Canadian seasonally-adjusted retail sales increased 2.2 per cent in May, hitting $62.2 billion. Sales grew in 8 of 11 subsectors, but were led by higher sales at gasoline stations and motor vehicle and parts dealers (+9.2 and +3.3 per cent respectively). Core retail sales, which strips out gasoline and motor vehicle and parts dealers, increased 0.6 per cent in May. In volume terms, sales were up 0.4 per cent. 

In BC, seasonally-adjusted sales rose 1.3 per cent in May. Compared to the same month last year, retail sales were up 3 per cent in the province. In the Greater Vancouver region, sales rose 0.8 per cent month-over-month and were up 4.5 per cent year-over-year. 

In May, Canadian e-commerce sales rose 6.5 per cent to 3.5 billion, corresponding to 4.9 per cent of retail sales. This percentage remains elevated relative to pre-pandemic levels, but is lower than during core months of the pandemic in 2020 and 2021. 

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 8.1 per cent on a year-over-year basis in June, up from 7.7 per cent last month. This was the fastest growth rate since January 1983. Excluding gasoline, the CPI rose 6.5 per cent year over year in June. Month-over-month, on a seasonally-adjusted basis, prices were up 0.6 per cent, down from 1.1 per cent last month. In BC, consumer prices rose 7.9 per cent year-over-year, down from 8.1 per cent last month. Average hourly wages grew 5.2 per cent year-over-year in June, indicating a decline in purchasing power. 

While June's CPI brought some encouraging early signs that inflation is peaking, we will need to see a sustained decline in the rate of inflation over the next several months to see any relief on mortgage rates. For now, markets are still expecting an aggressive Bank of Canada, singularly focused on bringing inflation back to its 2 per cent target.

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Canadian housing starts fell by 8.3k (3 per cent) to 273.8k units in June at a seasonally-adjusted annual rate (SAAR). Comparing year-over-year, starts were down from June of 2021 (1.6 per cent). Single-detached housing starts declined 3.9 per cent to 72.1k, while multi-family and others fell 2.6 per cent to 201.8k (SAAR). 

In British Columbia, starts rose 34.6 per cent in June, rising to 56.4k units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts declined 10.3 per cent m/m to 6.9k units while multi-family starts rose 48.4 per cent to 46k units. Starts in the province were 15.3 per cent below the levels from June 2021. Starts were up by 7.9k units in Vancouver, 6.4k in Kelowna, and 1.0k in Abbotsford from last month, while declining by 1.3k in Victoria. The 6-month moving average trend rose 0.3 per cent to 43.1k in BC in June. 

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The British Columbia Real Estate Association (BCREA) reports that a total of 7,136 residential unit sales were recorded by the Multiple Listing Service^® (MLS^®) in June 2022, a decrease of 35.7 per cent from June 2021. The average MLS^® residential price in BC was $951,105, a 4.6 per cent increase from $909,657 recorded in June 2021. Total sales dollar volume was $6.8 billion, a 32.8 per cent decline from the same time last year. 

“While a still growing economy and robust population growth point to strong demand, it is increasingly difficult to satisfy that demand at current interest rates,” said BCREA Chief Economist. “As a result, sales activity across the province, but especially in more expensive markets, continues to slow.”

For the second straight month, year-over-year provincial active listings rose, with listing in June 16.4 per cent higher than this time last year. While active listings remain below what is typical for a balanced market, some markets and housing types have tipped into balanced or even buyers’ market territory as sharply higher mortgage rates push potential buyers to the sidelines.

Year-to-date, BC residential sales dollar volume was down 17 per cent to $53.5 billion compared with the same period in 2021. Residential unit sales were down 27.6 per cent to 51,202 units, while the average MLS^® residential price was up 14 per cent to $1.05 million.

