Canadian inflation, as measured by the Consumer Price Index (CPI), registered 1.4 per cent in the 12 months to August. That is a slight uptick from 1.2 per cent in July.   The Bank of Canada's three measures of trend inflation were also up slightly, averaging 1.5 per cent.   In BC, provincial consumer price inflation was 2.0 per cent in the 12 months to August. 

Canadian retail sales increased 0.4 per cent on a monthly basis in July and were 7.8 per cent higher year-over-year. Sales were higher in 6 of 11 retail sub-sectors with the main contribution coming from motor vehicle dealers and food and beverage stores. In BC, vigorous consumer spending continues to set the pace for the BC economy. Retail sales in the province climbed 0.7 per cent on a monthly basis and were up 12.3 per cent year-over-year.
 
Despite rapid economic growth in Canada, there is still very little sign of inflation. With inflation reading well below the Bank of Canada's 2 per cent target once again in August, the case for a further rate increase in October is lessened though not completely closed.

 

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Canadian manufacturing sales declined for a second consecutive month, falling 2.6 per cent in July. The dip in sales was largely due the motor vehicle and parts sector while sales were up in 12 of 21 manufacturing sub-sectors.
 
In BC, manufacturing sales decreased 1.6 per cent on a monthly basis but were up 7 per cent year-over-year. Year-to-date, BC manufacturing sales are up close to 8 per cent over 2016, led by strong contributions from a diverse range of industries from wood and paper products to food manufacturing to machinery and equipment. A strong trade and manufacturing sector is helping to propel employment and economic growth around the province, which further supports robust housing demand in BC.

 

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Vancouver, BC – September 14, 2017. The British Columbia Real Estate Association (BCREA) reports that a total of 9,162 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in August, an increase of 2.4 per cent from the same period last year. Total sales dollar volume was $6.2 billion, up 22 per cent from August 2016. The average MLS® residential price in the province was $678,186, a 19.1 per cent increase from August 2016.

“BC home sales in August remained unchanged from July, on a seasonally adjusted basis," said Cameron Muir, BCREA Chief Economist. "Strong economic conditions are underpinning demand. However, rising home prices combined with upward pressure on mortgage interest rates is expected to temper demand over the balance of the year."

Year-to-date, BC residential sales dollar volume was down 15.9 per cent to $51.8 billion, when compared with the same period in 2016. Residential unit sales declined 15.0 per cent to 73,267 units, while the average MLS® residential price was down 1.1 per cent to $706,839.

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Canadian housing starts increased 1 per cent in August to 223,232 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts was also higher at 219,447 units SAAR.

New home construction in BC fell 21 per cent on a monthly basis to a still robust 35,773 units SAAR but were up 4 per cent on a year-over-year basis.  Single detached starts fell 7 per cent month-over-month and were 3 per cent lower year-over-year. Multiple unit starts declined 26 per cent on a monthly basis but were up 7 per cent year-over-year.

Looking at census metropolitan areas (CMA) in BC: 

  • Total starts in the Vancouver CMA fell 13 per cent year-over-year in August. Both single and multiple unit starts declined, falling by 2 and 16 per cent respectively on a year-over-year basis.
  • In the Victoria CMA market, housing starts followed up a surge in new units in July with a further 22 per cent year-over-year increase in August. Multiple unit starts were once again the main source of growth, rising 46 per cent year-over-year.
  • New home construction in the Kelowna CMA more than doubled compared to August 2016 due to a number of multiple unit projects breaking ground. Many of those units are new rental units, which year to date have totaled 1,366 starts. That is the highest 8 month total for construction of rental units in Kelowna's history.
     
  • Housing starts in the Abbotsford-Mission CMA continued a torrid pace of growth in August, rising 93 per cent year-over-year, boosted by strong growth in both single and multiple unit starts.

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Canadian employment increased by 22,000 jobs in August while the the national unemployment rate declined 0.1 points to 6.2 per cent, the lowest rate since October 2008. In the twelve months to August, employment in Canada is up 2.1 per cent, or 378,000 jobs.
 
In BC, employment declined for a second straight month, falling by 8,400 jobs.  In spite of those losses, the provincial unemployment rate moved 0.2 points lower to 5.1 per cent as the number of people looking for work also fell.  Over the past twelve months, the level of employment in BC is up 3.9 per cent.

