udi/fortis – state of the market q2...

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)


UDI – State of the MarketReport

• Aussie-Inspired Document

• Comprehensive update from multiple stat sources

• Relevant, convenient, all in one document


Population – Metro Vancouver• Population Growth – An easy trend to spot…


Population – Metro Vancouver• Interprovincial & International Migration

• Net Migration


Economic Indicators


• Labour Force (Metro Vancouver)

• Unemployment Rates (BC)

Economic Indicators


• 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


• 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.


New Wood Frame Condo Market

New Wood Frame Condo Market


• 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


New Townhome Market

New Townhome Market


New Home Affordability Index


• 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



• 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


• Kensington Gardens• Former Canadian Tire site on

Kingsway and Gladstone

• 410 units in 3 mid-rise towers (14storeys)


• 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?



• 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



• 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


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


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.


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”


USA 2008-2013Positive Outcomes of QE

• Dow Jones Industrial Average hasdoubled since the bottom


USA 2008-2013Positive Outcomes QE

• Stabilized real estate prices and gotpeople back to work



• Desired short term outcome ofsuppressed bond yields

USA 2008-2013Positive Outcomes of QE

Federal Reserve’s Monetary Base (1920 to Present)


• 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%


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


2013

• Debt/GDP Ratio of 1.066

• Current 10 year bonds at 2.85%


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



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


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?


• 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


• 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



Shanghai in 1990


Shanghai in 2013


• Hopes to become a self-servingeconomy

• 1,050,000 millionaires in China (up3% from last year)

• (9,000,000 in the US)


“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


Why you need to see MichaelFerreira’s Presentation (Oct. 24th)


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!


udi/fortis – state of the market q2...

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