Exponential Growth Bias and Household Finance - Dartmouth College
Experience Profile - Hardlines · 2017-11-20 · 2000s 1990s 1980s 1970s 1960s 1950s Before 1950...
Transcript of Experience Profile - Hardlines · 2017-11-20 · 2000s 1990s 1980s 1970s 1960s 1950s Before 1950...
Independent Real Estate Intelligence
Experience Profile
Conference Presentation – Economic and Housing Market Outlook
Research, Valuation & Advisory Cost Consulting & Project Management Realty Tax Consulting Geomatics Economic Advisory
33 Yonge Street, Suite 500, Toronto, ON M5E 1G4 Canada T 416.641.9500 F 416.641.9501
altusgroup.com
22nd Annual Hardlines Retail Conference “Bricks and Clicks”
Extreme pent up demand and a supply shortage in Toronto responsible for price escalation; expect the same ahead
Very strong economic condition and a surge in job growth will lift housing starts in almost all regions
Conference address by Peter Norman, VP & Chief Economist, Altus Group
This was Mr. Norman’s 8th address to the Hardlines Conference over the past 15 years
Synopsis
Housing prices were rising rapidly in Canada and
Ontario and particularly in Toronto until mid-year, and
the turbulence in markets over the past few months
following, in part, government policy announcements, is
interpreted as a housing market adjustment. But tight
underlying conditions and pent up demand still exist, so
expect more price pressure ahead.
Canadian prices have risen over the past two decades
generally in line with most other comparable countries,
and have been more stable. The largest point of price
escalation comes from the Greater Toronto Area where
an extreme shortage of new housing (especially new
single-family housing) relative to a very robust pace of
job growth and accelerating rates of in-migration that is
fuelling housing demand. These conditions are similar to
Vancouver. This pace of price growth is not ideal from an
economic development sustainability perspective, but it
is being fed by fundamentals and will very likely
continue to be an issue through 2018.
Supply and demand imbalances, especially in large cities,
are partly being driven by as shift in supply toward
apartment units and away from the more widely
demanded single family. It’s also likely municipalities are
not planning for and providing adequate units for the
growth in “non-household” occupancy demand.
Housing demand remains steady or even strengthening
in most regions fuelled by job growth, immigration, and
migration trends. While housing affordability in some
markets may be a challenge for ownership (as might the
very modest rise in interest rates recently), this same
factor also fuelling rental demand, which, in turn, is
fuelling a renaissance of purpose built rental supply right
across the country.
On net we expect housing starts will at least hold up to
the numbers seen last year nationally, weaker regions
improve and stronger regions stay relatively buoyant.
In terms of renovation activity, 2018 should see a modest
boost in investment activity, as still generally low interest
rates, improved home equity, and population aging
effects all point to higher demand for renovation projects.
11/15/2017
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Tracking the Trends Prospects for New Housing and Renovation Spending
Economic Intelligence
November 14th, 2017Hardlines Retail Conference, Niagara Falls
Peter Norman, VP & Chief Economist, Economic Consulting
2altusgroup.com @altus_group @EconomistNorman
Our Company Structure at a Glance
ARGUSAdvisoryData SolutionsVoyanta
Cost Consulting & Project ManagementResearch, Valuation & AdvisoryProperty TaxGeomatics
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2
3altusgroup.com @altus_group @EconomistNorman
Today’s Agenda
• Housing Market Adjustments – Real or Fake
News?
• The Economy: Benefits of Convergence
• Consumers Continue to be Stronger Than
We Think
• What Lies Ahead for New Construction?