 

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The total value of Canadian building permits fell 3.5 per cent on a monthly basis in July, the first decrease since March 2017.  The decrease was largely the result of lower construction intentions in Ontario, though several provinces saw declines. 

The total value of permits issued in BC increased 4.6 per cent on a monthly basis and were up 35.4 per cent year-over-year, exceeding $1.3 billion for a second consecutive month. Residential permits rose 7.8 per cent on a monthly basis and were 52.6 per cent higher year-over year. That growth was led by a record $771.8 million in permits for multi-family dwellings. Non-residential permits declined 6.1 per cent on a monthly basis and were 5.6 per cent lower year-over-year.

Construction intentions were higher in three of BC's four census metropolitan areas (CMA):

  • Permits in the Abbotsford-Mission CMA  fell 17.4 per cent on a monthly basis to just over $30 million. Year-over-year, permit values were more than double the value of July 2016.
  • In the Victoria CMA, total construction intentions totaled $138.9 million, an 8.2 per cent monthly increase and a 48 per cent increase in permit values from one year ago.
  • In the Kelowna CMA, permits were 1.8 per cent higher a monthly basis and close to 5 per cent higher compared to July 2016 at $71 million.
  • In the Vancouver CMA, a record value of multi-family dwelling permits pushed the total value of all permit activity to $858.6 million, an increase of 8.2 per cent on a monthly basis and a 48 per cent increase year-over-year.

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The Bank of Canada announced this morning that it is raising its target for the overnight rate by 25 basis points to 1 per cent. In the press release accompanying the decision, the Bank noted that recent economic data have been stronger than expected but growth is forecast to moderate in the second half of the year.  On inflation, the Bank cited some excess capacity and temporary price shocks as factors keeping inflation below its 2 per cent target. Importantly, the Bank mentioned it will be paying particular attention to the evolution of the economy's potential growth rate (meaning the economy's estimated long-run growth rate) as well as to labour market conditions and the economy's sensitivity to higher interest rates.

The Bank has now removed the stimulus it injected into the Canadian economy in 2015 to offset the impact of falling oil prices. With the economy expanding at a 3.5 per cent rate over the past year, that stimulus is clearly no longer required. The Bank seems to be more concerned about the potential for higher future inflation due to an over-heated economy than on the actual very low inflation observed in recent months. That leaves the door open for further rate increases should economic growth remain robust. 

 

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The Canadian economy posted a second consecutive quarter of stellar economic growth, with real GDP expanding by  an annualized 4.5 per cent in the second quarter of 2017.  That is the strongest rate of economic growth since the third quarter of 2011.  Quarterly real GDP growth has averaged a remarkable 3.7 per cent over the past four quarters.  Growth  in the second quarter was was led by strong household consumption, which grew 4.6 per cent, as well as a nearly 10 per cent rise in exports and and and a 7 per cent increase in non-residential business investment.

Today's strong economic data solidifies the Bank of Canada's case for raising interest rates at least one more time this year, likely at its meeting in October rather than at its September meeting next week. While the Bank's primary motivation for increasing rates seems to be withdrawing the stimulus introduced following the 2015 oil shock,  growth in the Canadian economy has been well above the Bank of Canada's estimate for long-run or potential economic growth for the past year which means existing slack in the economy is being eliminated quickly. That should, in turn, lead to inflation rising at or above the Bank's 2 per cent target in coming months. Interest rate increases by the Bank beyond the this year will depend crucially on how the outlook for inflation develops.

 

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Vancouver, BC – August 31, 2017. The British Columbia Real Estate Association (BCREA) released its 2017 Third Quarter Housing Forecast update today.
Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 10 per cent to 100,900 units this year, after reaching a record 112,209 units in 2016. Strong economic fundamentals are underpinning consumer demand and are expected to keep home sales at elevated levels through 2018. The ten-year average for MLS® residential sales in the province is 84,700 units. “British Columbia’s postion as the best performing economy in the country is bolstering consumer confidence and housing demand,” said Cameron Muir, BCREA Chief Economist. “Strong employment growth, a marked increase in migrants from other provinces, and the ageing of the millennial generation is supporting a heightened level of housing transactions. However, a limited supply of homes for sale is causing home prices to rise significantly in many regions, particularly in the Lower Mainland condominium market”.

