Geoff Cowling

The Canadian economy posted 0.4 per cent growth on a monthly basis in November, with 17 of 20 industrial sectors reporting increased output.  The manufacturing sector posted its strongest growth in three years and the real estate industry grew for a fourth consecutive month, led by a surge in the output of real estate agents and brokers. Given today's release, growth in the Canadian economy is tracking at 2.5 per cent for the fourth quarter, an uptick from 1.7 per cent growth in the third quarter.
  
Today's data, along with firming inflation in recent months, further supports the case for gradual tightening by the Bank of Canada in 2018. 

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian retail sales increased for a third consecutive month in November, rising 0.2 per cent on a monthly basis and 6.5 per cent year-over-year. Sales were higher in 6 of 11 sub-sectors representing 37 per cent of total retail trade.  Excluding the decline in new motor vehicle sales, retail sales were up 1.6 per cent over October.  Given today's data release, we are tracking Q4 2017 Canadian economic growth at 2.4 per cent.

In BC, retail sales were essentially unchanged on a monthly basis but were 11.5 per cent higher than November 2016. Year-to-date, retail sales in the province have grown 9.7 per cent, reflecting strong job and robust economic growth in the province. We forecast that the BC economy grew close to 4 per cent in 2017 and will enter 2018 with significant momentum.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian manufacturing sales increased 3.4 per cent to a record high $55.5 billion in November, a height primarily achieved due to higher sales in the transportation equipment, petroleum and coal and chemical industries.  Sales were up in 12 of 21 manufacturing sub-sectors, reflecting broad-based growth in the Canadian manufacturing sector.
 
In BC, manufacturing sales increased 0.7 per cent on a monthly basis and were up 7.1 per cent year-over-year. The BC manufacturing sector has thus far been able to move past disruptions in the forestry sector due to US trade policy, and has now posted four straight months of growth. Sales have moved higher in 8 of the lat 9 months and employment in the sector has been rising, contributing to BC's overall strong job growth and associated housing demand. 

Copyright British Columbia Real Estate Association. Reprinted with permission.

The Bank of Canada opted to raise the target for its overnight interest rate this morning 25 basis points  to 1.25 per cent.  In the statement accompanying the decision, the Bank cited recent strong economic data and rising inflation as motivations for the rate increase. The Bank expects growth in the Canadian economy to slow to 2.2 per cent in 2018 and 1.6 per cent in 2019 with consumption and new home construction contributing less to growth than in years past.  With the economy returning to full-capacity, inflation is forecast to remain at 2 per cent over the medium term.  The Bank also flagged risk to its outlook from ongoing NAFTA negotiations and noted it would remain cautious in considering future interest rate adjustments.

With the Canadian unemployment rate hitting a 40-year low and inflation ticking higher in recent months, the Canadian economy would seem to be operating at full capacity. That argues for a more hawkish approach to monetary policy in order to bring interest rates closer to what the Bank estimates would be neutral for the economy, that is, a level in which the economy is neither running too hot nor too cold.  While today's rate increase was widely anticipated, it did come earlier in the year than previously expected and likely signals further rate increases to come in 2018.  Canadian mortgage rates have already moved higher in anticipation of Bank of Canada tightening, which means a much tighter borrowing environment in 2018, particularly given newly implemented mortgage qualifying rules for low-ratio buyers.

Copyright British Columbia Real Estate Association. Reprinted with permission.

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.

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.

Copyright British Columbia Real Estate Association. Reprinted with permission.

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.

Copyright British Columbia Real Estate Association. Reprinted with permission.

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

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.

Copyright British Columbia Real Estate Association. Reprinted with permission.