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Output in the the Canadian economy declined in November with real GDP falling 0.1 per cent on a monthly basis. That decline partially offset robust 0.3 per cent growth in the month of October. A decline in the wholesale trade, finance and insurance, manufacturing and construction industries dragged overall GDP lower despite 13 of 20 industrial sectors posting gains. The GDP of offices of real estate agents and brokers declined for a third consecutive month as the volume of home sales weakened to end 2018. Overall, we are tracking fourth quarter Canadian economic growth at between 1 and 1.5 per cent.

While there are not many positives from November's GDP report, softening economic growth will keep the Bank of Canada sidelined which should translate to lower mortgage rates this year. That could provide much needed relief for prospective home-buyers currently shut out of markets due to the mortgage stress test.



Copyright British Columbia Real Estate Association. Reprinted with permission.


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Canadian retail sales declined 0.9 per cent on a monthly basis in November as lower sales at gas stations and a decline in motor vehicle sales dragged overall retail sales lower.  Excluding those subsectors, retail sales were up 0.2 per cent.   In BC, retail sales were up 0.3 per cent on a monthly basis, however, consumer spending continues to moderate compared to 2017 with retail sales up only 0.1 per cent year-over-year. 

Slowing retail sales, ongoing softness in the Canadian housing market and risks to global growth from an escalated US-China trade war should result in the Bank of Canada remaining sidelined in 2019. That should translate to lower mortgage rates as bond markets adjust expectations for Canadian monetary policy.



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Canadian inflation, as measured by the Consumer Price Index (CPI), registered 2 per cent in the twelve months to December, a slight uptick from 1.7 per cent in November. Lower energy prices were offset by an increase in air transportation, and telephone services.  Excluding the impact of falling gasoline prices, consumer prices were up 2.5 per cent. The Bank of Canada's three measures of trend inflation were all unchanged, averaging 1.9 per cent.   In BC, provincial consumer price inflation was 3 per cent in the 12 months to December. 

With core inflation trending sideways and the economy expected to slow this year, the odds of further Bank of Canada tightening this year are diminishing, which is being reflected by lower 5-year yields in the Canadian bond market. That should result in a dip in Canadian mortgage rates relatively soon, which would provide a much needed boost to a housing market still struggling with the impact of the mortgage stress test.



Copyright British Columbia Real Estate Association. Reprinted with permission.


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BC Home Sales Decline 25% in 2018

Vancouver, BC – January 15, 2019.


The British Columbia Real Estate Association (BCREA) reports that a total of 78,345 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in 2018, a decline of 24.5 per cent from the 103,758 units sold in 2017. The annual average MLS® residential price in BC was $712,508, an increase of 0.4 per cent from $709,601 recorded the previous year. Total sales dollar volume was $55.8 billion, a 24.2 per cent decline from 2017.


“BC home sales fell below the 10-year average of 84,800 units in 2018,” said Cameron Muir, BCREA Chief Economist. “The sharp decline in affordability caused by the B20 mortgage stress test is largely to blame for decline in consumer demand last year.”


A total of 3,497 MLS® residential unit sales were recorded across the province in December, down 39.1 per cent from December 2017. The average MLS® residential price in BC was $695,647, a decline of 5.2 per cent from December 2017. Total sales dollar volume was $2.4 billion, a 42.3 per cent decline during the same period. Total active residential listings were up 33.3 per cent to 27,615 units in December, the highest December inventory since 2014 when 33,995 active residential listings were recorded.



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The total value of Canadian building permits rose 2.6 per cent on a monthly basis in November to $8.3 billion. The increase was driven by higher construction intentions for commercial buildings.
 
In BC, the total value of permits increased 14.3 per cent to $1.7 billion. That increase was primarily the result of record high commercial permits due to a $240 million office project in the Vancouver CMA.  Total non-residential permits were up close to 80 per cent on a monthly basis and 68 per cent year-over-year. Residential permits fell 7.4 per cent compared to October but exceeded the $1 billion mark for a second consecutive month and were 33 per cent higher year-over-year.

