Vancouver, BC – January 12, 2017. The British Columbia Real Estate Association (BCREA) reports that a total of 103,763 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in 2017, a decline of 7.5 per cent from a record 112,211 unit sales in 2016. The average MLS® residential price in BC was $709,579 in 2017, up 2.7 per cent from the previous year. Total sales dollar volume was $73.63 billion, down 5.1 per cent from 2016.

“Robust housing demand in 2017 was underpinned by a strong economy, employment growth and rising wages," said Cameron Muir, BCREA Chief Economist. "Above trend migration, both international and interprovincial, also bolstered housing demand, while broader demographic fundamentals added fuel to condominium sales in urban centres and to all home types in retirement-oriented communities."

The BC housing market ended the year with a strong December. Home sales increased 4 per cent from November, on a seasonally adjusted basis. However, the year-end results were likely pushed higher by some homebuyers advancing their purchases to avoid tougher mortgage qualification rules in the new year.

In December, a total of 5,738 residential unit sales were recorded by the MLS® across the province, an increase of 21.5 per cent from the same period last year. Total sales dollar volume was $4.2 billion, up 36.3 per cent from December 2016. The average MLS® residential price in the province was $734,108, up 12.1 per cent from the same month last year.

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The total value of Canadian building permits fell close to 8 per cent on a monthly basis in November, the first decrease in three months.  The decline in construction intentions was broad based, with all categories of buildings except residential single detached posting lower permit values. 

The total value of permits issued in BC declined for a second consecutive month, falling 13.8 per cent on a monthly basis and 5 per cent year-over-year to $1.18 billion.  Residential permits fell almost 18 per cent on a monthly basis and were 22 per cent lower than this time last year. Non-residential permits declined about 6 per cent on a monthly basis but were 62 per cent higher year-over-year.

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

  • Permits in the Abbotsford-Mission CMA  fell 16.6  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 just under $50 million, a 74 per cent decline from October and 18 per cent decline in permit values from one year ago.
  • In the Kelowna CMA, permits were 21.5 per cent higher a monthly basis and 24 per cent higher compared to November 2016 at $76.4 million.
  • The Vancouver CMA recorded permit activity valued at $708.3 million, a decline of 8.6 per cent on a monthly basis and an 18 per cent decrease year-over-year. The value of multi-family residential permits fell 29.5 per cent while single-detached permit values were essentially unchanged.

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Canadian housing starts closed out the year falling 14 per cent on monthly basis to 216,980 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts remained elevated at 226,777units SAAR. For all of 2017, total new home construction in Canada was up 6.2 per cent.

BC saw total housing starts rise 11 per cent to almost 50,000 units SAAR in December on a monthly basis. Total starts in BC were up 26 per cent year-over-year. Single detached starts were down 2 per cent on a monthly basis but increased 21 per cent compared to December 2016 while multiple starts were up 15 per cent month-over-month and were 28 per cent higher year-over-year. For all of 2017, new home construction in BC was up 4 per cent.

Looking at census metropolitan areas (CMA) in BC: 

  • Total starts in the Vancouver CMA were driven higher by apartment condominium starts in Vancouver, Richmond and Coquitlam. Multiple starts across the CMA rose 11 per cent year-over-year in December, offsetting a 4 per cent decline in single detached starts. Overall, Vancouver CMA starts finished 2017 down 6 per cent.
  • In the Victoria CMA, the year closed with historically high housing starts, reaching the highest level of new home construction since 1976. Multiple unit starts jumped 70 per cent in December on a year-over-year basis, driven by elevated rental market construction. For all of 2017, Victoria new home construction increased 32 per cent.
  • New home construction in the Kelowna CMA were up 18 per cent from November but down 17 per cent year-over-year. For all of 2017, multiple unit starts drove a surge in new home construction, rising 88 per cent over 2016 leading to a 63 per cent overall increase in housing starts.
  • Housing starts in the Abbotsford-Mission CMA tumbled 72 per cent on a monthly basis in December following a spike in multiple unit starts the previous month. On a year-over-year basis, new home construction was down 41 per cent. For all of 2017, new home construction in the Abbotsford-Mission CMA was up 51 per cent.

