August 28, 2020

The Canadian economy contracted by 11.5 per cent from the first to the second quarter, or 38.9 per cent on a quarterly annualized basis, the steepest quarterly decline on record going back to 1961. Consumer spending fell 13.1 per cent as the start of the COVID-19 pandemic caused record job losses and prompted stores to close.  Business investment was down 16.2 per cent and exports fell 18.4 per cent as our trading partners dealt with the fallout of COVID-19 in their own economies.

The good news in an otherwise historically bad GDP report was that positive economic growth resumed with vigor following the record decline in April. The Canadian economy grew 4.8 per cent in May and 6.5 per cent in June, the highest monthly growth on record.  We are currently tracking third quarter real GDP growth at close to 8 per cent, or more than 30 per cent on a quarterly annualized basis. While that is a sharp and welcome rebound in economic activity, there is still quite a way to go before the Canadian economy is fully recovered. In fact, we do not expect real GDP to return to its pre-COVID-19 level until 2022.  That means that the current near-zero Bank of Canada policy rate and the resulting historically low 5-year fixed mortgage rates will be around for quite some time to come.


Vancouver, BC – August 25, 2020. The British Columbia Real Estate Association (BCREA) released its 2020 Third Quarter Housing Forecast Update today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to rise 6.5 per cent to 82,380 units this year, after recording 77,351 residential sales in 2019. MLS® residential sales are forecast to increase 17.6 per cent to 96,860 units in 2021.  

“The outlook for the BC housing market is much brighter following a surprisingly strong recovery,” said Brendon Ogmundson, BCREA Chief Economist. “We expect home sales will sustain this momentum into 2021, aided by record-low mortgage rates and a recovering economy.”  

With home sales more than fully recovered and now above pre-COVID-19 levels, combined with a decline in the supply of re-sale listings driven by the pandemic, many markets are now seeing sharply rising average prices despite a weak provincial economy. We are forecasting the provincial MLS® average price to finish the year up 7.7 per cent and to increase a further 3.7 per cent in 2021.


Another good news report. Retail sales were up for a second consecutive month in June by 24% on a seasonally-adjusted basis, this follows a 21% rise in May. Sales were up in all subsectors, with growth primarily led by motor vehicle and parts dealers, as well as clothing. Retail sales in June were 1.3% higher than pre-pandemic levels in February. The June report puts second quarter retail sales at 13% below the first quarter report.    

Sales were up in all provinces in June, the most notable increases were in Ontario (34%), Quebec (24%), Nova Scotia (23%) and Alberta (19%). In BC, seasonally-adjusted retail sales were up by 13% ($7.4 billion) and by 18% ($3.4 billion) in Vancouver. Retail sales were up in the majority of subsectors in BC, with the largest gains reported in motor vehicle and parts dealers, and at clothing stores. This comes on the heels of pent-up demand following closures at dealerships and at brick and mortar stores during the spring months. 

Growth in e-commerce sales slowed in June, up by 71% year-over-year, following a 113% rise in the previous month. In June, e-commerce sales totaled $3.2 billion, accounting for 5% of total retails sales, down from 8% in May. This excludes Canadians purchasing from foreign e-commerce retailers.  
Advance estimates provided by Statistics Canada for July suggest that retail sales increased by 0.7%. There has been some concern over what would happen once government support programs ended, but the federal government's announcement yesterday on extending CERB for another four weeks, and the transition to a restructured EI program has helped to lessen this concern, for now.

Canadian inflation, as measured by the Consumer Price Index (CPI) rose by 0.1% in July year-over-year, down from a 0.7% rise in the previous month. Excluding gasoline, the CPI rose by 0.7%. Inflation grew at a slower pace than in June due to a broad-based slowdown in price growth. Prices rose in five of eight components year-over-year, while prices fell for air transportation (-8.6%) and accommodations (-27%). This is the first year-over-year price decline in the transportation component since December 2015. Meanwhile, the Bank of Canada's three measures of trend inflation fell by 0.1 percentage points, averaging 1.6% in July. 

