North America

Toronto Real Estate Prices – 5 Factors To Consider

I do not know what will happen to Toronto housing prices. I do think, though, that if you look at five of the big things happening in Canada’s economy at large — namely, automation, digitalization, Baby Boomers nearing their 60s or 70s, rapidly rising home prices in some major cities, and the fall in fossil fuel and other commodity prices — all suggest that Toronto land values are likely to rise more slowly than other assets in the coming years.

1. Automation

— Many people are drawn to Toronto because of its strong employment market, so if automation causes employment rates or real wages to rise relatively slowly, some people may decide to move to other places where housing prices are more affordable

— If automation causes transportation to become more convenient because of self-driving vehicles, people may also find it easier than ever before to live further away from downtown Toronto

—The process of building homes or buildings might itself increasingly be carried out by machines, computers, or robots, which could reduce the time and money involved in construction

— If automation makes it easier to live in lands that have rugged geographies — for example, if self-driving vehicles or autonomous snowplows make it easier to live in Lake Huron Snowbelt cities like Owen Sound, which gets three times more snow per year than Toronto on average — it could cause home values of those lands to rise more quickly than those of established cities like Toronto

        Great Lake Snowbelts                              Great Lake Cities
     great lake pop

2.Digitalization

— The Internet might allow people to “e-commute” to work in some circumstances, thus making it easier to live outside of major employment centres like Toronto

— The Internet might put downward pressure on real estate in general by, in effect, using cyberspace as a substitute for real space. For example, if more people shop online, then there may be less of a demand for retail real estate, as more goods are taken direct from warehouses to consumers

 — The Internet might lead some jobs to be outsourced to other countries with cheaper labour, which in turn could cause wages or employment rates in Canada to rise relatively slowly, causing employment to become less of a determinant in people’s housing preferences, and home affordability to become more of a determinant instead

— The Internet could make it easier than ever before for new immigrants to Canada to live outside of major immigrant clusters like Toronto

— The Internet might make it easier to live in geographically rugged areas like the Lake Huron Snowbelt, for example by allowing people to e-commute or buy their groceries online in the wake of a snowstorm

3. Demographics

—Canada’s demographic profile is quite different today than it was a decade or two ago. Not only is its biggest cohort, the Baby Boomers, made up of individuals who are now nearing or have already reached their 60s, but also there are now no longer very many Canadians younger than the ages of 15-20

—Baby Boomers may now be somewhat more likely to sell, and less likely to carry out a major renovation, of their homes than they were a decade ago

—Fewer children means that parents don’t need as large houses. It also means there may be fewer jobs available in day-care, child-care, or education. And it means that, in the decade or so ahead, there may be fewer first-time home buyers or home-renters entering the market

—While there are fewer kids and fewer people in their 40s than there were a decade ago, there are still plenty of people between the ages of 20-70; in other words, there is still a lot of competition for jobs and wages. Areas of Canada with fewer people in the labour force, and with more elderly people who need doctors or nurses, could do better at attracting immigrants or new residents

—Many bilingual, bicultural second- or third-generation immigrants have recently or will soon come of age. These populations can more easily move to areas of outside immigrant clusters like Toronto than could their first-generation parents or grandparents. In doing so, they  create new, smaller clusters which can in turn attract new first-generation immigrants. This has already occured to some extent with white immigrant groups that have been in Canada for several generations. When, for example, Soviet Jews came to Canada a few decades ago, they largely skipped the typical immigrant stage of moving to downtown Toronto (as European Jews had done after WW2) and instead linked up with second-generation and third-generation Jews who were living uptown or in Vaughn.

—A caveat here would be if Canada was to allow an immense increase in immigration, well above the 0.59 percent net annual migration (which is already high by global standards) it allows today. If that were to happen, then Canadian real estate prices could be expected to continue rising rapidly

4. Gravity 

— Given the extent to which cities like Vancouver and Toronto have seen their real estate markets increase, many people are being priced out, or are on the verge of being priced out, of those markets. This may make it less likely that these markets will continue increasing as rapidly as others going forward

— A graph from this week’s Economist magazine has Canada’s housing markets among the most overpriced when viewed in comparison to rent costs or income levels:


5. Commodities

— After a decade or so of very high energy and other commodity prices, in 2014 prices crashed, and they remain low today. Inexpensive commodity prices should put downward pressure on Canadian home prices in two ways

— First, by weakening the Canadian economy in general, as the Canadian economy is an enormous commodity exporter. Toronto, as the commercial capital of the country, may not be immune to this