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Canadian employment declined by 43,000 (-0.2 per cent) to 19.597 million in June, falling for the first time since January. As a result of fewer people looking for work, the Canadian unemployment rate also declined by 0.2 to 4.9 per cent, the lowest rate on record for a fourth consecutive month. Average hourly wages were up 5.2 per cent on a year-over-year basis, increasing from 3.9 per cent in May and 3.3 per cent in April. Wage gains remain below the inflation rate, however, which hit 7.7 per cent year-over-year in the most-recent data. Total hours worked rose 1.3 per cent in June, the first increase since March 2022.

Employment in BC grew by 6.1k to 2.747 million in June, while Metro Vancouver's employment fell by 6.5k month over month. The unemployment rate rose slightly in June to 4.6 per cent. Among the provinces, only Saskatchewan, Manitoba, and Quebec currently have lower unemployment rates. 

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is currently $1,235,900. This represents a 2.0% decrease from May 2022 and a 12.4% increase from June 2021.

Specifically:

- The benchmark price for detached homes decreased 1.7% from May 2022 and increased 13.4% from June 2021.

- The benchmark price for townhouses decreased 2.2% from May 2022 and increased 17.8% from June 2021.

- The benchmark price for apartment/condos decreased 1.7% from May 2022 and increased 12.7% from June 2021.

*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.

Canadian GDP rose 0.3 per cent in April, led by growth in the mining, quarrying, and oil and gas sector. Goods-producing sectors rose 0.9 per cent while services-producing industries were up 0.1 per cent. Canadian real GDP is roughly 2.2 per cent above its pre-pandemic, February 2020 level. Preliminary estimates suggest that output in the Canadian economy shrank 0.2 per cent in May.

The Canadian economy continues to post relatively strong GDP growth numbers, although preliminary estimates are for a small contraction in May. The Bank of Canada has noted that the slack in the Canadian economy is absorbed, which is partly why it has hiked rates from 0.25 in March to 1.5 per cent currently. Amid continuing GDP growth and high inflation, the expectation is that the bank will again raise rates at its upcoming July 13th announcement by an outsized 0.75 per cent, following the US Fed. Our view is that the bank will continue quarterly rate hikes until the overnight policy rate reaches 2 to 3 per cent, roughly in line with the estimate of the neutral rate of interest. 

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 7.7 per cent on a year-over-year basis in May, up from 6.8 per cent last month. This was the fastest growth rate since January 1983. According to Statistics Canada, price rises were broad-based, with groceries up 9.7 per cent year-over-year, gasoline up 48 per cent, and shelter costs up 7.4 per cent. Excluding gasoline, the CPI rose 6.3 per cent year over year in May. Month-over-month, on a seasonally-adjusted basis, prices were up 1.1 per cent, the fastest pace since the introduction of the series in 1992. In BC, consumer prices rose 8.1 per cent year-over-year. Average hourly wages grew 3.9 per cent year-over-year in May, indicating a decline in purchasing power. 

A steep trajectory for the overnight rate implies that the 5-year fixed mortgage rate could reach the 5 per cent level for the first time since 2009 while variable mortgage rates may rise to as high as 4.5 per cent. With the stress test for both insured and uninsured borrowers, prospective homebuyers are currently being qualified at a rate of 6.49 per cent with a strong possibility of qualifying at 7 per cent soon, a rate that has not been a reality in the Canadian mortgage market since the early 2000s.

Given how aggressive markets expect the Bank of Canada to be, any good news on inflation, or any significant deterioration in the Canadian economy, could see a significant reversal in the most recent jump in Canadian bond yields. However, the baseline case for now is a Bank of Canada that is single-minded in its pursuit of lower inflation.

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Vancouver, BC – June 17, 2022.

The British Columbia Real Estate Association (BCREA) reports that a total of 8,214 residential unit sales were recorded by the Multiple Listing Service^® (MLS^®) in May 2022, a decrease of 35.1 per cent from May 2021. The average MLS^® residential price in BC was $1 million, a 9.3 per cent increase from $915,392 recorded in May 2021. Total sales dollar volume was $8.2 billion, a 29.1 per cent decline from the same time last year. 

