The Canadian economy expanded by 0.4 per cent. That is below Statistics Canada's original preliminary estimate of 0.7 per cent and follows a slight contraction in July.  The continued easing of restrictions was a main driver of growth in August, with increases in the accommodation and food service, retail trade and transportation sectors making strong contributions.  

However,  Statistics Canada's preliminary estimate for September  GDP is showing flat growth, which points to overall third quarter growth registering about 2 per cent on an annualized basis, in line with third quarter growth in the United States and well under the Bank of Canada's more rosy forecast of 5.5 per cent.  The middle quarters of 2021 have been fairly disappointing in terms of economic growth, with the economy contracting in the second quarter and underwhelming in the third. However, we anticipate that the economy will bounce back in the fourth quarter with Canadian real GDP expanding 4 per cent and carrying momentum into 2022.

Copyright British Columbia Real Estate Association. Reprinted with permission.

The British Columbia Real Estate Association (BCREA) released its 2021 Fourth Quarter Housing Forecast today.

Multiple Listing Service^® (MLS^®) residential sales in the province are forecast to rise 29 per cent to 121,450 units this year, after recording 94,013 sales in 2020. In 2022, MLS^® residential sales are forecast to pull back 15 per cent to 102,750 units.

“After a frenzied start to the year, activity in BC housing markets has settled back to a level that is broadly in-line with long-run trends. The strength of the first half of this year has sales on track to easily break the previous record for annual sales,” said BCREA Chief Economist, Brendon Ogmundson. “While we do not anticipate a repeat of the record-setting market of 2021, we do expect housing market activity to remain vigorous in 2022,” added Ogmundson. 

Given strong demand and very low active listings, particularly in smaller markets around BC, the average home price in BC is projected to rise 17 per cent in 2021. Prices are forecast to rise about 3 per cent in 2022 as the composition of home sales changes due to normalizing demand for single-family homes and a recovery in active listings helps the market balance out.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 4.4% on a year-over-year basis in September, rising at the fastest rate since 2003. On a month-over-month basis, the CPI was up 0.2% in September. The Bank of Canada's preferred measures of core inflation (which use techniques to strip out volatile elements) rose an average of 2.7% year-over-year in September. Major drivers of the year-over-year price increase included transportation prices (+9.1%), shelter (+4.8%) and food prices (+3.9%) partly on continuing supply-chain difficulties. The homeowner replacement cost index, which measures the cost of replacing home structures, rose 14.4% year-over-year in September, which was the fastest rate since the 1980s. In BC, consumer prices were up 0.15% month-over-month, and up 3.5% on a year-over-year basis. 

Inflation continues to run ahead of the Bank of Canada's 2 per cent target. The driving force behind rising prices is still isolated to a few categories of spending. In particular, the rising price of gasoline and the run-up in Canadian home prices since last year. Those categories alone accounted for about half of the observed inflation in September. Home prices in Canada are beginning to flatten out, which should mean a fading impact on inflation over the next year. Likewise, the impact of gas prices should continue to decline as base-year effects have less influence. Other issues putting upward pressure on consumer prices are being driven by bottlenecks and supply shortages. Those shortages are unlikely to resolve quickly and so we anticipate that the current elevated rate of inflation will linger for some time to come. Inflation that is lingering above target for an extended period may put some pressure on the Bank of Canada, though we still expect the first rate increase to come toward the end of 2022.

Copyright British Columbia Real Estate Association. Reprinted with permission.

Canadian housing starts declined for the fourth consecutive month in September, but remain strong compared to typical pre-pandemic activity. Housing starts decreased by 11.6k to 251.2k units (-4.4% m/m) in September at a seasonally-adjusted annual rate (SAAR). Comparing year-over-year, starts were up significantly from September of 2020 (20.1% y/y). Single-detached housing starts dipped 5% in September to 76.7k, while multi-family and others declined 4% to 174.4k (SAAR). 