Housing Market “Adjustments” Real or Fake News
11/15/2017
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5altusgroup.com @altus_group @EconomistNorman
Recent Price Change, Existing Homes
*Composite of eleven major markets
Source: Altus Group, MLS® HPI
20-month price history (Jan. 2016-Aug 2017)September Y/Y price
Y/Y % Change in Price, Monthly
10.8 10.9 0.6 7.7 12.0 6.2 5.1 5.5 17.3 8.8-10.0
-5.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
Canada Vancouver Calgary Regina Toronto Ottawa Montreal Moncton Guelph Oakville
6altusgroup.com @altus_group @EconomistNorman
Toronto Inventory Monitor
-20
-10
0
10
20
30
40
0
1
2
3
4
5
6
7
8
9
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
11
Jan-
12
Jan-
13
Jan-
14
Jan-
15
Jan-
16
Jan-
17
Jan-
18
Months Inventory
Annual % Change in Price
Month’s of Resale Inventory Annual % Change
Source: Altus Economics, Altus Data Solutions, TREB
Remaining Inventory (units)
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7altusgroup.com @altus_group @EconomistNorman
Toronto House Prices
Vancouver Lower Mainland (resale single-family)
Toronto(resale single-family)
Toronto Single-Family
Toronto ApartmentToronto (new high rise)
Toronto (new low rise)
8altusgroup.com @altus_group @EconomistNorman
Housing Policy and Housing Market Performance
-10%
-5%
0%
5%
10%
15%
20%
25%
25.0
30.0
35.0
40.0
45.0
50.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Recession
Total Home Sales, Canada
Home Price Index
Existing Home Sales (000s)
* CREA HPI® 11-market aggregate composite index Source: Altus Group Economic Consulting based on data from CREA
Y/Y Change in Benchmark Price* (%)
30 Year Am
Int Only
35 Yr Am
40 Yr Am
High Ratio definition 25% to 20%
Max 35 YrAms
Min 5% DPmt
Tighter Standards
20% down on Invest. Properties Max 30 Yr
Am
HELOC
Max 25 YrAm
Price Cap
GDS max 39%
Min 10% Downpmt above
$500k
OFSI – raise K req. for banks
Tighter federal Standards
Ontario Fair
Housing Plan
BC Foreign Inv’r Tax
OFSIB-20
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9altusgroup.com @altus_group @EconomistNorman
Canadian House Prices: International Context and Future Expectations
Source: Altus Economics, Economist.com, CREA: homepriceindex.com, Thompson Reuters
2.7%4.4%
5.4%
7.4%
14.8%
-5%
0%
5%
10%
15%
20%
2012
2013
2014
2015
2016
2017
2018
2019
Based on Reuters Canada Housing Market Poll**
Max
Median Response
Min
Year-over-year % Change in Price (CREA MLS HPI)*
* Dec over Dec** Survey of 16 housing forecasters in August 2017
Economy, Consumers, Demographics: Key Real Estate and Housing Drivers
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12altusgroup.com @altus_group @EconomistNorman
Economic Outlook
* Annual average
Source: Historical - Statistics Canada and Bank of Canada Forecasts – Altus Group Economic Consulting
14altusgroup.com @altus_group @EconomistNorman
Growth Improving in Oil-Levered Provinces
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2014 2015 2016 2017(f) 2018(f)
Oil producing* Ontario and B.C. Rest of Canada**
(e) – estimated, (f) – forecast*Newfoundland and Labrador, Saskatchewan and Alberta**New Brunswick, Nova Scotia, Quebec, Manitoba
Source: Historical - Statistics Canada Forecasts – Altus Group
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15altusgroup.com @altus_group @EconomistNorman
Job Growth Excelling Almost Everywhere
203
111
144133
325
235
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
10-y
r A
vg
2014
2015
2016
2017
2018
Year-over-year change in jobs (000s)
85
13 10
170
54
-12
-100.0
-50.0
0.0
50.0
100.0
150.0
200.0
BC AB
MS
ON
QU
ATL
Sep. 2017 Y/Y change in jobs (000s)
2.7%
3.9%
1.9%
2.6%2.1%
3.7%
-1.3%-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Van Cal
Edm
Win
Tor
Mtr
Hlx
By Major City
Sep. 2017 Y/Y Change in jobs (%)
Canada By Province
Altus Forecast
16altusgroup.com @altus_group @EconomistNorman
Net Migration Trends Strongly Boosting Ontario
Source: Statistics Canada
* Annual
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17altusgroup.com @altus_group @EconomistNorman
Population Growth, Ontario
-100
-50
0
50
100
150
200
250
300
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Natural Change International Migration Internal Migration Total Change
Source: Statistics Canada
000s Persons, 12 Months Ending December
18altusgroup.com @altus_group @EconomistNorman
Government Bond and Mortgage Rates
0.0
2.0
4.0
6.0
8.0
10.0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
5-Year Government Bond
5-Year Mortgage
Percent
4.7
2 5.2
3
5.6
2
5.5
4
4.1
7
4.1
0
3.8
6
3.3
0
3.5
1
3.3
1
2.8
3
2.7
7 3.3
1
0.0
2.0
4.0
6.0
8.0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Aug
3.
