Geoff Cowling

The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision the Bank noted that while economic growth slowed in the fourth quarter, the global economy appears to be stabilizing and export demand and business investment should pick-up over the next year.  In addition, strong population and income growth will provide a boost to consumer spending and the housing market continues to recover.  The Bank projects that inflation will stay around its 2 per cent target over the next two years.

Although the Canadian economy appears to have limped to the finish line in 2019, pressure on the Bank of Canada to lower rates may actually be easing as risks to the Global economy fade. Fear surrounding the outlook for the United States has subsided due to rate-cutting by the US Federal Reserve and guarded optimism around US-China trade relations.  With external risks to the outlook diminished, the Bank will likely remain focused on restraining the growth of household debt. Therefore, it is unlikely the Bank will opt to lower its policy rate this year, absent a significant deterioration in the outlook for Canadian growth and inflation.

Vancouver, BC – January 13, 2020. The British Columbia Real Estate Association (BCREA) reports that a total of 77,331 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in 2019, a decline of 1.5 per cent from the 78,516 units sold in 2018. The annual average MLS® residential price in BC was $700,460, a decline of 1.6 per cent from $711,564 recorded the previous year. Total sales dollar volume was $54.2 billion, a 3 per cent decline from 2018.

“Housing markets across the province staged a strong recovery in the second half of 2019,” said BCREA Chief Economist Brendon Ogmundson. “This sets up 2020 to be a much more typical year than what markets have experienced recently.”

A total of 5,218 MLS® residential unit sales were recorded across the province in December, up 48.9 per cent from December 2018. The average MLS® residential price in BC was $755,165, an increase of 8.7 per cent from December 2018. Total sales dollar volume was $3.9 billion, a 61.8 per cent increase year-over-year.

Total active residential listings were down 10.6 per cent to 24,691 units in December. Total inventory of homes for sale have declined more than 10 per cent on a year-over-year basis for two straight months.

Seasonally-adjusted Canadian retail sales fell by 1.2% in October to $50.9 billion, driven by lower sales at motor vehicle and parts dealers and at building material and garden equipment and supplies dealers. Retail sales were down in 8 of 11 sub-sectors, representing 81% of retail sales. Regionally, 6 of 10 provinces reported declines in October, led by Ontario (-2%), Quebec (-1.7%) and Saskatchewan (-1.7%). In contrast, increases in retail sales were reported in Manitoba (1.1%) and Alberta (0.4%).

In B.C., seasonally-adjusted retail sales fell by 0.9% to $7.1 billion in October, driven by a decline in home furnishing sales and sales in sporting/hobby/books/music. Vancouver also reported a monthly decrease of 1.9% in sales. Compared to the same time last year, B.C. retail sales were down by 0.7% in October.

Vancouver, BC – December 12, 2019. The British Columbia Real Estate Association (BCREA) reports that a total of 6,616 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in November, an increase of 27.5 per cent from the same month last year. The average MLS® residential price in the province was $746,939, an increase of 5.5 per cent from November 2018. Total sales dollar volume was $4.94 billion, a 34.4 per cent increase from the same month last year.

"After several months of strong gains, home sales are now firming around long-run averages," said BCREA Chief Economist Brendon Ogmundson. "We expect 2020 will be a much more typical year for markets compared to the volatility of recent years."

MLS® residential active listings in the province were down 6.6 per cent from November 2018 to 31,310 units, and down for a seventh straight month on a seasonally adjusted basis. Overall market conditions remain balanced with a sales-to-active listings ratio of 21 per cent.

Year-to-date, BC residential sales dollar volume was down 6 per cent to $50.23 billion, compared with the same period in 2018. Residential unit sales were 3.9 per cent lower at 72,106 units, while the average MLS® residential price was down 2.2 per cent year-to date at $696,574.

Canadian employment decreased by 71,000 jobs in November, led by Quebec (-45,000), BC (-18,200) and Alberta (-18,000). This brought the national unemployment rate up from 5.5% in the previous month to 5.9% in November. November's decline was largely driven by private-sector employment, while self-employment and public-sector employment was little changed. Most of the decrease was reported in manufacturing (-28,000), natural resources (-6,500) and in public administration (-25,000). Compared to the same month last year, Canadian employment is up 1.6%.  

Employment in BC fell by 18,200 jobs in November, completely wiping out the previous month's gain. The decline was driven by full-time employment (-20,500), which more than offset gains in part-time employment (2,300). By Industry, employment losses were generally broad-based. In contrast, employment was up in finance/insurance/real estate/leasing. The provincial unemployment rate rose by 0.3 percentage points to 5%. Compared to one year ago, employment in BC is up by 0.7% (18,100) jobs.  

The BCREA Commercial Leading Indicator (CLI) fell slightly to 135.3 in the third quarter of 2019. The index remains unchanged compared to the same time last year.

Provincial economic activity continued to slow in the third quarter of 2019, with declines in retail and manufacturing sales more than offsetting a gain in wholesale trade. This left the economic activity component of the CLI negative for the fifth consecutive quarter. Office employment was up for the fifth consecutive quarter, edging out a decline in manufacturing employment, which resulted in a positive change in the employment component of the CLI. The financial component of the CLI was positive for a third straight quarter. The underlying trend in the CLI has been relatively flat over the past five quarters, suggesting a stable environment for commercial real estate activity in the province.

Following several years of robust growth, the BC economy continues to slow in 2019. Weak manufacturing sales in petroleum and coal, and lower retail sales at gasoline stations and auto dealers, put a drag on economic activity in the third quarter. Wholesale trade sales were positive in the third quarter due to a large expansion in machinery and equipment.

Employment growth in key commercial real estate sectors such as finance, insurance, real estate and leasing continues to be strong, up by 7,600 jobs in the third quarter. This measure of office employment now sits at an all-time high, signalling strong future demand for office space. In contrast, manufacturing employment fell by 4,200 jobs from the previous quarter.

The CLI’s financial component was positive in the third quarter due to an increase in benchmark Canadian REIT prices, which more than offset the expansion of short term credit spreads.

The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that there is evidence that the global economy is stabilizing and that US recession concerns are waning, though trade conflicts remain the biggest threat to the Canadian economy.  The Bank expects modest growth in 2020 and for inflation to closely track its 2 per cent target.

With many central banks around the world lowering their policy rates,  why is the Bank of Canada holding firm? Simply, the Bank judges the potential of lower rates igniting a further accumulation of household debt as a greater risk to the Canadian economy than the risk from deteriorating global economic conditions.  Canadian policymakers have committed to bending the curve on the Canadian household debt-to-income ratio, through a combination of higher interest rates and stricter mortgage policy.

 Balanced against the goal of restraining debt, the Bank sees the risk of a further disruption in global trade as manageable.  The outlook for Canadian economic growth is roughly in line with trend growth for the economy and inflation is expected to be well tethered to its 2 per cent target. As long as that outlook holds, we expect that the Bank will remain on the sidelines in 2020.

The Canadian economy grew by 0.1% in September, following the same growth in the previous month. Services reported growth of 0.2%, slightly outpacing growth in goods (+0.1%). There were gains in 13 of 20 industries, with increases in wholesale trade and construction offset in part by lower activity in rail transportation. Activity at offices of real estate agents and brokers increased 1.2% in September, rising for the seventh consecutive month, primarily due to higher housing resale activity in Vancouver and Fraser Valley.

Rounding out the third quarter, Canada's economy grew by 1.3%, led by strong business investment (+2.6%) and household spending (+0.4%), while exports were down by 0.4% and imports were unchanged. Of note was growth in housing investment (+3.2%), which recorded the fastest pace since the first quarter of 2012. The increase was driven by both new home construction (mostly detached homes in Ontario) and higher ownership transfer costs from resales activity in B.C. and Ontario.

We expect growth in the Canadian economy will moderate to around 1.5 per cent in the second half of 2019 after posting strong second quarter growth and will post trend growth of about 1.8 per cent in 2020. Significant downside risks remain due to elevated trade tensions and their consequent impact on exports and business investment.

