The TRUTH IN NUMBERS Rennie Group 1 November 2017 Andrew Ramlo, VP Market Intelligence

The TRUTH IN NUMBERS Rennie Group 1 November 2017 Andrew Ramlo, VP Market Intelligence aramlo@rennie.com Ryan Berlin, Senior Economist rberlin@rennie.com

Demographic

2016 The People Growth & Change 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 age boomers 660,000 52 32 millennials 737,000 70 14 24,000 18,000 12,000 6,000 0 6,000 12,000 18,000 24,000 51 33 busters 795, 95,000!

Average Household Spending, BC People Consumer Spending $32,275 Household 2.59 Size Non-Major PMT Consumption $12,459 $26,060 2.34 $31,338 2.69 $35,846 3.26 $11,123 $11,655 $11,010 $39,505 $32,852 2.86 2.25 $13,790 $14,600 $23,425 1.79 $13,087 $17,365 1.51 $11,536 Consumption per Person Average < 25 25-34 35-44 45-54 55-64 65-74 75+ age

People Greater Vancouver s Mortgage Free Equity Mortgage free households in 2017: 288,807 Mortgage free households aged 55 to 74: 144,149 Mortgage free households aged 75 & older: 63,555 Est. mortgage free home value: $1.23 million Total mortgage free EQUITY: $355 Billion Total equity held by the 139,927 55 to 74 BOOMER households: $181 Billion Total equity held by the 61,441 75 PLUS households: $71 Billion 200,000 192,892 213,771 Number of Households by Age % of Homes Mortgage Free 193,313 69% 83% 80% growing HOUSING equity 150,000 100,000 50,000 0 35% 30,814 8,741 158,805 75,001 3,047 11,079 124,630 15% 17% 20,744 152,797 Number of Owned Homes 30% 46,234 50% 147,310 133,361 102,816 72,998 71,150 99,694 76,985 63,555 Number of Mortgage Free Homes Under 25 years 25-34 years 35-44 years 45-54 years 55-64 years 65-74 years 75 years and over 144,149 Households 60% 40% 20% 0%

3.1% 1,336,881 Total Population, Lower Mainland, 1976-2016 3.5% 3.4% 2,893,721 2,168,587 2.0% 1.6% 1.4% 0.9% 2028 2030 2032 2034 2036 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 The People Growth & Change

1986 11,284 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026-3,533 8,104 11,026 25,173 2028 2030 2032 2034 2036 Components of Change, Lower Mainland Net Immigration Natural Increase Net Inter-provincial Net Intra-provincial 3,83 4 The People The Drivers to Change

-27,733-49,475 117,036-45,159 123,890 313,925 266,890 320,932 330,316 Immigration as a share of population Components of Change, Canada, 1971 to 2036 actual 0.9% 0.83% Immigration Net Immigration Natural Increase Emigration projected 0.78% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 The People The Drivers to Change

People The Drivers to Change 16,461 16,538 11,423 9,173 5,034 13,000 9,000 5,000 1,000-3,000-7,000 Net Inter-Provincial Migration, British Columbia (Q2 2017) 6,127 Q2 average age 3,251 Q2 average 3,460-1,727-1,789-2,709-2,316-6,200 1972 1973 1975 1976 1978 1979 1981 1982 1984 1985 1987 1988 1990 1991 1993 1994 1996 1997 1999 2000 2002 2003 2005 2006 2008 2009 2011 2012 2014 2015 2016

Total= +20,026 People 42 113 43 The Drivers to Change 10,540 2,088 2,836 2,887 882 215 48 332 Q1 - Q4 2016

1986 11,284 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034-3,533 8,104 11,026 25,173 2036-8,890 1,402 6,391 41,440 Components of Change, Lower Mainland Net Immigration Natural Increase Net Inter-provincial Net Intra-provincial 3,83 4 The People The Drivers to Change

3.1% 1,336,881 Total Population, Lower Mainland, 1976-2036 3.5% 3.4% 3,379,524 3,827,434 2,168,587 2.0% 2,893,721 births 2.9M 1.6% 1.4% 4M 2.4 0.9% our aging & deaths 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 The People Growth & Change

934,000 more residents (32%) 3,827,434 3.1% Total Population, Lower Mainland, 1976-2036 3.5% 3.4% 3,379,524 2,893,721 2,168,587 2.0% 1.4% 1,336,881 1.6% 1.1% 0.9% 2030 2032 2034 2036 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 The People Growth & Change [725,000 over the past 20 (33%)]

2016 The People Growth & Change age 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 boomers 660,000 52 32 millennials 737,000 70 14 35,000 25,000 15,000 5,000 5,000 15,000 25,000 35,000 51 33 busters 795,000!

