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.

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

Vancouver, BC – October 12, 2017. The . The British Columbia Real Estate Association (BCREA) reports that a total of 8,340 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in September, an increase of 9.9 per cent from the same period last year. Total sales dollar volume was $5.8 billion, up 30.2 per cent from September 2016. The average MLS® residential price in the province was $693,774, up 18.5 per cent from September 2016.

“BC home sales rose nearly 5 per cent from August on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “Total active listings on the market continue to trend at ten-year lows in most BC regions, limiting unit sales and pushing home prices higher. While the economic fundamentals support elevated housing demand, rising home prices are eroding affordability, particularly for first-time buyers.”

Year-to-date, BC residential sales dollar volume was down 12.8 per cent to $57.6 billion, when compared with the same period in 2016. Residential unit sales declined 13 per cent to 81,608 units, while the average MLS® residential price was down 0.2 per cent to $705,501.

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.

BCREA ECONOMICS NOW
Canadian Inflation and Retail Sales – September 22, 2017
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.

Commercial real estate activity in the Lower Mainland declined from the record highs of one year ago and returned to more historically typical levels in the second quarter (Q2) of 2017.

There were 595 commercial real estate sales in the Lower Mainland in Q2 2017, a 32 per cent decrease from the record 875 sales in Q2 2016, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

The total dollar value of commercial real estate sales in the Lower Mainland was $2.886 billion in Q2 2017, a 37.5 per cent decrease from $4.615 billion in Q2 2016.

“Land and industrial sales experienced the largest year-over-year declines last quarter, with sales in both categories down more than one-third compared to 2016,” said Jill Oudil, REBGV president. “Looking back over several years, however, we see that last quarter’s sale and dollar value activity follow more historically normal trend lines.”

Q2 2017 activity by category

Land: There were 227 commercial land sales in Q2 2017, which is a 39.3 per cent decrease from the 374 land sales in Q2 2016. The dollar value of land sales was $1.510 billion in Q2 2017, a 28.6 per cent decrease from $2.116 billion in Q2 2016.

Office and Retail: There were 218 office and retail sales in the Lower Mainland in Q2 2017, which is down 23.2 per cent from the 284 sales in Q2 2016. The dollar value of office and retail sales was $0.775 billion in Q2 2017, a 57.7 per cent decrease from $1.835 billion in Q2 2016.

Industrial: There were 114 industrial land sales in the Lower Mainland in Q2 2017, which is down 34.9 per cent over the 175 sales in Q2 2016. The dollar value of industrial sales was $0.243 billion in Q2 2017, a 13.3 per cent decrease from $0.280 billion in Q2 2016.

Multi-Family: There were 36 multi-family land sales in the Lower Mainland in Q2 2017, which is down 14.3 per cent over the 42 sales in Q2 2016. The dollar value of multi-family sales was $0.358 billion in Q2 2017, a 6.8 per cent decrease from $0.384 billion in Q2 2016.

Click here to download the full Q2 2017 commercial stats package.

BCREA ECONOMICS NOW

Canadian Housing Starts – August 9, 2017

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.

BCREA ECONOMICS NOW

Canadian Monthly Real GDP Growth (May) – July 28, 2017

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. 

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. 

BCREA ECONOMICS NOW

Canadian Housing Starts – July 11, 2017

Canadian housing starts increased 9 per cent in June to 212,695 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts continues to trend higher at about 215,459 units SAAR, the highest level in almost five years.

In BC, total housing starts declined 19 per cent on a monthly basis to a still robust 37,279 units SAAR and were down 22 per cent on a year-over-year basis.  Single detached starts fell 2 per cent month-over-month but were 14 per cent higher year-over-year. Multiple unit starts fell 24 per cent month-over-month and were down 31 per cent year-over-year.

Looking at census metropolitan areas (CMA) in BC:

• Total starts in the Vancouver CMA were actually down 34 per cent year-over-year with a 2 per cent decline posted in single units starts and a 40 per cent drop in multiple units starts compared to last year. The record level of units currently under construction is likely putting downward pressure on new starts as the industry is close to capacity.
• In the Victoria CMA market, housing starts declined 42 per cent year-over-year with multiple unit starts at only half the level of June 2016. Single unit starts increased 5 per cent.

• New home construction in the Kelowna CMA was up 80 per cent year-over-year but fell by half on a monthly basis compared to a big increase in new home construction in May.
• Housing starts in the Abbotsford-Mission CMA more than doubled on a both a monthly and year-over-year basis due to more than 230 new multiple units starts in June.