Continue reading here: http://www.bcrea.bc.ca/docs/news-2017/2017-08-31forecast.pdf?sfvrsn=2

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Mt Baldy is back! The hill had great success operating in 2016-2017 and is now better than ever. 1994 chalet on 3 levels. Main floor living with open great room combining living room, dining area and kitchen. Cozy fireplace, plus a bedroom, bathroom and laundry all on this level. Up has two large bedrooms and full bathroom. Bunk beds ready to accommodate large families. Lower level walk out features entrance foyer/mud room, games room with fireplace, storage and utility area - flex rooms could be bedrooms too. Mount Baldy is only 20 minutes from Oliver, and a great alternative to city living! Whether you are here for winter fun or year round living, this is a great package! Please call Geoff Cowling 250.490.7272 or TF at 1.800. 734.0457  or visit GeoffCowling.com

 

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Great package! Three level, 4 bedroom, 3 bathroom, corner townhome. Small 4 unit complex that is child and pet friendly, and investor alert: rentals are OK. Nicely finished with an open floorplan on the main, 9 ft ceilings, and lots of natural light. Kitchen with breakfast bar opens to living and dining areas, warmed by a featured gas fireplace. Powder room on main level too. Upstairs: 3 good sized bedrooms and a 4 piece bath. Downstairs: big multipurpose room suitable for bedroom, media room or family room. Full height ceiling, and window well allows natural light. Laundry and a newer 3 piece bath. Note: gas heat, central air, built in vac, security system.Central location near the College and SOEC, and just a short drive to downtown and the beach. Please call Geoff Cowling 250.490.7272 or TF at 1.800. 734.0457  or visit GeoffCowling.com

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Solid 1959 house, fully finished on 2 levels. 2 beds up with full bath and laundry.s, laundry. 1000 square feet. One bed suite down with full bath and laundry. Character house with a suite, on the edge of downtown & walking distance to shops, Farmer’s Market, beach & close proximity to SOEC, Community Centre, and hospital.  Nice package! Call Geoff Cowling 250.490.7272 or TF at 1.800. 734.0457  or visit GeoffCowling.com

 

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Retail sales in Canada climbed 7.3 per cent to $49 billion in June compared to the same month last year. The month-over-month increase was 0.1 per cent, marking the fourth consecutive month of gains. After removing the effects of price changes, retail sales were up 0.5 per cent by volume. This strong performance supports further upward movement in the Bank of Canada target interest rate as broadening strength in Canadian economy signals an expectation of rising inflation.

BC retail sales posted a phenomenal 12.4 per cent increase year-over-year in June to $7.2 billion. Compared to May, BC retail sales rose 1.9 per cent. This surge in consumer spending is being underpinned by above trend economic growth, rising employment and increased migration. 

 

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Vancouver, BC – August 14, 2017. The British Columbia Real Estate Association (BCREA) reports that a total of 9,275 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in July, down 6.3 per cent from the same period last year. Total sales dollar volume was $6.48 billion, down 1.3 per cent from July 2016. The average MLS® residential price in the province was $698,761, a 5.3 per cent increase from the same period last year.

“Strong economic growth, an expanding population base and a lack of supply continue to drive BC home sales and prices this summer," said Cameron Muir, BCREA Chief Economist. "However, home sales have edged back 4 per cent since May, with active listings beginning to bounce back from a 20-year low," added Muir. "If these trends continue, it may signal that more balanced market conditions could emerge before the end of the year."

Year-to-date, BC residential sales dollar volume was down 19.3 per cent to $45.6 billion, when compared with the same period in 2016. Residential unit sales declined 17.0 per cent to 64,107 units, while the average MLS® residential price was down 2.8 per cent to $710,921.

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Canadian housing starts increased 4 per cent in July to 222,324 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts was also higher at217,550 units SAAR.

New home construction in BC was one of the main contributors to the overall increase in Canadian housing starts. Total housing starts in BC increased 20 per cent on a monthly basis to 45,597 units SAAR and were up 19 per cent on a year-over-year basis.  Single detached starts fell 3 per cent month-over-month and were 1 per cent lower year-over-year. Multiple unit starts rose close to 30 per cent on both a monthly and year-over-year basis.