GO
C 1
0-yr
Bon
d (B
loom
berg
)
Percent
Source: Altus Group based on data from Bank of Canada/ Major Financial Institutions/ Bloomberg
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19altusgroup.com @altus_group @EconomistNorman
Fool Me Once …… Fool Me Twice….
Source: Altus Group based on Scott Cameron as published in Macleans Magazine 12.13.16
20altusgroup.com @altus_group @EconomistNorman
Exchange Rate Outlook
0.6
0.7
0.8
0.9
1.0
1.1
Jan-
91
Jan-
94
Jan-
97
Jan-
00
Jan-
03
Jan-
06
Jan-
09
Jan-
12
Jan-
15
Jan-
18
USD per CADYear-End 2018
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21altusgroup.com @altus_group @EconomistNorman
Census Surprise
285 270
193
398
310
232
321373
335
0
100
200
300
400
500
1971-1976
1976-1981
1981-1986
1986-1991
1991-1996
1996-2001
2001-2006
2006-2011
2011-2016
Population
Average Annual Growth, Canada, 000s
226 223
142
205
160149
175 177
150
0
50
100
150
200
250
1971-1976
1976-1981
1981-1986
1986-1991
1991-1996
1996-2001
2001-2006
2006-2011
2011-2016
Households
Average Annual Growth, Canada, 000s
v. 395k Total Annual
Population Growth
v. 185k Total AnnualHousing
Completions
Source: Altus Group based on Census of Canada, Statscan, CMHC
altusgroup.com
Housing Supply Dynamics are Complicated
Housing Completions 925,000
Rise in Vacancy (40,000)
Conversion to Non-Household Occupancy (100,000 to 115,000)
Housing Demolitions (70,000 to 85,000)
Secondary Suites and Other 55,000
Total Household Growth 750,000
Source: Altus Group analysis and estimates based on Statistics Canada and CMHC data22
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23altusgroup.com @altus_group @EconomistNorman
Household Growth by Tenure and Birth Cohort, 2016-2026
340
700
-160-60 -30 -10
-300
490
100
1,020820
330
60
-100
-1,040
1,200
440
1,720
660
270
30
-110
-1,340
1,690
-1,500
-1,000
-500
0
500
1,000
1,500
2,000
2000s 1990s 1980s 1970s 1960s 1950s Before 1950 Total
Total Renter Household Growth
Total Owner Household Growth
Total Household Growth
Net New Units (000s)
altusgroup.com
300.0
320.0
340.0
360.0
380.0
400.0
420.0
440.0
460.0
480.0
500.0
1946
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Births (000s)
Source: Statistics Canada
Births, Canada, 1946-2014
Note: Truncated Axis!
1950s 2000s1990s1980s1970s1960s 2010s
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altusgroup.com
300
310
320
330
340
350
360
370
380
390
400
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
Annual Births, Canada
-10,000
0
10,000
20,000
30,000
40,000
50,000
60,000
2006
-201
1
2011
-201
6
2016
-202
1
2021
-202
6
2026
-203
1
Apartment Row Single-Family
Annual Net New Homes Required for Families with Children
What Lays Ahead?