2036 The People Growth & Change for every senior today there 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 65 & better +91% 411,000 more seniors 024 0-24 +18% 140,000 more kids 25-64 +23% 382,000 38more 0 workers 35,000 25,000 15,000 5,000 5,000 15,000 25,000 35,000 would be almost 2 by 2036

2036 The People Growth & Change 100 95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 0 65 & better 861,000 seniors 024 0-24 922,000 kids 25-64 2.04 million workers 35,000 25,000 15,000 5,000 5,000 15,000 25,000 35,000

North Shore: +16% Lower Mainland to 2036:+32% Vanc./UEL: +16% Burnaby/NW: +33% TriCities: +46% PittM/MapleR: +47% The Valley: +44% Richmond: +32% Sry/Delta/WR: +34% Langleys: +55%

People New Multi-Family Development Where in the region?

People New Multi-Family Development Where in the region?

PROJECTED GDP GROWTH RATE 2017 2018 3.0% 2.2% 2.0% 1.6% 1.5% 1.7% 2.1% 2.3% 1.8% 1.8% 1.1% 1.5% Source: IMF 1.5% 0.7%

HISTORICAL GDP CHANGE, 2015-16 AVG BC Ontario Manitoba 2.1% 2.5% 3.2% Recent GDP Growth Quebec NB PEI Canada NS Sask Nfld -1.3% -0.9% 1.4% 1.3% 1.2% 1.1% 1.1% Alberta -3.1%

PROJECTED GDP CHANGE, 2017-18 AVG Consensus OUTLOOK of the Big 5 Banks Alberta BC Ontario Canada Manitoba Quebec Sask PEI NS NB 1.2% 1.0% 1.4% 2.8% 2.6% 2.5% 2.4% 2.1% 2.0% 2.0% Nfld -0.8%

2010-16 EMPLOYMENT CHANGE British Greater Vancouver Rest of BC Columbia +7% +13% +156,500 +158,700 Strong jobs JOBS GROWTH -0.2% in Vancouver CMA -2,200

ANNUAL EMPLOYMENT GROWTH, 2013-16 3.5% 3.0% 2.9% 2.5% 2.0% 1.5% 1.3% 1.5% Recent EMPLOYMENT Growth 1.0% 0.5% 1.0% 0.0% Toronto Calgary Edmonton Vancouver

2015-16 EMPLOYMENT GROWTH ( 000s JOBS) Vancouver 60.7 +58% Toronto 38.3 CMA EMPLOYMENT Growth All Other CMAs Combined 44.9 +35% 0 10 20 30 40 50 60 70

EMPLOYMENT GROWTH, JAN-SEP 2017 5.7% 3.4% 3.5% 2.8% 2.9% CMA EMPLOYMENT Growth 20.8 23.3 110 73.4 76.2 Edmonton Calgary Toronto Montreal Vancouver Job growth, 000s

UNEMPLOYMENT RATE 12.0% Canada Montreal Toronto Calgary Edmonton Vancouver 10.0% 8.0% 8.5% 6.0% 6.5% 6.1% 3-month MA SEASONALLY ADJUSTED 4.0% 2.0% 4.5% 0.0% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

2016 SHARE OF TOTAL EMP, VANCOUVER CMA Trade 16.0% Health Care Pro/Sci/Tech Services 9.6% 11.5% Construction 8.0% Manufacturing 7.1% Education FIRE + Rental/Leasing Acc + Food Services 7.0% 7.0% 6.9% Canada Avg =6.2% Info, Culture + Rec 6.4% Transport & WH 6.3% composition of Business Support 4.7% EMPLOYMENT Other Services Public Admin 4.3% 3.7% Other Resource 0.5% Utilities 0.5% Agriculture 0.5%

CONTRIBUTION OF FIRE + RENTAL/LEASING TO TOTAL EMPLOYMENT GROWTH, VAN CMA 15% FIRE & Rental/ Leasing 5% SECTOR Past 15 Years Past Year

CONTRIBUTION OF FIRE + RENTAL/LEASING For Jan-Sep 2017, TO TOTAL EMPLOYMENT GROWTH, VAN CMA FIRE + Rental/Leasing 15% has accounted for 20% FIRE & Rental/ Leasing of total employment growth in 5% Greater Vancouver SECTOR Past 15 Years Past Year

LOWER MAINLAND EMPLOYMENT & PRICES 40% 30% 8% 6% 20% 4% 10% 2% prices & job growth CORRELATED 0% -10% -20% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 YoY Change in Benchmark $ YoY Change in Employment Poly. (YoY Change in Employment) 0% -2% -4%