Regionally, the CPI was positive in five provinces. In BC, CPI rose by 0.2% year-over-year, following a 0.5% rise in June. Prices for food, alcohol/tobacco/cannabis, and health and personal care continued to rise in July, while downward pressure on gas prices eased up as people were using their vechicles more.

The impact of COVID-19 on some of the hard hit components are beginning to dissipate, excluding the transportation and accommodation sectors, which usually see a rise in the summer months. The path of inflation going forward will be a constant tension between various incentives such as reduced fees, discounts and promotions, against lower revenues due to physical distancing measures.


Vancouver, BC – August 13, 2020. The British Columbia Real Estate Association (BCREA) reports that a total of 10,090 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in July 2020, an increase of 26.6 per cent from July 2019. The average MLS® residential price in BC was $770,810, a 12.9 per cent increase from $682,702 recorded the previous year. Total sales dollar volume in July was $7.8 billion, a 43 per cent increase over 2019.

“The strong recovery in sales activity continued in July,” said BCREA Chief Economist Brendon Ogmundson. “Increased demand for more living space combined with an undersupplied market is producing significant upward pressure on home prices, particularly in the market for single-family homes.”

Active listings remain down significantly year-over-year, creating upward pressure on prices, though increased demand for single-family homes has somewhat skewed average prices in some markets.

Year-to-date, BC residential sales dollar volume was up 8.4 per cent to $32.5 billion, compared with the same period in 2019. Residential unit sales were down 1.4 per cent to 43,718 units, while the average MLS® residential price was up 10 per cent to $754,842. 

Canadian employment grew by 419,000 jobs in July (2.4%, m/m). Combined with gains in May of 290,000 and gains in June of 953,000, this brought national employment to within 1.3 million of the pre-COVID February level. The national unemployment rate fell by 1.4 percentage points to 10.9 per cent from the previous month. Most of the employment gains in July were in part-time work. Compared to the same month last year, Canadian employment was down by 6.3% (-1.2 million). 

Regionally, all provinces reported an increase in employment except New Brunswick, where employment was little changed. The strongest gains were in Ontario which were almost all in part-time work, reflecting the later easing of COVID-related measures compared with other provinces. In July, employment continued to rise faster among women than men, but on a cumulative basis, men are closer to being back at pre-COVID levels than women. 

To address gaps in the understanding of the impact of the pandemic on certain visible communities, Statistics Canada has enhanced their employment survey. Of note, Statistics Canada found that compared to the same time last year, South Asians and Chinese Canadians experienced the highest increases in unemployment related to the pandemic, in part attributable to their greater concentration in some of the industries hardest hit by COVID-19 restrictions. Meanwhile, unemployment rates were lower for Black Canadians and Filipino Canadians, where many work in health care and social assistance industries. 

Employment in BC grew by 70,000 jobs (3%, m/m) in July, reaching almost 94% of the February employment level. This followed job gains of 118,100 in June and 43,000 in May. July's employment gain brought down the unemployment rate by 1.9 percentage points to 11 per cent. In Vancouver, employment increased by 48,000 jobs to reach almost 90% of the February level. Compared to one year ago, employment in BC was down by 7.5% (-192,000) jobs. 

This was another good news report. However, gains in July were lower than in June, reflecting reopening measures that began in June where employment growth was coming back from very low levels. We can expect that recovery will be slower from here on, as many of the hardest hit industries have reopened and will continue to maintain physical distancing measures. Also important are consumers' demand for goods and services, which is expected to be hampered by the still 165,000 unemployed individuals in BC since February, and the winding down of government support programs.

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. 


Copyright British Columbia Real Estate Association. Reprinted with permission.

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. 

Copyright British Columbia Real Estate Association. Reprinted with permission.

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. 

Copyright British Columbia Real Estate Association. Reprinted with permission.

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.

Copyright British Columbia Real Estate Association. Reprinted with permission.

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