26altusgroup.com
Home Ownership Rate Fell in 2016 Census
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75+
1991 1996 2001 2006 2011 2016
Age of Household Head
Source: Altus Group, Census
Home Ownership Rates by Age (%)
59.0
60.0
61.0
62.0
63.0
64.0
65.0
66.0
67.0
68.0
69.0
70.0
Canada
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altusgroup.com
Private Purpose-built Rental Apartment Starts & Rental Apartment Starts
14.9 14.2 13.0
14.9 15.7
17.7 19.0
20.3
30.4 30.0
16.9
19.0
0
5
10
15
20
25
30
35
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
6
201
7Jan-July
Vancouver Calgary Edmonton Saskatoon Regina Winnipeg Toronto Ottawa Montreal Halifax
Medium Term ** Short Term ***
*Centres 50,000+ ** 2016 over 2014 *** First half 2017 Y./Y
Source: Altus Group Economic Consulting based on data from CMHC
Private Purpose-built Rental Apartment Starts, Canada*, (000s units)
Recent Momentum in Rental Apartment Starts by CMA
altusgroup.com
Apartment Starts by Intended Market Segment, Canada*
15 14 13 15 16 18 19 2030 30
18 22
4561
2840
55
7051 50
57 51
3537
0.0
10.0
20.0
30.0
40.0
50.0
0
25
50
75
100
125
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2016 2017
Purpose-built Rental Condominium Purpose-built Rental as % of Total ApartmentUnits (000s)
%
Source: Altus Group Economic Consulting based on CMHC data
Jan - Aug
*Centres 50,000+
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altusgroup.com
Apartment Starts by Intended Market Segment, Canada*
1.74.8 3.5 2.6 1.5 2.7 2.3 1.8 2.9
7.03.4
5.4
9.3
11.3
9.48.3
18.1
20.9
13.6 13.1 11.07.0
4.14.2
0
10
20
30
40
50
60
0
5
10
15
20
25
201
0-1
4
201
5-1
6
YT
D 2
01
6
YT
D 2
01
7
201
0-1
4
201
5-1
6
YT
D 2
01
6
YT
D 2
01
7
201
0-1
4
201
5-1
6
YT
D 2
01
6
YT
D 2
01
7
Purpose-built Rental Condominium Purpose-built Rental as % of Total ApartmentUnits (000s)%
Source: Altus Group Economic Consulting based on CMHC data
Vancouver Toronto Montreal
altusgroup.com
Montreal New Home Sales
2,1411,878
2,9253,245
1,565943
1,668 1,607 1,620
0
1,000
2,000
3,000
4,000
2013* 2014* 2015 2016 2013* 2014* 2015 2016 2017
1,277
2,682
1,493 1,532 1,731 1,925
1,057 929 756 612908
1,429
0
1,000
2,000
3,000
4,000
2011 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2017
* Excludes low rise Source: Altus Group Montreal New Condominium Market Overview
Hig
h a
nd
Mid
-ris
e A
par
tmen
t
(Do
wn
tow
n)
All
Un
its
(Res
t o
f
CM
A)
1st Half
11/15/2017
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altusgroup.com
New Home Sales, Toronto
13,80711,996
18,02419,575
18,350
9,096
5,998
9,76711,915 11,644
6,160
0
6,000
12,000
18,000
24,000
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2017
Source: Altus Data Solutions
17,628 15,748
21,627 22,165
29,684
10,3107,326
10,918 11,08613,765
22,729
0
10,000
20,000
30,000
40,000
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2017
Ap
artm
ent
(“H
igh
-ris
e”)
Sin
gle
-fam
ily
(“Lo
w-r
ise”
)
1st Half
32altusgroup.com @altus_group @EconomistNorman
GTA Land Sales Continue to Break Records
$4.9
$3.0
$0.8
$0.4
$1.9
$1.0
$7.6
$4.5
$0
$2
$4
$6
$8
$10
199
5
199
6
199
7
199
8
199
9
200
0
200
1
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
H1
2016
H1
2017ICI land
Residential lots
Residential land
Source: Altus Data Solutions
11/15/2017
16
33altusgroup.com @altus_group @EconomistNorman
Foreign Investor Buyers Picked Up Again
Source: Altus Data Solutions
0.0%
1.2%
2.4%
3.6%
4.8%
6.0%
$0
$300
$600
$900
$1,200
$1,500
2012 2013 2014 2015 2016 H12016
H12017
Volume ($millions)
% of All Investment
Foreign Buyer Property Investment, GTA
4%12%
38%10%
8%
9%
19%
% of Foreign Investment by Asset Class, 2014-H1 2017
ICI Land
Residential Land
Office
Retail
Industrial
Apartment
Hotel
altusgroup.com
New Apartment Sales, Vancouver
3,379 3,1623,906
5,336
7,538
1,9251,320
1,958 2,279
