A brief summary of BILD’s Economic and Housing Outlook 2016

Last week, the Building Industry and Land Development Association (BILD) hosted the Economic and Housing Outlook 2016 Breakfast, where Derek Burleton, Deputy Chief Economist with TD Bank Group, and George Carras, President of RealNet Canada spoke about the future of housing in the GTA.

BILD also announced a few awards for some longstanding BILD members. The Quarter Century Club now includes Beaver Valley Stone Limited, Cassidy & Co. Architectural Technologies, First View Homes, Jourdan, Minto Communities, and Royal Indevco Properties.

If you think, 25 years is a long time, there were also four new members of the Half Century Club announced. The new members include Brookfield Residential, Menkes, PMA Brethour Realty Group, and Quality Sterling Group. Fun fact: The average home price in the GTA in the year that these companies joined the association was $13,000.

BILD President and CEO Bryan Tuckey

Housing Outlook 2016

“The trend’s your friend until the bend in the end,” Burleton said as he kicked off his presentation. “At some point in housing, we’re going to get a cool down, but that bend keeps getting pushed back, and in terms of the broader outlook, probably more towards 2017.” For the GTA, the end of 2016 is when we’ll probably see that soft landing that everyone keeps talking about.

Canada’s economy has improved slightly, with British Columbia seeing the most growth, and Ontario following closely behind. “It’s not great growth, but good growth,” said Burleton, but he is sure that Ontario will be a growth leader in the near future.

When it comes to interest rates, there has been discussion about whether they’re going up or down, and Burleton seems pretty confident that they will go up. You don’t need to worry though, the rates won’t shoot up to 13.5% where they were back in the day, Burleton reassured the crowd. For the Bank of Canada, these rate hikes are expected to happen in the second half of 2017.  

Burleton highlighted three challenges that the industry has to face right now and in coming years: Affordability, diversity, and infrastructure. The catch is that these three issues are all connected. Affordability is at stake due to policy and regulatory obstacles, as well as a lack of developable land. There would be more developable land if there was infrastructure in place to service new communities. And, since sites are smaller, the majority of housing has been high-rise, trending towards micro-units, creating a lack of diversity in the market.

Carras spoke next and started off by presenting some “market gauges.” Investment is up to $14 billion, land prices are averaging $64/square foot, the average resale price of a detached home in the 416 region is over $1.1 million, and there have been over 20,000 condo completions.

He also referred to the GTA as “GTA 3.0.” In GTA 1.0 (before 2005), the focus was on residential and predominantly low-rise. In GTA 2.0 (2005-2015), this was the beginning of the shift to high-rise. The present is a bit more complicated. We now have commercial space, retail space, and the rental market all blending together. They all depend on each other and it’s the responsibility of the builders and developers in the GTA to lead the charge on master-planned mixed-use communities.

Carras also said that the price gap between new low-rise and high-rise homes will continue to widen. Right now, the gap is over $300,000. With regards to high-rise completions, we should expect the number to increase over the next few years since the vast majority of the unsold inventory is still in the preconstruction phase.

When it comes to low-rise inventory, supply has hit an all time low of 4,298 units. Carras referenced Minto’s East Gwillimbury February opening to show everyone how people are lining up to buy new low-rise homes because of the lack of options. Thousands of people registered for the community and hundreds showed up the day before even though the weather had fell into the deep negatives.  

So, to break things down:: Mixed-use communities are super important, we need to continue finding ways to increase affordability, we must slowly stray away from micro-units, and we must guide municipalities and work with them to develop and connect the GTA and Greater Golden Horseshoe as a whole.

Can’t wait to see what happens in 2016!