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It’s been a busy real estate market here. Check this article from the paper this morning:

www.pentictonherald.ca/news/article_0d6380e2-efe4-11e7-a028-c3e4656511dd.html

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Strong Canadian job growth continued in December as employment increased by 79,000 jobs. However, most of the job gains were concentrated in part-time work, which rose by 55,000 jobs. The the national unemployment rate fell 0.2 points to 5.7 per cent, the lowest level of unemployment since comparable data became available in 1976.  In the twelve months to December, employment in Canada was up 2.3 per cent, or 423,000 jobs. Strong fourth quarter job growth and historically low national unemployment will put extra pressure on the Bank of Canada to raise interest rates in 2018.

In BC, employment rose by 5,600 jobs, although full-time employment declined by 6,200 while part-time work was up 11,800.   The provincial unemployment rate fell 0.2 points to a Canada-wide low of 4.6 per cent. BC finished 2017 with employment growth of 3.6 per cent or 83,000 jobs.

 

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The Canadian economy grew 1.7 per cent in the third quarter, a significant deceleration from the over 4 per cent growth recorded in the previous quarter. Growth was led by gains in household spending while exports declined and business investment slowed. Despite the second half slowdown, the Canadian economy is still on track to grow more than 3 per cent this year, which would make it the envy of most advanced economies around the world.

While the economy slowed in the third quarter, employment in November surged. Canadian employment increased by 80,000 jobs while the the national unemployment rate fell 0.4 points to 5.9 per cent, the lowest rate since February 2008. In the twelve months to November, employment in Canada is up 2.1 per cent, or 390,000 jobs. In BC, a string of four straight months of declining job growth was broken as the province added 18,000 new jobs in November.   Over the past twelve months, the level of employment in BC is up 3.8 per cent.  The provincial unemployment rate ticked 0.1 points lower to 4.8 per cent.

 

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Vancouver, BC – November 30, 2016. The BCREA Commercial Leading Indicator (CLI) increased for a ninth consecutive quarter, rising 2 points in the third quarter of 2017 to 135.3. That increase represents a 1.7 per cent rise over the second quarter and a 7.3 per cent increase from one year ago.

“A booming BC economy continues to drive the CLI higher," says BCREA Economist Brendon Ogmundson. "While we expect that the almost unprecedented cycle of above-trend growth in the BC economy will end next year, the overall economic environment remains very supportive."

The underlying CLI trend, which smooths often noisy economic data, continues to push higher due to strong provincial economic and employment growth. That uptrend signals further growth in investment, leasing and other commercial real estate activity over the next two to four quarters.

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BCREA 2017 Fourth Quarter Housing Forecast

Vancouver, BC – November 28, 2017. The British Columbia Real Estate Association (BCREA) released its 2017 Fourth Quarter Housing Forecast today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 10.4 per cent to 91,700 units in 2018, after an expected 8.8 per cent decrease this year. A record 112,209 unit sales were recorded in 2016. The ten-year average for MLS® residential sales in BC is 84,700 units. Strong economic and demographic fundamentals are supporting elevated housing demand. However, a number of factors are expected to temper home sales in the province next year.

“Housing demand across the province will face increasing headwinds in 2018," said Cameron Muir, BCREA Chief Economist."A rising interest rate environment combined with more stringent mortgage stress tests will reduce household purchasing power and erode housing affordability." The 5-year qualifying rate is forecast to rise 20 basis points to 5.15 per cent by Q4 2018, and the new qualification rules for conventional mortgages will erode purchasing power by up to 20 per cent. "Given the rapid rise in home prices over the past few years, the effect of these factors will likely be magnified."

The supply of homes for sale is now trending at or near decade lows in most BC regions. The imbalance between supply and demand has been largely responsible for rapidly rising home prices. The combination of weakening consumer demand and a surge in new home completions next year is expected to induce more balanced market conditions, producing less upward pressure on home prices. The average MLS® residential price in the province is forecast to increase 3.1 per cent to $712,300 this year, and a further 4.6 per cent to $745,300 in 2018.

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Canadian retail sales edged up 0.1 per cent on a monthly basis in September and were 6.2 per cent higher year-over-year. However, excluding the impact of higher sales of gasoline, retail trade actually declined 0.2 per cent in September and were down 0.6 per cent in inflation-adjusted terms. Given today's data release, we are tracking Q3 Canadian economic growth at 1.7 per cent, a significant deceleration from over 4 per cent growth in the second quarter.