— Second, by making suburban sprawl cheaper. Nearly every aspect of suburban living is much more energy-intensive and commodity-intensive than is urban living

— There is, not surprisingly, a historical correlation between commodity prices and Canadian real estate prices. When commodity prices reached their modern-day lows during the mid-1990’s, Canadian home prices declined by roughly 5% in spite of strong growth occurring in the general economy at the time. When, on the other hand, commodity prices reached their modern-day highs between 1979 – 1983 and between 2007 – 2014, Canadian home prices went up by roughly 10% and 35%, respectively, in spite of the fact that the country’s two most severe postwar recessions took place during the years 1982 and 2008-2009

So, What’s A Guy/Gal To Do? 

Well, you could rent. Or, you could buy in a different city or town. Or, if you are wealthy enough to afford it, you could rent an apartment in Toronto and buy a home somewhere else.

On the Other Hand…

Of course, that I could be entirely wrong about all this. The counter-theory to the one I have put forth is one that you might call “the Manhattan project”: namely, that Canada is bound to develop a city that is at least somewhat comparable to New York City at some point, and that city is likeliest to be Toronto. Today, the City of Toronto’s population density is 4,150 per square km; Manhattan’s is approximately 27,000, Brooklyn’s 14,200. The Greater Toronto Area’s total population, at 6.4 million, is only around a quarter the size of the New York Metropolitan Area’s. Viewed in that comparative manner — and Torontonians do have a reputation for seeing their city as a New York-in-waiting — Toronto has plenty of room to continue growing. (Though, on yet another hand, Canada’s population is only around a tenth of the US’s…). Indeed, as was mentioned above, a big wild card for the future of Canadian real estate is the future of Canadian immigration. There are 7.5 billion people in the world, but only 36 million in Canada. If we are willing to accept immigrants with open arms — far beyond the numbers we presently allow — the population of Canada could soar, and its home values too.

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North America

Geopolitics in Canada: Politics, Economics, and Future Technologies

Canada is often considered to be a haven from geopolitics, a nation relatively free from economic want or political cant. But if by geopolitics we refer simply to the influence of geography upon politics, Canada may in fact be a prime place to study it, if only because the country posseses so much of the former when in comparison to the latter.

The basic fact of Canadian geopolitics is this: more Canadians live in the city of Toronto than live in the 2500 kilometer-wide expanse of land separating Toronto from Alberta. (Or, to put it in the most Canadian way possible, there are a heckuva lot more people who would like to see Auston Matthews win the Calder Trophy than Patrick Laine). Canada is in this way divided in two: between Alberta and BC on the one hand, in which around 25 percent of Canadians live and 30 percent of Canada’s GDP is generated, and Ontario and Quebec on the other, which account for roughly 60 percent of Canada’s population and GDP.

Source: Future Economics

These two halves, in turn, can also be divided into two parts. Alberta is separated from BC by the Rockies; Ontario from Quebec by the Anglo-French divide. (The debate is still open as to which of these two barriers is the more venerable). However, while the BC-Alberta split is pretty well balanced — Alberta’s GDP is a bit larger than BC’s, but BC’s population is a bit larger than Alberta’s — the Ontario-Quebec divide is tilted strongly in support of Ontario. By itself, Ontario accounts for an estimated 38.6 percent of Canada’s population and 38.4 percent of Canada’s GDP.

These are large figures not just in Canadian terms, but also in global ones. Few provinces or states within major countries represent such a bulk of their respective nations. Ontario’s provincial government has a budget that in recent years was larger than those of Quebec and Alberta combined, and also close to half that of Canada’s federal government (the capital of which, Ottawa, happens to be located in Ontario). The Ontario provincial budget is higher than those of any states in the US apart from California or New York. It is higher than the budgets of 15 EU nations.

Among other things, this makes the provincial election of Ontario that is scheduled to occur by 2018 a matter of some significance. According to current polls (yes, I know, polling cannot be trusted…), the Ontario Liberals likely will be thrown out of office for the first time since 2003, to be replaced with the Progressive Conservative party. This would be noteworthy given that, at present, only Manitoba is led by a Conservative government. The rest are governed by Liberal parties with majorities in provincial parliaments, or else by the New Democratic Party (in Alberta) or Saskatchewan Party (in Sasketchewan, of course), both of which enjoy majority governments too.

