The economic climate of Toronto has cooled slightly in recent months, perhaps due to the controversial enactment of a tax on foreign real estate buyers this past April. This downward trend worries some economists, leading many to speculate as to Toronto’s prospects in what remains of 2017 and moving forward into 2018.
RBC projected back in March that Ontario will experience steady economic growth, with a 2.5 percent increase; but, that was before the government announced a host of initiatives designed to slow down a rapidly escalating and unaffordable housing market. Analysts at TD anticipated a rate of 2.6 percent growth, but that estimation also predated the April news.
However, many other factors influence the growth of the Toronto economy. Unemployment is at a 16-year low, with positive outcomes for those in the finance, manufacturing, real estate, and technology industries. Ontario corporations are experiencing record profits, resulting in increases in tax revenue of 16.8 percent in 2016 and 19.6 percent in 2015. Findings from a Bank of Canada survey of Ontario businesses suggest companies are ready to hire more personnel and purchase additional equipment. Toronto’s GDP has risen 2.6 percent this year.
Still, Ontario workers aren’t convinced their financial health is improving, with many having seen their wages actually decrease in 2016. Numbers from Statistics Canada reveal most Ontarians weekly average earnings increased only 1.1 percent last year, below inflation. As a result, fewer Ontarians are looking to buy homes.
Michael Beattie, founder and CEO of MBM Consulting in Toronto and an executive with more than twenty years in both the residential and commercial construction industries, has some thoughts on the city’s economic prospects.
“The economic climate in Toronto is favorable right now, and from my vantage point, it’s only going to improve in the coming months,” Michael Beattie explains. “While there are legitimate concerns about the housing market, the real estate industry – in terms of commercial construction – is experiencing tremendous growth.”
Michael Beattie, who launched MBM Consulting in 1995, has spent the past twenty plus years building a reputation in commercial construction in Toronto and broadly across North America of turning around struggling companies and returning them to operational efficiency to make them once more profitable.
“The real estate market has outpaced manufacturing as the source of Ontario’s GDP, which seems unusual when most people aren’t buying homes until you factor commercial construction into the equation,” Beattie said.
Another potential propeller of the Toronto economy is their neighbor to the south. The city’s proximity to the United States is appealing to businesses aiming to sell products and services to American consumers.
“What we’ve got in Ontario is a prime opportunity for corporations to expand. Our 11.5 percent corporate tax rate is very attractive to businesses looking to relocate their operations. From where I stand, that means a win-win for all involved, whether it’s the construction company who lands a new contract, or an employee who finds a new job with a livable wage,” Michael Beattie added.
Andrey Pavlov, finance professor at the Beedie School of Business at Simon Fraser University, concurs with this assessment that Toronto’s real estate market is hot. “One quarter of Canada’s economy is linked to real estate in some way,” Pavlov said.
That’s good news for Toronto’s overall economy, according to John Andrew, director of the Queen’s Real Estate Roundtable. Pavlov told Global News back in April. “There’s a strong linkage between people spending in real estate and their spending in the economy,” Pavlov said.
About Michael Beattie: