The next four years will bring 230,000 new jobs to the Greater Toronto Area (GTA), according to a report by BMO Economics.
“Strong demographics and a diverse labour market continue to support Toronto’s economy, which is poised to gain some momentum in the coming years,” says Robert Kavcic, senior economist, BMO Capital Markets. “While the housing market is expected to cool, these fundamentals combined with only gradual interest rate increases should help the city avoid a deep near-term correction in home prices.”
Kavcic states factory and transportation/warehousing activity will benefit from stronger trade flows, the service sector will remain sturdy, and public infrastructure spending will provide an added boost.
The report adds employment was growing at a solid pace in Toronto, at least up until the turn of the year when the ice storm and a harsher-than-normal winter hit. Construction employment rebounded strongly last year after slipping in the prior year; transportation and warehousing, retail and finance all saw solid growth; and cuts in the public sector subsided.
“Employment expanded by 4% in 2013, the strongest single-year performance in 13 years, though the unemployment rate remains elevated at 8%,” notes Kavcic. “Looking ahead, employment growth is expected to pick up again…pulling the unemployment rate down to 7%.”
Here are some more findings.
- The Toronto housing market continues to perform well, but a gradual rise in mortgage rates and increased condo supply should temper price growth in the years ahead.
- The average transaction price sat at $558,000, up almost % year over year, while the more representative MLS Home Price Index was up just over 7% year over year. The market continues to defy the skeptics and push higher.
- Despite the run-up in prices over the past decade, income gains and a significant decline in mortgage rates have left Canadian housing affordability close to historically-normal levels-this is true in Toronto as well. With BoC policy expected to remain stable through mid-2015, and longer-term interest rates rising gradually to levels lower than historically normal, the market should support price gains slightly below the rate of income growth.
- New housing starts in Toronto have moderated, but some risk remains from the high number of condo units currently under construction.
- Non-residential activity is an area that should continue to support growth.
- Transit expansion is a key priority area for local and provincial policymakers, even if many of the details remain undecided and the revenue tools to fund it are still to be determined at the provincial level. Activity is underway to revitalize Union Station, create a rail link between Pearson Airport and Union Station, and build out light rail transit.
- Additionally, construction activity to host the 2015 Pan Am Games is underway and expected in the $500-to-$700 million range.