UDI/Fortis – State of the MarketQ2 2013
Economic Factors Contributing toMetro Vancouver’s Housing Market
Urban Analytics Inc. (September 10, 2013)
UDI – State of the MarketQ2 2013 Presentation
• State of the Market Report Intro & Overview
• Significant project launches (Fall 2013)
• USA – Why it can’t afford significant rate hikes
• China – Not a flash in the pan
• Q/A (Time permitting)
Urban Analytics Inc. (September 10, 2013)
UDI – State of the MarketReport
• Aussie-Inspired Document
• Comprehensive update from multiple stat sources
• Relevant, convenient, all in one document
Urban Analytics Inc. (September 10, 2013)
Population – Metro Vancouver• Population Growth – An easy trend to spot…
Urban Analytics Inc. (September 10, 2013)
Population – Metro Vancouver• Interprovincial & International Migration
• Net Migration
Urban Analytics Inc. (September 10, 2013)
Economic Indicators
Urban Analytics Inc. (September 10, 2013)
• Labour Force (Metro Vancouver)
• Unemployment Rates (BC)
Economic Indicators
Urban Analytics Inc. (September 10, 2013)
• Interest Rates (BoC Posted Rates)
• Consumer Price Index (CPI)
• Housing Starts
• Pre-sale inventories slowlyrising across the board.
• Sales are okay, but not asimpressive as the past fewyears.
• Need a boost from significantupcoming project launches.
• Standing inventory levelsdropping the most inVancouver.
Urban Analytics Inc. (October 17, 2012)
New Concrete Condo Market
New Concrete Condo Market
Urban Analytics Inc. (September 10, 2013)
• Inventory levels rising in InnerMetro and Outer Metro, butlow in Vancouver.
• Slower sales activity acrossthe board. Still deals to bemade.
• Completed product ispreferred.
• Standing inventory levels onthe rise in Outer Metro.
Urban Analytics Inc. (October 17, 2012)
New Wood Frame Condo Market
New Wood Frame Condo Market
Urban Analytics Inc. (September 10, 2013)
• Sales activity picking up inInner Metro locations,slowing down in Outer Metro.
• Very low supply in Vancouver.
• Locations like Surrey “feel”slower than they actually are.
• Pre-sale inventory levels risingbut standing levels droppingin Surrey/Langley
Urban Analytics Inc. (October 17, 2012)
New Townhome Market
New Townhome Market
Urban Analytics Inc. (September 10, 2013)
New Home Affordability Index
Urban Analytics Inc. (September 10, 2013)
• Current Results Example (Q2 2013)
New Project Launches – Fall 2013
• Potential for 30 to 40 new project launches in MetroVancouver in Fall/Winter 2013
• Over half of them are in either Vancouver, Surrey and Langley
• Some in the Tri-Cities
• The remaining spread between Richmond, Burnaby and North Shore
Urban Analytics Inc. (September 10, 2013)
New Project Launches – Fall 2013
• Wall Centre 900 E Hastings• 282 market units and 70 non-
market units in 3 mid-rise towers
• 84% of the plans are studio, 1 bedor 1 & den product
Urban Analytics Inc. (September 10, 2013)
• Kensington Gardens• Former Canadian Tire site on
Kingsway and Gladstone
• 410 units in 3 mid-rise towers (14storeys)
New Project Launches – Fall 2013
• University District (Bosa Prop.)
• First tower will feature 322 units in 33storeys (overall plans for 1,000+)
• Bosa brand to draw more attention fromthe end-user market here?
Urban Analytics Inc. (September 10, 2013)
New Project Launches – Fall 2013
• Queen Mary (Polygon)
• 95 unit low rise project in mid Lonsdale
• Part of former Queen Mary School site(school will be renovated and kept on site)
• Views similar to concrete at wood frameprices
• Nearly completed product
Urban Analytics Inc. (September 10, 2013)
New Project Launches – Fall 2013
• Burquitlam/Central Coquitlam
• Condo projects Uptown, Charland andRegan’s Walk
• Apx. 600 units.
• Intracorp will also introduce 113townhome units in late 2013/early 2014
• Evergreen Line completion in 2016
Urban Analytics Inc. (September 10, 2013)
USA 2008-2013:Importance, review of Fed activity and
what to expect with Interest Rates
• Why is USA Important?
• World’s largest economy (GDP)
• World’s largest consumer
• 75% of Canada’s exports go to the USA
• US Dollar is World’s reserve currency
• World’s largest military
Urban Analytics Inc. (September 10, 2013)
USA 2008-2013Global Crisis Thwarted by US Fed
• 2008 crisis – Fear, no liquidity, paralytic realestate market, falling prices.
