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Highlights

  • Wild year for interest rates
  • Canadian economy: slow and steady
  • Why is the Bank of Canada holding back?


Mortgage Rate Outlook
As the year ends, it's worth reflecting on how significantly the Canadian interest rate environment has changed in just twelve months. One year ago, the Canadian yield curve was its usual upward sloping shape, with markets expecting gradual rate increases by the Bank of Canada. Based partly on those expectations, Canadian mortgage rates were climbing. However, within 8 months the yield curve in Canada had inverted, bond yields tumbled, and Canadian mortgage rates were once again heading lower.

So, what happened? Most prominently, two of the worlds' largest economies entered a mutually destructive trade war, which has in turn slowed global economic growth and caused a sharp retracing of interest rate expectations. At its most fervent point, and informed by the yield curve's impressive recession forecasting record, the bond market panic pushed 5-year bond yields to just 1.13 per cent, and pulled the average 5-year mortgage contract rate well below 3 per cent and about 100 basis points below where rates ended 2018. However, by the end of summer the panic had subsided, aided by three rate cuts by the US Federal Reserve, and an otherwise occupied White House taking a step back from sabre-rattling on trade tariffs. As a result, 5-year Canadian bond yields bounced back to around 1.5 per cent and Canadian mortgage rates are now experiencing a small amount of upward pressure.

The outlook for where mortgage rates go from here is fairly clouded. While bond markets are no longer as shaken as they were six months ago, growth in the Canadian economy is still slightly below trend. Canadian monetary policy may also be tighter than necessary, given that the Bank's US counterparts have been lowering rates and global economic risk is elevated. However, those risks seem to be already priced into bond yields and absent a change in the stance of Canadian monetary policy, mortgage rates may be in for a dull year with rates remaining low and stable. Perhaps a welcome relief from the volatility of the past two years.

Economic Outlook 
The Canadian economy grew just 1.3 per cent in the fourth quarter of 2019, an expected slowdown after an abnormally strong second quarter saw real GDP growth of 3.7 per cent. The impact of elevated trade tensions is apparent in the data, with Canadian export and investment both negatively effected. Canadian exports have slowed in recent months and nonresidential investment contracted in the first half of the year.However, business sentiment outside of the energy sector has improved slightly and we have yet to see the impact on the trade sector leak into the wider economy through declining job growth or consumer spending. Household consumption spending should get a further boost as the housing market recovers and firmer price growth and lower interest rates spur increased borrowing against home equity.

Overall, we expect growth in the Canadian economy will finish 2019 at 1.6 per cent and will post trend growth of about 1.8 per cent in 2020.

Interest Rate Outlook 
With many central banks around the world lowering their policy rates, a key question is why is the Bank of Canada holding firm? The answer is simply that the Bank judges the potential of lower rates igniting a further accumulation of household debt as a greater risk to the Canadian economy than deteriorating global economic conditions. Canadian policymakers have committed to bending the curve on the Canadian household debt-to-income ratio, through a combination of higher interest rates and stricter mortgage policy.

Balanced against the goal of restraining debt, the Bank sees the risk of a further disruption in global trade as manageable. The outlook for Canadian economic growth is roughly in line with trend growth for the economy and inflation is expected to be tethered to its 2 per cent target. As long as that outlook holds, we expect the Bank will remain on the sidelines in 2020.

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Canadian housing starts decreased by 0.3% in November to 201,318 units at a seasonally adjusted annual rate (SAAR). The trend in national housing starts continues to be healthy, averaging about 219,000 units SAAR over the past six months. 

In BC, housing starts rose by 41% on a monthly basis to 48,840 units SAAR, largely due to a 59% increase in construction in the multi-unit segment in Vancouver, while single detached home construction was down by 13%. Compared to the same time last year, provincial starts were up by 22%.

Looking at census metropolitan areas in BC: 

Housing starts in Vancouver were up by 78% in November at 27,688 units SAAR, following last month's lowest reported level of starts in 2019. The increase was driven entirely by the multi-unit segment. Compared to last year in November, housing starts in Vancouver were up by 26%. 

In Victoria, housing starts were up by 9% on a monthly basis to 4,224 units SAAR. Compared to a year ago, housing starts were up by 44%.

In Kelowna, housing starts decreased by 9% in November to 3,504 units SAAR. Year-over-year starts were down by 18% in the region. 

