium sector also had an above-average year, selling 21,658 units in 2015, the fourth highest total in the last decade. This was achieved in a year in which condominium completions were at near-record levels.