In BC, retail sales were up once again, rising 0.4 per cent on a monthly basis and 9.8 per cent compared to September last year. Year-to-date, retail sales in the province have grown more than 9 per cent, reflecting strong job and economic growth in the province.

 

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Canadian manufacturing sales rose for a second consecutive month, increasing 0.5 per cent in September.  Sales were up in 7 of 21 manufacturing sub-sectors, with the majority of growth arising due to higher sales in the energy sector.
 
In BC, manufacturing sales increased 0.4 per cent on a monthly basis and were up 7.2 per cent year-over-year. Although the manufacturing and trade sector faced significant headwinds in recent months due to a stronger Canadian dollar and punitive tariffs on softwood lumber, the sector continues to be a substantial driver of BC's robust economic growth in 2017. 

 

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Vancouver, BC – November 14, 2017. The British Columbia Real Estate Association (BCREA) reports that a total of 8,677 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in October, an increase of 19.3 per cent from the same period last year. Total sales dollar volume was $6.25 billion, up 41.6 per cent from October 2016. The average MLS® residential price in the province was $720,129, up 18.7 per cent from October 2016.

“BC home sales trended higher in October, up 23 per cent from January on a seasonally adjusted basis," said Cameron Muir, BCREA Chief Economist."A lack of supply in the resale market continues to put upward pressure on home prices in most BC regions."

Total active listings were down 5.1 per cent to 27,987 units in October compared to the same month last year, and have declined 49 per cent over the last five years. The ratio of home sales to active listings was up from 24.7 per cent in October 2016 to 31 per cent last month. The BC housing market is considered to be in relative balance when the ratio of home sales to active listings is between 12 and 20 per cent.

Year to date, BC residential sales dollar volume was down 9.4 per cent to $63.8 billion, when compared with the same period in 2016. Residential unit sales declined 10.7 per cent to 90,290 units, while the average MLS® residential price increased 1.4 per cent to $706,881.

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Canadian housing starts increased 2 per cent in September to 222,771 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts also increased to 216,770  units SAAR.

New home construction in BC jumped 44 per cent on a monthly basis to 53,751 units SAAR  and more than doubled on  a year-over-year basis.  Single detached starts were down 6 per cent from one year ago while multiple unit starts nearly tripled year-over-year.

Looking at census metropolitan areas (CMA) in BC: 

  • Total starts in the Vancouver CMA reached a 12-month high in October, rising 92 per cent from September and 186 per cent compared to September 2016. A surge in multiple unit starts to 2,532 units in October accounted for the large increase in new home construction with large condominium projects getting underway in Burnaby, Coquitlam and Surrey.
  • In the Victoria CMA market, housing starts continue to record significant gains, rising 267 per cent year-over-year. Multiple unit starts continue to drive new home construction, with starts more than 5 times the levels seen in October 2016.
  • New home construction in the Kelowna CMA was down 16 per cent year-over-year and down 61 per cent from a strong September of new home construction.
  • Housing starts in the Abbotsford-Mission CMA also fell in October, with both single and multiple units starts down more than 30 per cent year-over-year.

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Canadian employment increased by 35,000 jobs in October while the the national unemployment rate increased 0.1 points to 6.3 per cent. In the twelve months to August, employment in Canada is up 1.7 per cent, or 308,000 jobs.

In BC, employment declined for a fourth consecutive month, falling by 6,100 jobs in October. Full-time employment continued to rise, with firms adding 11,000 full-time positions, but total employment was dragged lower by a 17,200 drop in part-time work.   Over the past twelve months, the level of employment in BC is up 2.7 per cent. The provincial unemployment rate held steady in October at 4.9 per cent.

 

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A slightly frightening Halloween release of Canadian GDP data showed that the Canadian economy edged down 0.1 per cent in August. Declines in the manufacturing, mining and oil and gas sectors offset increases in the other 12 of 20 industrial sub-sectors that posted positive growth. Given today's release,  growth in the Canadian economy is tracking at about 2 per cent for the third quarter.
     
