Vancouver, BC – February 27, 2018. The BCREA Commercial Leading Indicator (CLI) increased for the fourth consecutive year, rising 0.4 points in the fourth quarter of 2017 to 135.7. That increase represents a 0.3 per cent rise over the second quarter and a 6.7 per cent increase from one year ago.

“The BC economy continued to thrive in the fourth quarter of 2017," says BCREA Economist Brendon Ogmundson. "Increased activity in key commercial real estate sectors contributed to a fourth consecutive year of a rising CLI, mirroring the last four years of robust economic growth."

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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Canadian inflation, as measured by the Consumer Price Index (CPI), slowed for a second consecutive month to 1.7 per cent year-over-year, down from 1.9 per cent in December. The Bank of Canada's three measures of trend inflation were either up or flat in January, and are all now close to 2 per cent.   In BC, provincial consumer price inflation was 2.1 per cent in the 12 months to January.
 
Although total CPI inflation has ticked lower in the past two months, core inflation continues to firm up. The Bank of Canada has a tendency to look past short-term movements in CPI inflation so the most recent downtrend probably will not prompt a shift in thinking at the Bank, at least as long as core inflation moves higher.  That means the Bank is still likely to raise its overnight rate at least one more time this year.

 

Copyright British Columbia Real Estate Association. Reprinted with permission.

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Canadian retail sales closed the year on a down note, falling 0.8 per cent in December. That broke a string of three consecutive monthly increases. Sales fell in 6 of 11 sub-sectors representing 42 per cent of total retail trade.  For all of 2017, Canadian retail sales were up 6.7 per cent. With today's data release, we are tracking Q4 Canadian economic growth at 2.2 per cent.

In BC, retail sales declined 0.6 per cent on a monthly basis but were up 10.6 per cent compared to December 2016. For the year, BC retail sales grew at 9.6 per cent, the fastest rate of annual growth in over two decades. That jump in consumer spending was a main contributor to a robust provincial economy, which we forecast grew 3.8 per cent in 2017.

 

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Canadian manufacturing sales ended 2017 on a down note, declining 0.3 per cent on a monthly basis after a nearly 4 per cent increase in November. The decline was the result of lower sales in the energy sector as well as declining sales in food manufacturing.  Sales were down in 11 of 21 manufacturing sub-sectors, representing 57 per cent of the manufacturing sector.  On a year-over-year basis, Canadian manufacturing sales were up 3.7 per cent over December 2016.

In BC, manufacturing sales dipped 0.7 per cent on a monthly basis but were up close to 9 per cent year-over-year. For all of 2017, BC manufacturing sales rose 8.1 per cent with significant contributions from a diverse array of industries, most notably the the forestry sector where sales of paper and wood products were up more than 9 per cent on an annual basis. Those gains helped drive employment and housing demand around the province as BC posted another stellar year of economic growth.

 

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Vancouver, BC – February 15, 2018. The British Columbia Real Estate Association (BCREA) reports that a total of 5,306 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in January, an increase of 18.3 per cent from the same period last year. The average MLS® residential price in BC was $721,477, up 16.2 per cent from the previous year. Total sales dollar volume was $3.83 billion, a 37.4 per cent increase from January 2017.

“BC home sales dipped 10 per cent from December to January, on a seasonally adjusted basis," said Cameron Muir, BCREA Chief Economist. "New mortgage rules requiring conventional borrowers to qualify at a higher interest rate likely contributed to the decline in home sales last month. The impact was magnified by a strong December as many households advanced their purchase decisions ahead of the policy's implementation."

Despite the decline in January transactions, the seasonally adjusted annual rate of home sales was 101,800 units.

Compared to January 2017, market conditions tightened in all BC board areas except Victoria, where the sales-to-active listings ratio declined from 46.3 per cent to 40.5 per cent. Despite this decline, Victoria remains in strong sellers' market territory. Total active listings in the province were down 8.6 per cent to 20,901 units, compared to the same period last year.

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A slow start to the year as Canadian employment fell by 88,000 jobs in January. On the bright side, the losses were entirely due to declining part-time work while full-time jobs actually grew by 49,000 and total hours worked were up 2.8 per cent. The national unemployment rate ticked up 0.1 points to 5.9 per cent.

In BC, employment was down by 5,100 jobs although full-time employment was up by 4,100 while part-time work declined.   Despite those losses, the level of employment was still 2.5 per cent higher than January last year. The provincial unemployment edged up by 0.2 points in January to 4.8 per cent.

 

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The total value of Canadian building permits increased 5 per cent on a monthly basis in December.  The increase was primarily the result of higher construction intentions in the residential sector. For all of 2017, the value of building permits across Canada rose 10.4 per cent. 

The total value of permits issued in BC broke a string of consecutive down months, rising 27 per cent on a monthly basis and 55.5 per cent year-over-year to 1.5 billion.  Residential permits accounted for all of the increase, rising 51 per cent on a monthly basis and 60 per cent over December last year. Non-residential permits declined 17.5 per cent on a monthly basis but were 42 per cent higher year-over-year. Building permits were up 22.9 per cent for all of 2017, the largest increase of all the provinces.

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

  • Permits in the Abbotsford-Mission CMA  rose 167.1 per cent on a monthly basis to just under $80 million. Year-over-year, permit values were more than triple the value from December 2016.
  • In the Victoria CMA, total construction intentions increased 69.2 per cent to $81.5 million and were up 13.7 per cent year-over-year.
  • In the Kelowna CMA, permits were down 31.6 per cent monthly basis to $52 million, a 16.1 per cent decline from  December 2016.
  • The Vancouver CMA recorded permit activity valued at $976.3 million, an increase of 39 per cent over November and up 71 per cent over the last year.  For the year as a whole, Vancouver permits rose 14.2 per cent to $9.4 billion with all components except single detached dwellings posting increasing permit values.

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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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