“Canadian mortgage rates continue to climb,” said BCREA Chief Economist Brendon Ogmundson. “The average 5-year fixed mortgage rate reached 4.49 per cent in June. That is the highest mortgage rates have been since 2009.”

Provincial active listings were 4.4 per cent higher than this time last year, the first year-over-year increase in active listings since 2019. However, active listings still remain below what is typical for a balanced market, though current market conditions have a high degree of variation across regions and product types.

Year-to-date, BC residential sales dollar volume was down 14.5 per cent to $46.7 billion, compared with the same period in 2021. Residential unit sales were down 26.3 per cent to 43,921 units, while the average MLS® residential price was up 16 per cent to $1.06 million.

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Canadian employment edged up by 39,800 to 19.64 million in May. The labour market continued to tighten, with the Canadian unemployment rate declining by 0.1 to 5.1 per cent, the lowest rate on record for a second consecutive month. Average hourly wages were up 3.9 per cent on a year-over-year basis, increasing from April's 3.3 per cent. Wage gains are below the inflation rate, however, which hit 6.8 per cent year-over-year in the most-recent data. The employment rate held steady at 61.9 per cent.

Employment in BC grew by 5.1k to 2.74 million in May. Metro Vancouver's employment grew by 7.1k (0.5 per cent) month over month. The unemployment rate declined sharply in May to 4.5 per cent, approaching record lows set in the mid 2000s. Of the provinces, only Quebec currently has a lower unemployment rate. 

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is currently $1,370,377. This represents a 0.3% decrease from Apr 2022 and a 14.7% increase from May 2021.

Specifically:

- The benchmark price for detached homes decreased 0.4% from Apr 2022 and increased 15% from May 2021.

- The benchmark price for townhouses decreased 0.6% from Apr 2022 and increased 21.5% from May 2021.

- The benchmark price for apartment/condos increased 0.4% from Apr 2022 and increased 15% from May 2021.

* 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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Canadian seasonally-adjusted retail sales were largely flat in March, hitting $60.1 billion. Despite declining sales at motor vehicle and parts dealers (-6.4 per cent), higher sales in all other subsectors resulted in no net change month over month. Core retail sales, which strips out gasoline and motor vehicle and parts dealers, increased 1.5 per cent in March. In volume terms, sales were down 1 per cent. 

In BC, seasonally-adjusted sales declined 0.5 per cent in March. Compared to the same month last year, retail sales were up 0.6 per cent in the province. In the Greater Vancouver region, sales fell 0.8 per cent month-over-month and were up 6.2 per cent year-over-year. 

In March, Canadian e-commerce sales rose 15 per cent to 3 billion, corresponding to 4.9 per cent of retail sales. This percentage remains elevated relative to pre-pandemic levels. 

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After growing in February and March to a record level, Canadian employment was little changed in April at 19,601k. The labour market is tight, with the Canadian unemployment rate declining by 0.1 to 5.2 per cent, the lowest rate on record since comparable data became available in 1976. The total hours worked fell 1.9 per cent in April while average hourly wages were up 3.3 per cent on a year-over-year basis, similar to March and February. Wage gains are below the inflation rate, however, which clocked in at 6.7 per cent year-over-year in the most-recent data. The employment rate held steady at 61.9 per cent.

Employment in BC was largely unchanged in April at 2,736k. Metro Vancouver's employment growth was also largely flat at -0.2 per cent month over month. The unemployment rate rose in April for a second month in a row, reaching 5.4 per cent and surpassing Canada's rate for the first time since mid-2020. 

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The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver* is currently $1,374,500. This represents a 1% increase from March 2022 and a a 18.9% increase from April 2021.

Specifically:

- The benchmark price for detached homes increased 1% from Mar 2022 and increased 20.8% from Apr 2021.

- The benchmark price for townhouses increased 1.1% from Mar 2022 and increased 25% from Apr 2021.

- The benchmark price for apartment/condos increased 1.1% from Mar 2022 and increased 16% from Apr 2021.

* 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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