In British Columbia, starts declined for a third consecutive month, dropping sharply by 23.7% m/m to 35.9k units SAAR in all areas of the province. Single-detached starts rose 9.6% m/m to 7.9k units while multi-family starts offset this growth with a 32.5% decline to 23.7k units. Despite this, starts in the province remained 11% above the levels from September 2020. BC's six-month moving average for starts declined sharply following three months of gains. 

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The British Columbia Real Estate Association (BCREA) reports that a total of 9,164 residential unit sales were recorded by the Multiple Listing Service^® (MLS^®) in September 2021, a decrease of 19.9 per cent from September 2020. The average MLS^® residential price in BC was $913,471, a 14 per cent increase from $801,241 recorded in September 2020. Total sales dollar volume was $8.4 billion, an 8.6 per cent decline from last year.

“Home sales have settled at levels that are slightly above long-term average,” said BCREA Chief Economist Brendon Ogmundson. “The main story in all markets continues to be a severe lack of listings supply, particularly in Fraser Valley, Vancouver Island and Interior markets.”

Total active residential listings were down 36.8 per cent year-over-year in September for the province as a whole and were more than more than 50 per cent below last September’s levels in the Fraser Valley and Victoria.

Year-to-date, BC residential sales dollar volume was up 81.8 per cent to $90.4 billion, compared to the same period in 2020. Residential unit sales were up 52.4 per cent to 99,182 units, while the average MLS^® residential price was up 19.3 per cent to $911,195. 

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Canadian employment grew for the fourth consecutive month in September, rising by 157,000 to 19.13 million (0.8%, m/m). During the survey period, several provinces had reintroduced or planned to reintroduce vaccine passports and indoor masking. Restrictions on international travelers entering the country were eased on September 7th, likely boosting tourism employment. 

The current employment level matches the figure from February 2020, meaning that the job market has technically erased the losses from the pandemic. Due to population growth, the employment rate remains 0.9 percentage points below February 2020 at 60.9%. The Canadian unemployment rate declined for a fourth consecutive month to 6.9%, the lowest level since the onset of the pandemic. 

In BC, employment grew by 12,300 to 2.682 million (0.46%, m/m), once again hitting the highest level since the pandemic began. For the fourth consecutive month, British Columbia was the sole province with employment notably above its pre-pandemic level. The unemployment rate declined by 0.3 in September to 5.9%, the lowest level since the pandemic began. BC has the third lowest unemployment rate in Canada, following Manitoba and Quebec. 

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is currently $1,186,100. This represents a 13.8% increase from September 2020 and 0.8% increase compared to August 2021.

Specifically:

- The benchmark price for detached homes increased 1.2% from August.

- The benchmark price for townhouses increased 1.2% from August.

- The benchmark price for apartment/condos increased 0.5% from August.

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

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The Canadian economy contracted 0.1 per cent in July following growth of 0.6 per cent in June.  The level of GDP remains about 2 per cent below its pre-pandemic level of February 2020.  The majority of Canadian industries actually grew in July, led by re-opening of many provincial economies which led to a strong increase in the accommodation and food services sectors. That strength was more than offset, however, by declines in agriculture, manufacturing and wholesale trade. On the bright side, Statistics Canada's preliminary estimate for August real GDP is showing a strong bounce back, with output across the economy rising 0.7 per cent on a monthly basis. 

Given today's release, we are tracking 3rd quarter real GDP growth in Canada at about 3.5 per cent. The pace of the recovery remains uncertain due to the pandemic and especially the Delta variant driven rise in cases around the country. We saw this uncertainty at play in the second quarter when the economy unexpectedly contracted and again, though to a lesser extent, in July. We anticipate that some of the expected acceleration of economic growth may now be pushed into the fourth quarter of 2021 and the first half of 2022. As a result, we have trimmed our forecast for Canadian real GDP growth from about 6 per cent in 2021 down to 5 per cent.

Copyright British Columbia Real Estate Association. Reprinted with permission.