Outlook 2020 – what’s in store for GTA housing next year?
Global and even some Canadian economic and political uncertainty shouldn’t derail growth in the GTA housing market next year, according to experts at the Building Industry and Land Development Association’s (BILD) recent Outlook 2020 event.
Craig Wright, senior vice-president and chief economist at RBC, and Peter Donolo, political and communications strategist with Hill + Knowlton Canada, said that overall, the fundamentals for the economy and housing market in Ontario and the GTA bode well for 2020. There are some challenges, however – namely the ongoing new home supply issue.
With Justin Trudeau’s Liberals re-elected as a minority government, Canada will see a relatively stable left-leaning federal government that will focus on environmental issues, affordability and redistribution rather than on economic growth, Donolo says.
Globally, geopolitical uncertainty and softening economic growth mean that Canada faces challenges with export and investment, leaving the heavy lifting to the consumer, according to Wright. Economic growth is expected to be modest and in line with employment and income, at about 1.7 per cent, and interest rates will likely continue to be low.
Strong employment growth
For Ontario, GDP growth will likely be a notch below, about 1.5 per cent, with housing starts for 2019 and 2020 at about 72,000 units, compared to about 79,000 in 2018, Wright says.
“That reflects a number of factors,” Wright told HOMES Publishing. “We continue to see strong employment gains, Ontario is leading Canada in terms of employment growth on a year-over-year basis, and strong population growth. So, strong fundamentals supporting it, in a low rate environment.”
The GTA’s robust population growth will continue to drive demand for both ownership and rental housing, Wright says. Municipal and provincial governments are shifting to supply-side solutions for balancing the housing market.
“As you look at the structural reality of the GTA market, where we have immigration coming in… we have 140,000 to 150,000 people coming to this region each and every year,” adds BILD President Dave Wilkes. “That really does bode well for our industry.”
The mortgage stress test needs to be revisited in light of the continued low interest rates, Wright says.
Millennial attitudes
Another issue that might affect the Canada and the building industry is Millennials and their views on the environment and the economy – attitudes Donolo describes as “absolute.”
“When I say absolute, you talk about the oil sands and it’s like you’re talking about the Medellin drug cartel,” he says. “They’re not conscious or interested in the fact that the oil sands and Canada’s oil and gas sector is a kind of the backbone of the Canadian economy, that millions of jobs depend on it… They’re not interested in a kind of slow transition or weaning away from it. They think it’s immoral… and this is a very widespread view.”
Millennial views on homeownership are also different, Donolo says.
“Do Millennials look differently at what homeownership is about? Are they less interested in owning a traditional detached house with a backyard and property? If you look at rates of drivers licenses among Millennials, there is perhaps an indication.”
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Brad Carr, CEO, Mattamy Homes Canada[/caption]
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Anson Kwok, Vice-President Sales & Marketing, Pinnacle International[/caption]
I would also expect new home pricing to be better paired with location and product in the marketplace. This will definitely help purchasers in their decision-making process.
CL: And for your company?
Kwok: Pinnacle International currently has four active construction sites in the GTA, and we are looking forward to increasing that to six projects under construction in 2020.
We are excited to welcome new members to our Pinnacle Uptown community in Mississauga, as Perla begins occupancy in the summer of 2020.
We are actively refining our master-planned communities in the GTA, with Pinnacle One Yonge, Pinnacle Etobicoke and Pinnacle Uptown in Mississauga.
CL: What is your company doing to address the issues facing the homebuilding industry – namely, affordability and new home supply?
Kwok: Our first step is developing and creating transit-oriented communities that provide the opportunities to increase new home supply, as well as provide homeowners with the flexibility of no longer requiring a vehicle and all the associated costs.
Another focus for our company is to build larger units both in terms of square footage and the number of bedrooms. This might create higher initial costs but increases livability and reduces the need to move multiple times to get to your desired size, which reduces additional transaction costs.
CL: What more could the industry do to address these issues?
Kwok: There is a still a lack of supply to meet the current demand, so we still need to continue to work with municipalities to streamline the development process.
The industry also needs to provide supply that may be more size appropriate to the changing demographics in the GTA. This would require some incentives such as development charge reductions and changes to the financing model in the marketplace.
CL: What should prospective new-home buyers know about your company for 2020?
Kwok: In 2020, we are looking forward to launching the tallest residential tower in Canada – SkyTower at Pinnacle One Yonge, which will be 95 storeys.
CL: Why should prospective new-home buyers consider buying from your company this year?
Kwok: Location, master-planned communities and suite layouts. We have projects located in strategic, transit-oriented locations in Toronto, Etobicoke and Mississauga, and we are focused on providing master-planned communities for families to grow in. And when it comes to suite design, we are extremely proud of our layouts and have many family-friendly options.
