Steve Flynn  RE/MAX Crest Realty- Burnaby 

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Canadian economic growth started the year a lot slower than the already diminished expectations of most economists. Real GDP growth for the first quarter registered just 0.4 per cent, matching the meager growth of the previous quarter.  A strong recovery in household consumption spending was offset by a decline in housing investment due to the B20 stress test and the lagged impact of rising interest rates in 2018.  A drop in exports, the first decline since the third quarter of 2017, reflects a difficult global trade environment.
 
We are forecasting that the Canadian economy will expand between 1 and 1.5 per cent this year, a deceleration from 1.8 per cent growth in 2018.  That slowdown, along with muted inflation will likely keep the Bank of Canada sidelined, particularly given the uncertain state of the global economy and the ongoing impact of the B20 stress test on the housing sector. 



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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 slowdown over the past two quarters was temporary and growth should pick up beginning in the second quarter of 2019. On inflation, the Bank expects that both total CPI and core inflation will remain near its 2 per cent target in coming months. Overall, the Bank judges its current level of monetary accommodation as appropriate.

Slow growth in the first half of 2019, the result of reductions in Alberta oil production, global trade uncertainty and the continued impacts of the B20 stress test, has likely pushed out any possibility of further tightening by the Bank of Canada into next year at the earliest. In fact, if financial markets are to be believed, the Bank may have missed its chance to return its policy rate to its preferred or "neutral" level and the next move may even be a rate cut. Canadian mortgage rates have responded strongly to revised market expectations for Canadian monetary policy, with 5-year mortgage rates falling back to 2017 levels. Those lower rates are already providing a boost to sales in May and should continue to do so through the summer. 



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Canadian retail sales increased for a second consecutive month in March, rising 1.1 per cent to $51.3 billion. Retail sales were higher in 7 out of 11 subsectors with higher sales at gas stations and building and gardening material stores as the main contributors growth.   

In BC,  retail sales were up 0.7 per cent on a monthly basis and just 1.2 per cent year-over-year. Despite a strong labour market, BC consumers have been hesitant to spend over the past year. Interest rate sensitive and housing related sectors continue to be a drag on the retail sector. Sales of motor vehicles and parts were down 6 per cent year-over-year and sales of furniture and home furnishings fell 3.7 per cent. 



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Affordability Continues to Weigh on B.C. Housing Demand

Vancouver, BC - May 14, 2019.


The British Columbia Real Estate Association (BCREA) reports that a total of 6,652 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in April, a decline of 18.9 per cent from the same month last year. The average MLS® residential price in the province was $685,304, a decline of 6.2 per cent from April 2018. Total sales dollar volume was $4.6 billion, a 23.9 per cent decline from the same month last year.


BC home sales were essentially unchanged from March on a seasonally adjusted basis, said BCREA Chief Economist Cameron Muir. Prospective home buyers continue to grapple with the decline in their purchasing power caused by federal government changes to mortgage policy.


Total MLS® residential active listings increased 33.6 per cent to 38,672 units compared to the same month last year. The ratio of sales to active residential listings declined from 28.4 per cent to 17.2 per cent over the same period. Year-to-date, BC residential sales dollar volume was down 29.8 per cent to $13.9 billion, compared with the same period in 2018. Residential unit sales decreased 24.5 per cent to 20,479 units, while the average MLS® residential price was down 7 per cent to $680,671.



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Canadian employment jumped by 107,000 jobs in April after posting a slight loss in March. In the past 12 months, the Canadian economy added 426,000 jobs including 248,000 full-time jobs. The national unemployment rate fell 0.1 points to 5.7 per cent.

In BC, employment grew by 5,900 jobs in April as a nearly 30,000 job increase in full-time work was partially offset by a drop in part-time employment.  On a year-over-year basis, employment was up 3.3 per cent. The provincial unemployment rate fell 0.1 points to 4.6 per cent.