BCREA 2019 Fourth Quarter Housing Forecast

Vancouver, BC – November 6, 2019. The British Columbia Real Estate Association (BCREA) released its 2019 Fourth Quarter Housing Forecast today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 1.8 per cent to about 77,100 units this year, after recording 78,505 residential sales in 2018. MLS® residential sales are forecast to increase 10.9 per cent to 85,500 units in 2020, just below the 10-year average for MLS® residential sales of 85,800 units.

“After a slow start to 2019, MLS® home sales in BC have embarked on a sustained upward trend since the spring,” said Brendon Ogmundson, BCREA Chief Economist. “The dampening effects of federal mortgage rules mean that rather than a return to the heights of recent years, home sales are simply returning to trend after sustaining a significant shock.” 

As demand normalizes, the accumulation of resale inventory has reversed course in many markets around BC. We anticipate that this trend will continue in 2020, with sales and listings finding balance. For most markets, this will mean price growth that is in-line with inflation, though for some supply-constrained areas we are forecasting strong price growth. We anticipate that the MLS® average price will decline 2 per cent in 2019 before rising modestly by 3.6 per cent to $723,000 in 2020.

The Canadian economy grew by 0.1% in August, following no growth in July. The goods producing industries reported growth of 0.2% after two months of declines, led by a rebound in manufacturing primarily due to increased sales. A decline of 0.1% was reported in the services producing industries, largely due to decreases in wholesale trade and utilities. Activity at offices of real estate agents and brokers increased 1.8% in August, as housing re-sale activity was up in the majority of Canadian urban markets.

We expect growth in the Canadian economy will moderate to around 1.5 per cent in the second half of 2019 after posting strong second quarter growth and will post trend growth of about 1.8 per cent in 2020. Significant downside risks remain due to elevated trade tensions and their consequent impact on exports and business investment.

The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that ongoing trade conflicts have weakened the global economic outlook, which is expected to drag Canadian economic growth below its potential in the second half of this year. The bank is further projecting that growth will register under 2 per cent over the next two years. Inflation is expected to trend at the Bank's target of 2 per cent.

With the expectation that the US Federal Reserve will be lowering its own policy rate later today, the third rate cut this year, there may be extra pressure for the Bank to begin loosening monetary policy at its next meeting.  As reflected by the Bank's statement, while current trade conflicts will test the resilience of the Canadian economy, the Bank does not as yet foresee the need for lower interest rates. However, the Bank stands ready to act if the impact of trade conflicts spreads beyond trade and investment and begin to slow consumer spending or housing activity. Thus far, the Bank appears to judge those risks as contained, which likely mean no change in interest rates this year.

Canadian retail sales decreased by 0.1% in August to $51.5 billion, driven largely by lower sales at food and beverage stores and at gasoline stations. Retail sales were down in 6 of 11 sub-sectors, representing 51% of sales. Regionally, 4 of 10 provinces reported a decrease in August with notable declines reported in Ontario (-0.8%) and Manitoba (-1.6%).

In B.C., retail sales rose by 0.8% to $7.2 billion in August, ending four consecutive months of declines. Vancouver also reported a monthly increase of 1.7% in sales. Provincial sales were up in 7 of 11 sub-sectors, largely driven by sales at food and beverage stores and to a lesser extent, in furniture and home furnishings. On a year-over-year basis, B.C. retail sales were down by 0.4% in August.

Canadian inflation, as measured by the Consumer Price Index (CPI), rose by 1.9 per cent compared to the same time last year, equaling the increase in August. Excluding the impact of lower energy prices, the CPI was up 2.4 per cent year-over-year. The Bank of Canada's three measures of trend inflation were all slightly higher in September, averaging 2.1 per cent. In B.C., CPI inflation ticked higher to 2.4 per cent in September compared to a year ago.

A recent surge in national employment growth combined with inflation at its 2 per cent target, plus some quieting of trade tensions globally, means that the Bank of Canada will likely remain on hold at its October meeting.

Vancouver, BC – October 15, 2019. The British Columbia Real Estate Association (BCREA) reports that a total of 6,938 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in September, an increase of 24 per cent from the same month last year. The average MLS® residential price in the province was $697,943, an increase of 2.1 per cent from September 2018. Total sales dollar volume was $4.84 billion, a 26.5 per cent increase from the same month last year.

