Auto industry boosts Ontario economy, housing sector

The slowdown in the oil and gas industry has been well documented, including its potential impact on the economy and housing sector. Offsetting those challenges, however, is the performance of auto industry in Ontario – which is coming off a record 2014.Canadian auto sales climbed a stronger than expected six per cent last year to a record high of 1.85 million units, according to the latest Scotiabank Global Auto Report.The sales surge continued last month, giving the auto industry its best performance in February since 2008.“We expect sales to edge up 1.86 million units in 2015, buoyed by ongoing job gains, low interest rates, and near-record vehicle affordability,” Carlos Gomes, senior economist and auto industry specialist at Scotiabank, said in the report.“Canadian exports have accelerated over the past year, advancing by 11 per cent – the best performance since 2011. Shipments will be buoyed in 2015 by the strongest economic growth in the United States in a decade, as well as by the recent sharp depreciation of the Canadian dollar as a result of the slump in global oil prices.”How does this impact real estate?In Ontario, manufacturing sectors such as the auto industry are key contributors to the economy. And when a sector is healthy, it leads to job growth, which leads to demand for housing – be it rental, at first, as people move to an area to pursue employment, or ownership, once they have settled in and gained employment stability.For example:

  • Late last year, Honda Canada announced it was investing $857 million to upgrade three plants north of Toronto to make the next generation Civic. With 10 per cent of the cost coming from the Ontario government, the three-year project includes partnerships with Ontario colleges and universities.
  • Earlier this year, General Motors announced a $560-million investment in its Ingersoll, Ont. plant to make the new Chevrolet Equinox.
  • In Windsor, Fiat Chrysler Automobile NV’s assembly plant is in the midst of a $2-billion retooling to make the company’s new minivan.
  • In late February, Ford Motor Co. announced it is adding 400 new jobs in Oakville, Ont. to assemble the redesigned Ford Edge crossover. This is in addition to the 1,000 positions added there in 2014.

The economic benefits deepen when you look at the supply sector – companies that supply parts to the auto makers.

  • Linamar Corp. announced in January it is investing $400 million – plus $100 million from the Ontario and federal governments – at its plant in Guelph, Ont. to make create new, more environmentally friendly transmissions. The move will create 1,200 new full-time jobs.
  • And this week, Toyota Boshoku Canada announced it is partnering with the provincial government to expand its Elmira, Ont. manufacturing facility, creating 73 new jobs. Toyota Boshoku supplies parts to Toyota’s Ontario assembly plants in Woodstock and Cambridge.

These are among the reasons Scotiabank, the Conference Board of Canada and others are forecasting Ontario to be among the economic growth leaders in Canada this year.

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