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Canadian housing starts increased 23 per cent on a monthly basis in April to 235,460 units at a seasonally adjusted annual rate (SAAR).  The trend in Canadian housing starts was up,  averaging 206,000 units SAAR over the past six months.

In BC, total housing starts were down 51 per cent on a monthly basis to 49,200 units SAAR.  Total starts were up 26 per cent compared to April of last year.  On a monthly basis, starts of multiple units were up 63 per cent to 41,000 units SAAR while single detached starts rose 11 per cent to 8,150 units SAAR.
 
Looking at census metropolitan areas (CMA) in BC: 

  • Total starts in the Vancouver CMA were up 63 per cent on a monthly basis in April at 34,200 units SAAR as multiple unit starts jumped 75 per cent from March. Compared to April 2018, total starts in Vancouver were up 46 per cent. 
  • In the Victoria CMA, housing starts more than doubled on a monthly basis to 5,305 units SAAR, mostly due to a spike in multiple unit starts. New home construction was up 66 per cent year-over-year.
  • Total starts in the Kelowna CMA increased 30 per cent on a monthly basis, though were still relatively low at just 760 units SAAR. Year-over-year, total starts were down 82 per cent as inventory of unsold units accumulate, constraining further new construction projects. This is precisely the risk we outlined when the provincial speculation tax was introduced.
  • Housing starts in the Abbotsford-Mission CMA were down 46 per cent in April at just under 1000 units SAAR. However, on a year-over-year basis, new home construction was up more than double due to strong multiple unit starts.


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Decreased demand continues to allow the supply of homes for sale to accumulate across the Metro Vancouver* housing market:


The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 1,829 in April 2019, a 29.1 per cent decrease from the 2,579 sales recorded in April 2018, and a 5.9 per cent increase from the 1,727 homes sold in March 2019.


Last month's sales were 43.1 per cent below the 10-year April sales average. Government policy continues to hinder home sale activity. The federal government's mortgage stress test has reduced buyers' purchasing power by about 20 per cent, which is causing people at the entry-level side of the market to struggle to secure financing, Ashley Smith, REBGV president said. Suppressing housing activity through government policy not only reduces home sales, it harms the job market, economic growth and creates pent-up demand.


There were 5,742 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in April 2019. This represents a 1.3 per cent decrease compared to the 5,820 homes listed in April 2018 and a 16 per cent increase compared to March 2019 when 4,949 homes were listed.


The total number of homes currently listed for sale on the MLS® in Metro Vancouver is 14,357, a 46.2 per cent increase compared to April 2018 (9,822) and a 12.4 per cent increase compared to March 2019 (12,774). There are more homes for sale in our market today than we've seen since October 2014. This trend is more about reduced demand than increased supply, Smith said. The number of new listings coming on the market each month are consistent with our long-term averages. It's the reduced sales activity that's allowing listings to accumulate.


The overall sales-to-active listings ratio for April 2019 is 12.7 per cent. By property type, the ratio is 9.4 per cent for detached homes, 15.4 per cent for townhomes, and 15.3 per cent for apartments. Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.


The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,008,400. This represents an 8.5 per cent decrease over April 2018, and a 0.3 per cent decrease compared to March 2019.


Detached home sales totalled 586 in April 2019, a 27.4 per cent decrease from the 807 detached sales in April 2018. The benchmark price for a detached home is $1,425,200. This represents an 11.1 per cent decrease from April 2018, a 0.8 per cent decrease compared to March 2019.


Apartment home sales totalled 885 in April 2019, a 32.3 per cent decrease compared to the 1,308 sales in April 2018. The benchmark price of an apartment is $656,900 in the region. This represents a 6.9 per cent decrease from April 2018 and is unchanged from March 2019.


Attached home sales totalled 358 in April 2019, a 22.8 per cent decrease compared to the 464 sales in April 2018. The benchmark price of an attached home is $783,300. This represents a 7.5 per cent decrease from April 2018 and is unchanged from March 2019.



Areas covered by the Real Estate Board of Greater Vancouver include: Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, Pitt Meadows, Maple Ridge, and South Delta.



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