4,197
2,766
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2017
Source: Altus Data Solutions
5,559 5,097
7,1668,186
12,051
3,5532,356
3,415 3,291
6,000
3,322
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 2017
Hig
h-r
ise
Ap
artm
ent
All
oth
er
Ap
artm
ents
1st Half
11/15/2017
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altusgroup.com
New Multifamily Home Sales, Calgary
1,361
2,008
1,276990 894 1,056
771446 520 422
0
500
1,000
1,500
2,000
2,500
2012 2013 2014 2015 2016 2013 2014 2015 2016 2017
1,652 1,5111,216
849
309
902607
337 175 238
0
500
1,000
1,500
2,000
2,500
2012 2013 2014 2015 2016 2013 2014 2015 2016 2017
1st Half
1,173
1,8962,332
1,3281,117 1,037
1,375
647 588841
0500
1,0001,5002,0002,500
2012 2013 2014 2015 2016 2013 2014 2015 2016 2017
Low
-ris
e A
par
tmen
tTo
wn
ho
use
Source: Altus Data Solutions
Hig
h-r
ise
Ap
artm
ent
altusgroup.com
Residential Investment Still Lagging
% of GDP Chronically Weak Investment in New Residential Since Recession is Troubling
Typically, Look For About 3.2% of GDP as a Sustainable Rate of Investment
Source: Altus Economics based on Statistics Canada
2.4
2.6
2.8
3.0
3.2
3.4
3.6
3.8
200
2
200
3
200
4
200
5
200
6
200
7
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
11/15/2017
18
37altusgroup.com @altus_group @EconomistNorman
Buoyant Housing Starts Forecast Ahead12
9.0
157.
0
157.
0
127.
0
101.
0 125.
0
114.
0
118.
9
109.
4
110.
4
100.
9
107.
6
118.
1
114.
9
121.
4
41.0
71.0
72.0
84.0
48.0
65.0
80.0
95.9
78.5
79.0
94.6
90.3
93.0
93.1
87.9
0
50
100
150
200
Avg
. 199
5-20
05
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
f
2018
f
2019
f
Single-Family Apartment
000s
Uni
ts
170
227
228
211
149
190
194
215
188
189 196
198 21
1
208
206
201
192
0
50
100
150
200
250
300
Avg
. 199
5-20
05
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
f
2018
f
2019
f
2020
f
2021
f
000s Units
50%
60%
70%
80%SF % of Total
Source: Altus Economics based on CMHC
Historical Forecast
38altusgroup.com @altus_group @EconomistNorman
Forecast by Province
0.0
10.0
20.0
30.0
40.0
50.0
2009
2010
2011
2012
2013
2014
2015
2016
2017
(f)
2018
(f)
2019
(f)
2009
2010
2011
2012
2013
2014
2015
2016
2017
(f)
2018
(f)
2019
(f)
2009
2010
2011
2012
2013
2014
2015
2016
2017
(f)
2018
(f)
2019
(f)
Single-Family Apartment
000s Units
BC Alberta Man/Sask
Source: CMHC, Altus Group Economic Consulting
11/15/2017
19
39altusgroup.com @altus_group @EconomistNorman
Forecast by Province
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2009
2010
2011
2012
2013
2014
2015
2016
2017
(f)
2018
(f)
2019
(f)
2009
2010
2011
2012
2013
2014
2015
2016
2017
(f)
2018
(f)
2019
(f)
2009
2010
2011
2012
2013
2014
2015
2016
2017
(f)
2018
(f)
2019
(f)
Single-Family Apartment
000s Units
Ontario Quebec Atlantic
Source: CMHC, Altus Group Economic Consulting
40altusgroup.com @altus_group @EconomistNorman
Residential Renovations – Our Love Affair Continues
Source: Altus Group Economic Consulting based on Statscan Data
71.3
0
10
20
30
40
50
60
70
80
199
21
993
199
41
995
199
61
997
199
81
999
200
02
001
200
22
003
200
42
005
200
62
007
200
82
009
201
02
011
201
22
013
201
42
015
201
62
017
201
82
019
Residential Renovation Spending, Canada
Billions 2016$
11/15/2017
20
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Data Solutions – We’ve Got You Covered.
42altusgroup.com @altus_group @EconomistNorman
Want to Stay Ahead of the Competition?
Altus Group Housing Provides the Little Numbers Behind the Big Picture
11/15/2017
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Thank you.
Peter NormanVice President & Chief Economist
@economistnorman@altus_group
416-698-4653
National Economic Advisory
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2020 - 4th Street SW, Calgary, Suite 310
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