Looking at census metropolitan areas (CMA) in BC: 

  • Total starts in the Vancouver CMA bounced back from a decline in June, rising 13 per cent year-over-year in July. The increase was primarily due to an 18 per cent jump in multiple unit starts, with most new construction activity taking place around Burnaby, Coquitlam and New Westminster.
  • In the Victoria CMA market, housing starts more than doubled year-over-year due to a more than 300 per cent increase in multiple unit starts. This represents a much needed boost to the supply of housing in Victoria over the medium term but will do little to address current low inventory levels.
  • New home construction in the Kelowna CMA was down 34 per cent year-over-year and declined 41 per cent on a monthly basis. The decline was likely the result of relative inactivity due to wildfires.
     
  • Housing starts in the Abbotsford-Mission CMA more than doubled for the second consecutive month as developers broke ground on 157 new multiple unit starts.

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Canadian employment increased by 11,000 jobs in July after adding almost 100,000 jobs over the previous two months. The national unemployment rate declined 0.2 points to 6.3 per cent, the lowest rate since October 2008. In the twelve months to July, employment in Canada is up 2.1 per cent, or 388,000 jobs including 354,000 full-time positions.
 
In BC, employment declined by 5,100 jobs, the first monthly decline since November 2016. However, the decline was entirely the result of fewer part-time positions while full-time employment actually expanded  by 7,000 jobs. The provincial unemployment rate edged up 0.2 points to 5.3 per cent.  Over the past twelve months, the BC economy has added 87,000 new jobs including 99,200 full-time jobs at the expense of part-time employment which has fallen by 12,200.

 

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Great package, just listed. Three level, 4 bedroom, 3 bathroom, corner townhome. 4 unit complex that is child and pet friendly, and investor alert: rentals are OK. Nicely finished with an open floorplan on the main, 9’ ceilings, and lots of natural light. Kitchen with breakfast bar opens to living and dining areas, warmed by a featured gas fireplace. Powder room on main level too. Upstairs: 3 good sized bedrooms and a 4 piece b...ath. Downstairs: big multipurpose room suitable for bedroom, media room or family room. Full height ceiling. Laundry, 3 piece bath. Note: gas heat, central air, built in vac, security system. Private NW corner allows afternoon sun. Fenced flat yard. Central location near the College and SOEC, and just a short drive to downtown and the beach. Please call Geoff Cowling 250.490.7272 or TF at 1.800. 734.0457 or visit GeoffCowling.com


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The Canadian economy posted blockbuster growth in May, expanding 0.6 per cent on a monthly basis and 4.6 per cent year-over-year.  This was the seventh consecutive month of positive growth for the Canadian economy. Moreover, growth was broad based with output increasing in 14 of 20 industrial sectors.  Given the first two months of GDP data, the Canadian economy is on track to post a second consecutive quarter of growth close to 4 per cent.

Strong economic growth further solidifies the Bank of Canada's case for raising interest rates one more time this year, likely at its October meeting. However, the path of interest rates beyond that rests heavily on the evolution of Canadian inflation, which has been trending well below the Bank's 2 per cent target. 

 

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A further sign of momentum in the Canadian economy this morning as Canadian manufacturing sales increased 1.1 per cent in May, the third consecutive monthly increase.  Overall, sales were higher in 16 of 21 manufacturing sub-sectors, reflecting broad-based strength in the Canadian economy.  Continued strong economic data will likely push the Bank of Canada closer to a second rate increase this fall.
 
In BC, manufacturing sales increased 1.8 per cent on a monthly basis and were up 8.2 per cent year-over-year. A strong manufacturing and trade sector has been a key contributor to economic growth in the province this year, which is on track to record a fourth consecutive year of 3 per cent or more growth in real GDP, the best performance for the provincial economy since 2007. 

 

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The Bank of Canada announced this morning that it is raising its target for the overnight rate by 25 basis points to 0.75 per cent. In the press release accompanying the decision, the Bank noted that Canada's economy has been robust and a significant amount of economic slack has been absorbed. While inflation data has been soft, the Bank expects that this is temporary and that inflation will return to its 2 per cent target by mid-2018.