“Markets across BC built on momentum from the summer,” said BCREA Chief Economist Brendon Ogmundson. “While the year-over-year increase in provincial sales was quite strong, home sales in most areas are simply returning to historically average levels.”

MLS® residential active listings in the province were up 4 per cent from September 2018 to 39,117 units and were essentially flat compared to August on a seasonally adjusted basis. Overall market conditions remained in a balanced range with a sales-to-active listings ratio of about 18 per cent.     

Year-to-date, BC residential sales dollar volume was down 12.4 per cent to $39.7 billion, compared with the same period in 2018. Residential unit sales were 8.9 per cent lower at 57,773 units, while the average MLS® residential price was down 3.9 per cent year-to-date at $687,530.   

Canadian inflation, as measured by the Consumer Price Index (CPI) rose by 1.9 per cent in August year-over-year, down from a 2 per cent increase in the previous month. This marks 6-months of consecutive year-over-year growth in the CPI, coinciding with strong labour market conditions. Excluding the impact of lower gasoline prices, the CPI rose by 2.4 per cent year-over-year. The Bank of Canada's three measures of trend inflation remain unchanged to average 2 per cent in August.

In B.C., CPI slowed to 2 per cent year-over-year, down from 2.1 per cent in July. The decline was largely driven by gasoline prices, as global oil prices declined slightly in August due to higher production and soft international demand. 

With Canadian inflation just under 2 per cent, the Bank of Canada will have to turn to other economic indicators at their next meeting on October 28. The Bank will have to consider how to balance a stable domestic economy with continued global uncertainty.  

The BC housing market appears to be stabilizing after a year and a half of volatility induced by the B20 mortgage stress test and other policy measures. Total MLS® unit sales are on pace to finish 2019 at just under 75,000 units, a 5 per cent decline from 2018. Home sales posted a sharp rebound over the summer, buttressed by strong employment growth and a decline in mortgage rates. We expect that most markets will normalize around long-term averages in 2020, with total provincial sales reaching 82,710 units.

Growth in the BC economy is projected to slow for a second consecutive year in 2019. A policy driven slowdown in housing activity, a challenging global trade environment and cautious consumer spending have provincial real GDP on pace to grow at about 2.2 per cent this year. Our baseline forecast is for slightly improved economic growth at 2.5 per cent in 2020, as spending on LNG projects ramp up and the impacts of restrictive mortgage credit begin to fade. There remains significant downside risk around this forecast, however, given the uncertain economic outlook in the United States.

Housing starts in the province were much higher than anticipated through the first half of 2019 as some construction activity in the Metro Vancouver area was pushed forward to avoid higher development costs slated to be implemented in the back half of the year. While we do expect the pace of new home construction to moderate, the large pipeline of units under construction ensures that markets will be well supplied in the short-run. A recovery in home sales has slowed the accumulation of resale inventory, with active listings still well short of the previous peak in 2012. That leaves market conditions at the provincial level essentially balanced with little upward pressure on prices. We anticipate that the MLS® average price will decline 2.3 per cent in 2019 before rising modestly by 3.2 per cent to $718,000 in 2020.

Vancouver, BC – July 15, 2019. The British Columbia Real Estate Association (BCREA) reports that a total of 6,960 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in June, a decline of 11.8 per cent from the same month last year. The average MLS® residential price in the province was $687,584, a decline of 4 per cent from June 2018. Total sales dollar volume was $4.8 billion, a 15.3 per cent decline from the same month last year.

“BC home sales moderated lower in June after a stronger showing in May,” said BCREA Deputy Chief Economist Brendon Ogmundson. “While mortgage rates offered by lenders have moved below 3 per cent, a static qualifying rate has limited the impact of the lower cost of borrowing.”

Total MLS® residential active listings were up 18.6 per cent to 42,625 units compared to the same month last year and were essentially flat on a seasonally adjusted basis compared to May.

Year-to-date, BC residential sales dollar volume was down 23.4 per cent to $24.5 billion, compared with the same period in 2018. Residential unit sales decreased 18.7 per cent to 35,679 units, while the average MLS® residential price was down 5.8 per cent to $688,080..