Today's disappointing GDP data should be the final nail in the coffin for further Bank of Canada rate increases this year.  The economy is showing real signs of slowing with no inflation in sight. We expect the Bank will hold its key policy rate at 1 per cent until mid-2018.

 

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The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 1 per cent. In the press release accompanying the decision, the Bank noted that inflation has edged up slightly and is expected to return to its target of 2 per cent in the second half of 2018 while economic growth is forecast to slow in the final six months of this year following a very strong first half.  The Bank emphasized that it will be cautious in making future adjustments to its policy rate as it assesses the sensitivity of the economy to higher interest rates.

There are several factors influencing the Bank's decision to move to the sidelines. Recent economic data points to a slowing of growth from the soaring heights of the first half of 2017. Moreover, inflation remains muted and newly announced tightening of mortgage regulations will have a significant impact on households, particularly in a rising mortgage rate environment. We expect that the Bank will take a wait and see approach over the next few months as the impact of its previous rate tightening takes hold.

 

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Canadian inflation, as measured by the Consumer Price Index (CPI), registered 1.6 per cent in the 12 months to September, up from 1.4 per cent in August.  The Bank of Canada's three measures of trend inflation were largely unchanged, averaging 1.6 per cent.   In BC, provincial consumer price inflation was 2.0 per cent in the 12 months to September. 

Canadian retail sales declined 0.3 per cent on a monthly basis in August but were 6.9 per cent higher year-over-year. Sales were down in 8 of 11 retail sub-sectors and excluding the impact of higher gas prices and rising motor vehicle sales, the retail sector was down 1.3 per cent. In BC, after five straight monthly increases, sales fell 1 per cent on a monthly basis, but were up more than 10 per cent compared to September last year.

Given that incoming economic data has been signalling a slowing of the economy and inflation is still essentially treading water below the Bank's 2 per cent target, not to mention the tightening of mortgage regulations by OSFI, we expect that the Bank of Canada will stay on the sidelines at its upcoming October 25th meeting.

 

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Canadian manufacturing sales rebounded 1.6 per cent in August following two consecutive months of falling output.  Sales were up in only 8 of 21 manufacturing sub-sectors, with the majority of growth arising due to higher sales in the transportation equipment and energy sectors.
 
In BC, manufacturing sales increased 0.8 per cent on a monthly basis and were up 5.2 per cent year-over-year. Strong gains continued in the wood products sector, along with very strong growth in machinery, and transportation equipment manufacturing. A growing manufacturing base has helped push employment higher across the province, supporting housing demand making strong contributions to BC's economy in 2017.

 

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Canadian housing starts decreased by 4 per cent in September to 217,118 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts also declined to 214,821 units SAAR.

New home construction in BC rose 6 per cent on a monthly basis to 37,470 units SAAR but was down 18 per cent on a year-over-year basis.  Single detached starts were flat compared to one year ago while multiple unit starts declined 24 per cent year-over-year.

Looking at census metropolitan areas (CMA) in BC: 

  • Total starts in the Vancouver CMA fell 13 per cent from August and were down about half compared to September 2016. Multiple unit starts were down 58 per cent from one year ago as record levels of units under construction weigh on new projects.
  • In the Victoria CMA market, housing starts continue to surge, rising 127 per cent year-over-year. Multiple unit starts continue to drive new home construction, with starts more than triple levels seen last September.
  • New home construction in the Kelowna CMA jumped more than 200 per cent year-over-year as close to 350 new multiple unit starts were recorded.
  • Housing starts in the Abbotsford-Mission CMA also more than doubled year-over-year due to strong growth in both single and multiple starts.

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Growth in the Canadian economy was essentially flat in July following 8 consecutive months of growth.  Only 11 of 20 industrial sub-sectors posted positive growth with output in key industries like mining, oil and gas and manufacturing declining.   Given today's release, third quarter growth in the Canadian economy is tracking at about 2.5 per cent - a deceleration from the nearly 4 per cent growth in the first half of 2017. 

The Bank of Canada has been emphatic that future rate adjustments will be highly data dependent. Slower growth in the third quarter likely means the Bank will hold off on increasing rates at its October meeting. However, beyond that meeting, as long as the Canadian economy is growing well above trend, which the Bank sees as a signal of rising future inflation, we expect further rate increases to come either by the end of this year or in early 2018.

 

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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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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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