The motivation for today's rate increase seems primarily to be that the Bank feels that the stimulus it injected into the Canadian economy in 2015 through two rate cuts is no longer required given a recent trend of strong economic and employment growth. If that is the case, a further 25 basis point increase before the end of the year will likely follow.  After that, the pace of rate increases relies heavily on the trend in Canadian inflation, which to date has been well below the Bank's 2 per cent target. If that trend does not reverse by early next year, the Bank may decide to stop at a 1 per cent overnight rate until higher inflation emerges. 

As bond markets reprice rate expectations, Canadian mortgage rates have returned to levels observed at the beginning of the year. We expect that mortgage rates will rise further in the second half of 2017, finishing near 3 per cent for a five-year fixed rate. 


 

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US Real GDP Growth (Q4'2016) - January 27, 2017


US real GDP growth registered a weaker than expected 1.9 per cent growth the final quarter of 2016, and 1.6 per cent growth for the year as a whole.  Growth was pulled lower by a widening US trade deficit, while consumer demand and business investment were robust. Most economists expect US economic growth to accelerate to about 2.2 per cent in 2017.

The pace of economic growth in the United States could be a key determinant in the BC housing market this year. While faster US growth is generally positive for the BC economy, a stronger pace of growth along with a possibly significant shift in the fiscal outlook due to the large tax cuts and ramped-up spending plans of the Trump administration, is already translating to rising long-term interest rates as markets anticipate higher inflation and consequent monetary tightening by the US Federal Reserve. In turn, that uptrend in rates is putting pressure on Canadian mortgage rates, with many lenders increasing their best offered rates. 

 

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Canadian Retail Sales - January 20, 2017


Canadian retail sales inched 0.2 per cent higher in November.  Sales were higher in just 5 of 11 sub-sectors, with motor vehicle and parts dealers and building materials supplies leading the way.  E-commerce sales accounted for 3 per cent of total retail sales, the highest proportion to date in 2016.  Given today's data,  we are currently tracking fourth quarter Canadian real GDP growth at 1.5 per cent. 

In BC, retail sales were down 0.7 per cent on a monthly basis, but were 5.5 per cent higher year-over-year.  Year-to-date, retail sales in the province are up 6.5 per cent. 


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Canadian Manufacturing Sales - January 19, 2017


Canadian manufacturing sales rose 1.5 per cent in November after posting a moderate decline the previous month.  Sales were higher in 14 of 21 manufacturing sub-sectors. After adjusting for inflation, the total volume of sales was 1.2 per cent higher. 

In BC, where the manufacturing sector is a significant employer and a key driver of economic growth, sales were up 2.4 per cent on a monthly basis and 9.2 per cent year-over-year. The manufacturing sector has been on a significant upswing after a slow first half with sales posting nearly 8 per cent growth over the second half of the year. That growth is adding to already strong momentum in other sectors and supporting housing demand across BC communities where manufacturing, particularly of forestry products, is an important driver of local economic activity. 


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Bank of Canada Interest Rate Announcement - January 18, 2017


The Bank of Canada announced this morning that it is holding the target for its overnight rate at 0.5 per cent. In the press release accompanying the decision, the Bank noted that uncertainty in the global outlook, particularly with regard to policies in the United States, is undiminished. The Canadian economy is forecast to grow 2.1 per cent in both 2017 and 2018, implying the Canadian economy will return to full capacity in mid-2018.  On inflation, the Bank noted that it continued to be lower than expected but should return to it 2 per cent target in coming months.

Political uncertainty in the United States will likely govern the direction of both policy rates and long-term bond yields over the next year. The interest rate on 5-year government of Canada bonds has risen to its highest point in a year, which is adding upward pressure to mortgage rates offered by Canadian lenders.  While the Canadian economy is forecast to post steady growth in 2017, overall slack in the Canadian economy remains persistent.  Without a significant uptick in economic growth, inflation will likely continue to trend at or below the Bank's 2 per cent target.  That, along with lingering uncertainty, will keep the Bank sidelined through 2017 with a chance of lowering its target rate should current downside risks to the economy become realized.


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