LOWER MAINLAND EMPLOYMENT & PRICES 40% Our housing market and our economy are becoming increasingly 30% 6% 8% 20% intertwined. 4% 10% 2% Factors influencing our housing market also 0% 0% prices & job growth CORRELATED -10% have the potential to influence broader economic activity, which includes consumer -20% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 spending and the demand for ICI space. YoY Change in Benchmark $ YoY Change in Employment Poly. (YoY Change in Employment) -2% -4%

The Interest Rate environment THE LONG, LONG RUN 25% 20% 15% 10% 5% 0% 5-yr Conventional Mortgage, Canada BoC Target 2 hikes in 3 mos 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

+0.50% in the target rate @ 2.70% @ 3.20% $736K $702K -5% in purchasing power Let s assume: $100K HH Inc. $100K DP 25 year am. 35% GDS The 0.50% increase in the interest rate costs an additional ~$25/month per $100,000 borrowed

The Interest Rate environment the Bank will be guided by incoming data to assess the sensitivity of the economy to interest rates A new paradigm?

The Interest Rate environment [we] will be cautious in making future adjustments to the policy rate A new paradigm?

DECEMBER 2018 OVERNIGHT TARGET RATE > BMO Capital Markets: 1.75% > TD s: 1.50% > CIBC World Markets: 1.50% > Scotiabank: 1.75% Consensus > RBC: 2.00% OUTLOOK of the Big 5 Banks

IN 50 WORDS OR LESS - new stress test for uninsured borrowers, effective 1 Jan 2018 The NeW Osfi Rules - must clear a higher hurdle interest rate to qualify for a mortgage - could reduce PP, home renovations; could result in higher debt costs for existing owners & reduce competition among lenders - impacts could be moot

+0.50% @ 2.70% @ 3.20% +2.00% @ 5.20% The NeW Osfi Rules Let s assume: $100K HH Inc. $100K DP 25 year am. 35% GDS $736K $702K -5% $589K -20% in purchasing power

+0.50% +2.00% The NeW Osfi Rules Let s assume: $100K HH Inc. $100K DP 25 year am. 35% GDS So @ there 2.70% are housing @ 3.20% risks @ and, 5.20% by extension, risks to overall economic $736K $702K activity. -5% $589K That said, from an ICI perspective, opportunities exist. -20% in purchasing power

POPULATION BY PLACE OF WORK, VAN CMA 8.3% Share working @ home 1,104,760 Total Employment +7% 1,182,390 7.5% POR & POW EMPLOYMENT Work @ Home -3% 91,590 88,745 2006 2011

POPULATION BY PLACE OF WORK, VAN CMA employment 8.3% Share working @ associated home with 1,182,390 1,104,760 Total Employment Meanwhile usual places of work +7% in Greater Vancouver rose by 6% 7.5% POR & POW EMPLOYMENT Work @ Home -3% or by 91,590 88,745 57,400 jobs. 2006 2011

EXPORT-ORIENTED (ECONOMIC BASE) VS POPULATION-SERVING EMPLOYMENT Export-oriented employment refers to jobs associated with activities that reflect comparative advantage. Population-serving & Export-oriented SECTORS Examples: resource-extraction, agriculture

EXPORT-ORIENTED (ECONOMIC BASE) VS POPULATION-SERVING EMPLOYMENT Population-serving employment refers to jobs associated with local population needs. Population-serving & Export-oriented Examples: retail trade, construction SECTORS

EXPORT-ORIENTED (ECONOMIC BASE) VS POPULATION-SERVING EMPLOYMENT Population-serving employment refers to jobs associated with local population needs. Population-serving & Export-oriented SECTORS Within a particular market, communities are either under-served or over-served.

TOTAL EMPLOYMENT Regional Average: 52 jobs / 100 residents 42 72 62 36 30 70 39 55 41

PER CAPITA RETAIL SPENDING, CMAs $1,600 $1,500 $1,400 $1,300 Montreal Toronto Vancouver Vancouver: +46% Toronto: +37% Montreal: +25% Expansion-era retail sales growth $1,200 $1,100 $1,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

EMPLOYMENT IN TRADE Vanc./UEL: +16% North Shore: 16% 6.7 TriCities: +46% Regional Average: 8.4 jobs / 100 residents PittM/MapleR: +47% 8.3 8.3 5.6 6.8 The Valley: +44% Sry/Delta/WR: +34% 6.6

TAKEAWAYS Wrapping It Up BC & the Lower Mainland are enjoying a sustained period of economic stability and growth not seen for many decades this is reflected in our growing & changing population Interest rates remain relatively low, supporting new housing development, borrowing, and spending Migration will drive population and employment growth and aging will drive our change Opportunities in the ICI space exist and will evolve in line with our changing economy, demographics, & local land use policies