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

  • Permits in the Abbotsford-Mission CMA increased 4 per cent on a monthly basis to $34 million. Year-over-year, permit values were down 21 per cent.
  • In the Victoria CMA, total permit values rose 36 per cent on a monthly basis to $131.2 million, a 73 per cent increase year-over-year.
  • In the Kelowna CMA, permits values decreased by 10 per cent from a strong October to a still robust $111 million, a 45 per cent increase compared to November 2017.
  • In the Vancouver CMA, the value of permits rose 15 per cent to $1.1 billion. On a year-over-year basis, the value of permits was 73 per cent higher.


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The Bank of Canada left its target for the overnight rate unchanged at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that the outlook for the Canadian economy is moderating due to  falling oil prices and mandatory production cuts in Alberta and a slowdown in global demand due to US-China trade tensions. As a result, the Bank has trimmed its forecast for Canadian economic growth in 2019 from 2.1 per cent to 1.7 per cent.  Total inflation is being dragged lower by falling gasoline prices, though core inflation remains near the Bank's 2 per cent target.

While the direction of future monetary policy remains tilted toward higher interest rates, our baseline forecast is for a single rate hike as the most likely outcome for 2019. With a housing market battered by the stress test and signs of slowing growth elsewhere in the economy, it will be difficult for the Bank to accelerate monetary tightening beyond a gradual pace.  A less hawkish Bank of Canada, along with a steep fall in Canadian bond yields, should translate to mortgage rates flattening out or even moving slightly lower in 2019. 



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Canadian employment was up slightly in December, rising by 9,300 jobs. The national unemployment held steady at 5.6 per cent, the lowest it has been since 1976. Total employment for all of 2018 increased by 163,000 jobs, a 0.9 per cent rise over 2017.
 
In BC, employment grew by 4,400 jobs in December as full-time work jumped by almost 23,000 jobs but was offset by a drop in part-time employment.  On a year-over-year basis, employment was up 1.8 per cent and the provincial unemployment rate was unchanged at 4.4 per cent, the lowest rate among all provinces. 



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Metro Vancouver home sales in 2018 were the lowest annual total in the region since 2000.


The Real Estate Board of Greater Vancouver (REBGV) reports that sales of detached, attached and apartment properties reached 24,619 on the Multiple Listing Service® (MLS®) in 2018, a 31.6 per cent decrease from the 35,993 sales recorded in 2017, and a 38.4 per cent decrease compared to the 39,943 residential sales in 2016. Last year’s sales total was 25 per cent below the region’s 10-year sales average.


“This past year has been a transition period for the Metro Vancouver housing market away from the sellers’ market conditions we experienced in previous years,” Phil Moore, REBGV president said. “High home prices, rising interest rates and new mortgage requirements and taxes all contributed to the market conditions we saw in 2018.”


Home listings in Metro Vancouver reached 53,614 in 2018. This is a 1.9 per cent decrease compared to 54,655 homes listed in 2017 and a 6.9 per cent decrease compared to the 57,596 homes listed in 2016. “The supply of homes for sale will be an important indicator to follow in 2019. We’ve had record building activity in recent years and many projects will complete soon. This will provide additional housing options for home buyers across the region,” Moore said.


The MLS® HPI composite benchmark price for all residential homes in Metro Vancouver ends the year at $1,032,400. This is a 2.7 per cent decrease compared to December 2017. “As the total supply of homes for sale began to accumulate in the spring, we began to see downward pressure on prices across all home types throughout the latter half of the year,” Moore said.


The benchmark price of detached homes in the region declined 7.8 per cent over the last 12 months and 7.3 per cent since June 2018. Apartment homes increased 0.6 per cent over the last 12 months and have declined 6.4 per cent since June 2018. The benchmark price for townhomes in Metro Vancouver have increased 1.3 per cent since December 2017 and have decreased 5.3 per cent over the last six months.



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