• The solution – “Quantitative Easing” or“QE”
• Quantitative Easing – Print currency to buyMBS (bail-out banks) and bonds to helpdrive interest rates down.
Urban Analytics Inc. (September 10, 2013)
USA 2008-2013Global Crisis Thwarted by US Fed
• QE1 (2008) – $700 Billion
• QE2 (2011) – $600 Billion
• QE3 (2012) – $1 Trillion per year on-going
• Trillion is “one million million”
Urban Analytics Inc. (September 10, 2013)
USA 2008-2013Positive Outcomes of QE
• Dow Jones Industrial Average hasdoubled since the bottom
Urban Analytics Inc. (September 10, 2013)
USA 2008-2013Positive Outcomes QE
• Stabilized real estate prices and gotpeople back to work
Urban Analytics Inc. (September 10, 2013)
Urban Analytics Inc. (September 10, 2013)
• Desired short term outcome ofsuppressed bond yields
USA 2008-2013Positive Outcomes of QE
Federal Reserve’s Monetary Base (1920 to Present)
Urban Analytics Inc. (September 10, 2013)
• Higher debt and a huge balance sheet
• Actual current balance sheet nowestimated at $3.6 trillion
US Economy: 2000 vs. 2013
2000
• Debt/GDP Ratio of 0.59
• Bond rates estimated at 5%
Urban Analytics Inc. (September 10, 2013)
15%
85%
Estimated Payment onNational Debt InterestAll Other Payments
0
2
4
6
8
10
12
14
16
18
GDP National Debt
GDP and National Debt (2000)
$9.59 Trillion
$5.7 Trillion
US Economy: 2000 vs. 2013
2013
• Debt/GDP Ratio of 1.066
• Current 10 year bonds at 2.85%
Urban Analytics Inc. (September 10, 2013)
17%
83%
EstimatedPayment onNational DebtInterest
All OtherPayments
0
2
4
6
8
10
12
14
16
18
GDP National Debt
GDP and National Debt (2013)
$15.88 Trillion
$16.93 Trillion
US Economy: 2000 vs. 2013
Urban Analytics Inc. (September 10, 2013)
To “taper” or not to “taper”?
• “Tapering”– Reducing currency printing andbond/MBS buying from $1 trillion/year to $800billion/year
• “Tapering” risks?
Rising Interest Rates
Urban Analytics Inc. (September 10, 2013)
31%
69%
Estimated Paymenton National DebtInterest
All Other Payments
Scenario A) 5.00% Interest on US Debt
41%59%
Estimated Paymenton National DebtInterestAll Other Payments
Scenario B) 6.63% Interest on US Debt
Debt/Tax Revenue Sources – www.usdebtclock.org
SOLUTION?
Urban Analytics Inc. (September 10, 2013)
• USA can’t afford a significantrise in interest rates.
• Hope that the world buys USbonds and if rates rise, increasethe QE.
US Housing Sales –Cash Transactions on the Rise
Urban Analytics Inc. (September 10, 2013)
• Low interest rates irrelevantto the near 60% of buyers inUSA housing market today
• Assumed to be investors
China – Not a flash in the pan
• World’s largest population – 1.36billion (39 Canada’s)
• 2nd Largest GDP - $9 to $10 trillionand growing at a rate of 7.5% peryear
• Estimated to surpass USA in 2018
• Only represents 4% of Canada’sexports
Urban Analytics Inc. (September 10, 2013)
China – Not a flash in the pan
Shanghai in 1990
Urban Analytics Inc. (September 10, 2013)
Shanghai in 2013
China – Not a flash in the pan
• Hopes to become a self-servingeconomy
• 1,050,000 millionaires in China (up3% from last year)
• (9,000,000 in the US)
Urban Analytics Inc. (September 10, 2013)
“Dead Sea” swimming pool in Daying County draws in tens ofthousands of people during heat wave in July 2013
Conclusion - USA & China
• Canada’s monetary policy toodependant on USA monetarypolicy
• Canada’s Exports – 4% toChina, 75% to US will likelyshift in the coming decade
• Vancouver nicely positionedto capitalize on this shift
Urban Analytics Inc. (October 17, 2012)
Why you need to see MichaelFerreira’s Presentation (Oct. 24th)
Urban Analytics Inc. (September 10, 2013)
THE FUTURE…WILL YOU NEED SHADES,AN UMBRELLA OR A PASSPORT?
• Market Status Update – Review of Q3 NewHome Source Results
• A Look Ahead – The UAI Take on what youcan expect in 2014 and beyond
– Supply
– Demand
– Challenges
– Opportunities
Thank you!
Urban Analytics Inc. (September 10, 2013)