In Canada, due to the country’s vast size and diffuse population, provinces possess a high measure of capital and clout. The combined budgets of the ten provincial governments, for example, is larger than the federal budget. (In the US, by comparison, the 50 state budgets amount to less than half the US federal budget. And in Britain, the central government is far more prominent still). So, if provincial Liberals lose upcoming elections in provinces of considerable size—Quebec may have an election in 2018 too, and BC will likely have one this year— it might unsettle provincial relations with Justin Trudeau’s federal Liberal majority; a federal majority likely to remain until at least 2020.

It is not however only Ontario’s size which tends to make it the fulcrum in Canadian politics. Ontario is also centrally positioned, both economically and politically, within the country. Economically, the four provinces west of Ontario have around one-third of Canada’s GDP, while the five provinces east of Ontario have around one-quarter of Canada’s GDP. The median line of longitude of the Canadian economy — the place where the GDP to the east equals the GDP to the west; the Prime Median, as it were — runs directly through the city of Toronto, Ontario’s capital.

Ontario trades nearly seven times more with Quebec than does any other province, and trades three times more with Alberta than does Quebec. Ontario also trades more with Canada’s four Atlantic Maritime provinces than Quebec does. Politically, moreover, Ontario shares a long border with French-speaking Quebec — a border Ottawa abuts and Montreal is just 60 km from — yet shares a language with most of the rest of Canada.

We’ve left out any mention of Canada’s three Territories, Yukon, the Northwest, and Nunavut, for the sake of simplicity. Combined, they have a population of 113,000; smaller than the smallest province, PEI, and just 0.32 percent of the overall Canadian population. (By comparison, Alaska accounts for 0.23 percent of the population of the United States)

This is where we get to the real bacon of Canadian geopolitics: the somewhat uncanny reflection of geographical realities within Canada’s electoral outcomes; specifically, in the ability of Ontario to “swing” between either Quebec or western Canada during federal elections, or else for Ontarians to vote for a party supported in neither Quebec nor in western Canada and yet still manage to have that party win (or at least, manage to avoid having any rival party acheive a majority government).

The four most recent elections, which saw Trudeau emerge with a majority government in 2015, Stephen Harper win his first-ever majority in 2011, and Harper gain only minority governments in 2008 and 2006, are ideal examples of this:

The three major candidates in the 2015 election, Justin Trudeau, Stephen Harper, and Thomas Mulcair

In 2011, Harper’s Conservatives won a majority by uniting Ontario and western Canada — including receiving 27 out of 28 seats in Alberta — even as they won only 5 out of 75 seats in Quebec. In that election Ontario and every province west of Ontario gave a large majority of their seats to Harper’s Conservatives, while, with the exception of New Brunswick (the westernmost Atlantic province), none of the provinces east of Ontario came even close to giving a majority to the Conservatives.

Quebec, in contrast, gave 59 seats to the NDP, allowing that party to become one of the two largest in Parliament for the first time in its history. 2011 was a good example of Ontario swinging to the west. (Harper, not incidentally, was born in Toronto, attended university in Edmonton, and represented a Calgary riding in Parliament).

In 2015, on the other hand, Trudeau’s Liberals won an even larger federal majority by winning most of the seats in both Ontario and Quebec, even as they were crushed in both Saskatchewan and Alberta. The Liberals won a large majority of seats in Ontario and in every province east of Ontario—except Quebec, where they won only a narrow majority—and also won exactly half the seats in Manitoba, the easternmost Prairie province. But the Liberals did not come even close to winning a majority in any other province west of Ontario.

The large victory of Trudeau (who, by the way, was born in Ottawa, went to university in Montreal, and represents a Montreal electoral district in Parliament) is a good example of Ontario swinging east. While BC did give a plurality of its votes to the Liberals in 2015 too, it only amounted to 17 out of the 42 seats in that province; in contrast, in the Atlantic Maritimes the Liberals swept all 32 seats in the four provinces of the region, and in Ontario the Liberals won 80 out of 121 seats.

In 2008 and in 2006, Ontario did not give a majority of its seats to any party. Moreover, in neither of those elections did Ontario and Quebec give a plurality or majority of their seats to the same party. This resulted in both cases in federal minority governments.

In 2008, Ontario gave a plurality of seats to Harper’s Conservatives, who won big majorities in every province west of Ontario but who lost in every province east of Ontario except New Brunswick. Quebec meanwhile gave a large majority to the Bloc Quebecois that year. In 2006, when Harper’s minority victory was much narrower than in 2008, Quebec also gave a large majority to the Bloc Quebecois, but Ontario gave a plurality to the Liberals rather than to Harper.

