In part two of our Industry Leaders Blog featuring Helmut Pastrick, Chief Economist for Central Credit Union 1, we discuss the economic impacts on a more local economy - that of Canada, BC and Metro Vancouver.
Canada has fared reasonably well over the past few years - how do you think this is going to shape out in the coming years? Are we still relatively insulated?
Not completely. It depends on the outcome in Europe and the US. If Europe falls into a banking crisis and the US into a recession at roughly the same time, then of course Canada would also be hit by a recession - not necessarily a severe one, but a mild one. Maybe it's even milder than the previous one, that's certainly possible. If not, then it's more of a scenario of moderate performance and growth, somewhere below potential but growing nonetheless - I would think that BC would be in that same vain as well. Metro Vancouver would probably fare a little better than BC; based on the past couple of years we have seen Metro Vancouver's economy perform quite well, relative to the rest of BC and Canada.
For the most part it seems like Vancouver and Toronto, the metropolitan area markets, have done quite well - that's partly due to the fact that they have very little exposure to commodities. Their economic base is not based on forestry, mining, and oil - it's a service based economy. It is of course interrelated and interconnected to the resource commodities through transportation, administration and finance links, but you won't find too many mines and sawmills in metropolitan Toronto or Vancouver. That's one benefit this time around, that has resulted in reasonably decent performance in the metro area economy. Vancouver's job growth this year has been well above the provincial average, with the same situation in the Toronto metro area.
I think next year is going to be a repeat performance; certainly there is a slowdown underway in the global economy. The US will probably experience a slowdown in growth in the first half of next year, potentially extending through most of 2012 - that will probably have some spillover effect on the metro area economy. However, I still foresee a moderate amount of growth in Metro Vancouver, in regards to employment and so on.
Population growth is another factor that stands out when you look at the metro area economy; it's obviously the main destination for immigrants to the province. Given its better job performance, it also attracts people from other parts of the province. Population growth is again, above the provincial rate and will likely remains so. That's another additional element to demand in the local economy.
With that growth in the metropolitan areas over the past few years, do you think it's established a sort of bubble in regards to real estate?
No I don't. But it's a tough question to really nail down - the evidence is sparse and anecdotal. Potentially some markets and some sub-markets that are more prestigious are certainly attracting a lot of news when their million dollar homes sell. I'm referring to the west-side Vancouver, West Vancouver, and the like. For the most part, most of the market, no there isn't a housing bubble. The fact that there are offshore investors paying excessive amounts for single family homes in west side Vancouver doesn't necessarily mean that it applies to other markets. I think it's quite localized in that regards.
The housing market has held up well, interest rates are very low, mortgage financing is cheap, historically cheap, for anyone that has a steady job - it's a great time to get into the market from that point of view. Granted, it is expensive, but it's been expensive in the lower mainland for many years, and that's not going change.
Do you think we are insulated in Metro Vancouver? Where do you think Vancouver is headed? Share your thoughts in the comments below. Don't forget to check back next Wednesday as we discuss the NAIOP Vancouver Economic Outlook Survey, and see how accurate our members' predictions are.