In 2006 the Alberta-BC divide was also larger than in 2008 or 2011: the Conservatives swept Alberta but won only a plurality in BC. (New Brunswick however did fall in line with its fellow Maritimers in 2006: all four gave a majority of seats to Liberals). In both the 2006 and 2008 elections, every province west of Ontario gave majorities or pluralities to the Conservatives, while none to Ontario’s east (except, again, New Brunswick in 2008) did so.

While geopolitical patterns such as these vary over time and so are not certain to endure, still it is clear they run deep.

In Part 2 of this 4-Part essay, we will take a more detailed look back at Canada’s past elections and the (geo)politics of Canada’s provinces. In Part 3 we will attempt to analyze the modern Canadian economy, and in Part 4 we will discuss how technological changes in robotics and communications may impact the country.

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Europe

Spanish Geo-Economics: Past, Present, and Future

Link: spanish-geo-economics-past-present-and-future-january-2017

(If some the pictures on the link above are too blurry, you can see them clearly on the link below….however some of the text paragraphs in the link below are out of place. Sorry for the inconvenience).

spanish-geo-economics-past-present-and-future-january-2017

spain-landflatland

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North America

Bricks, Mortar, and Wireless Headphones

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Today, at the launch of the iPhone 7, Apple CEO Tim Cook announced that the phone will not have an outlet for headphones. Customers will either have to use wireless Bluetooth headphones, or else buy a special pair of headphones that is capable of plugging into the outlet for the phone’s charger.

If the wireless headphone age really is about to get underway, many unforeseen consequences are likely to accompany it in the coming years. One industry that might, perhaps, be hit very hard by wireless headphones is the movie theatre business. While on the one hand it might be the case that wireless headphones could make going to the theatre more enjoyable – you no longer have to listen to other people smack popcorn or  whisper to one another noisily – on the other hand it could lead to vastly increased competition for movie theatres, as it could allow new movie theatres to pop up in unexpected places.

Let’s quickly look at two places this competition could arise from: sports bars and brick-and-mortar retail stores.

Sports bars could be a threat to matinées. Sports bars already have lots of big screen televisions, and in some cases very big projector screens, and in many cases comfy seats as well. They also have food and drink, and operate well under capacity during the daytime. Many also have basements or back-rooms with no windows, which can be made pitch-black even in the daytime. Some may try to turn themselves basically into little movie theatres during the day.

(Sports bars could maybe also be a threat to cable tv. One reason many people have been sticking with cable tv insted of “unplugging” and just using the Internet is to watch sports. Wireless headphones could make watching sports at a sports bar a more appealing alternative than it has been up until now, however, by shutting out other noise from the bar so that fans do not have to watch the game on mute while listening to loud drunk people around them. Now if only they could do something about those filthy bar bathrooms..)

The same is true of restaurants, though they do not have as many tv’s or as big tv’s as sports bars do, and though there are many restaurants that will certainly not want people coming in to watch sports or movies. Still, it is easy to imagine some of the less fancy restaurants trying to do this to entice customers.

The big move, however, could be at brick-and-mortar stores. These stores, even for giants like Walmart, are right now under severe threat from the online retailers, led by Amazon. It may not be long before even the grocery stores are under the same threat. These stores are desperately looking for ways to get customers to come to their stores — a desperation that is only going to increase in the years ahead.

One option they may have to attract customers is to put big movie screens in their parking lots or even inside their stores. In their parking lots, these could play movies at night when the lot is mostly empty of cars, or they could become a drive-in theatre. The screens could be put inside tents that could be easy to put up and take down, in order to block out light pollution and rain, or they could be used without tents. Given that parking lots will often be empty as more people turn to online shopping, they could have lots of room to do this.

The bigger brick-and-mortar retailers could do a similar thing inside their stores as well, which would be useful when the weather is bad and would block out light pollution. At the very least, they could allow their tv departments to play movies that children could watch while their parents shop. At the most, they could basically set-up movie theatres inside their stores, making use of wireless headphones to do so. In fact, just like how they are likely to have fewer cars in their parking lots as a result of online shopping, they are also likely to have more room inside their stores, as more of their own customers buy goods from them online and then swing by the store just to pick up what they have purchased.

And maybe to watch a movie, too.

With all this in mind, I do not think I would invest in a movie theatre company stock, like CNK, right now. If on the other hand you have any ideas of why people might instead go to the theatres more in the future, I would like to hear them, so please leave a comment about it below.

 

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