Monthly housing starts in Abbotsford-Mission were down by 30% at 1,636 units SAAR. Compared to this time last year, new home construction was up by 154%.

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Please visit our Open House at 601 7888 SABA RD in Richmond.
Open House on Saturday, December 7, 2019 2:00PM - 4:00PM
OPAL at Richmond Centre. Steps to shopping & Canada Line Station. 2 bdrms/study room+ 2 full baths, highly functional and efficient floor plan, wood flooring in living & dining room, granite counters, glass kitchen cabinets and stainless steel appliances. Huge balcony with city & mountain view.
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Canadian employment decreased by 71,000 jobs in November, led by Quebec (-45,000), BC (-18,200) and Alberta (-18,000). This brought the national unemployment rate up from 5.5% in the previous month to 5.9% in November. November's decline was largely driven by private-sector employment, while self-employment and public-sector employment was little changed. Most of the decrease was reported in manufacturing (-28,000), natural resources (-6,500) and in public administration (-25,000). Compared to the same month last year, Canadian employment is up 1.6%.   

Employment in BC fell by 18,200 jobs in November, completely wiping out the previous month's gain. The decline was driven by full-time employment (-20,500), which more than offset gains in part-time employment (2,300). By Industry, employment losses were generally broad-based. In contrast, employment was up in finance/insurance/real estate/leasing. The provincial unemployment rate rose by 0.3 percentage points to 5%. Compared to one year ago, employment in BC is up by 0.7% (18,100) jobs.   


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The BCREA Nowcast estimate of provincial economic growth (expressed as year-over-year growth in real GDP) for September is 1.7 per cent, up slightly from estimated 1.6 per cent annual growth in August. Recently released National Accounts data showed that the BC economy grew 2.6 per cent in 2018, close to our 2018 Nowcast estimate of 2.8 per cent. We are currently tracking 2019 real GDP growth at 2.2 per cent.
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The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that there is evidence that the global economy is stabilizing and that US recession concerns are waning, though trade conflicts remain the biggest threat to the Canadian economy.  The Bank expects modest growth in 2020 and for inflation to closely track its 2 per cent target.

With many central banks around the world lowering their policy rates,  why is the Bank of Canada holding firm? Simply, the Bank judges the potential of lower rates igniting a further accumulation of household debt as a greater risk to the Canadian economy than the risk from deteriorating global economic conditions.  Canadian policymakers have committed to bending the curve on the Canadian household debt-to-income ratio, through a combination of higher interest rates and stricter mortgage policy.

Balanced against the goal of restraining debt, the Bank sees the risk of a further disruption in global trade as manageable.  The outlook for Canadian economic growth is roughly in line with trend growth for the economy and inflation is expected to be well tethered to its 2 per cent target. As long as that outlook holds, we expect that the Bank will remain on the sidelines in 2020.
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Please visit our Open House at 601 7888 SABA RD in Richmond.
Open House on Saturday, November 30, 2019 2:00PM - 4:00PM
OPAL at Richmond Centre. Steps to shopping & Canada Line Station. 2 bdrms/study room+ 2 full baths, highly functional and efficient floor plan, wood flooring in living & dining room, granite counters, glass kitchen cabinets and stainless steel appliances. Huge balcony with city & mountain view.
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Canadian inflation, as measured by the Consumer Price Index (CPI) rose by 1.9 per cent in October year-over-year, matching the increase in September. This marks 7-months of consecutive year-over-year growth in the CPI. Excluding the impact of higher gasoline prices, the CPI rose by 2.3 per cent year-over-year. The Bank of Canada's three measures of trend inflation remain unchanged to average 2 per cent in October.

In B.C., CPI slowed to 2.2 per cent year-over-year, down from 2.4 per cent in September. The decline was largely driven by recreation, education and reading, while notable increases were reported in gasoline, transportation and clothing and footwear prices. 

With Canadian inflation hovering at 2 per cent, the Bank of Canada will likely continue its dovish-to-neutral tone. The Bank will need to see a deterioration in the economic indicators before taking action.


  

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Seasonally-adjusted Canadian retail sales fell by 0.1% in September to $51.6 billion (after an upwardly revised 0.1% in August), driven by lower sales at motor vehicle and parts dealers and at gasoline stations. Retail sales were down in 6 of 11 sub-sectors. Regionally, 7 of 10 provinces reported declines in September with notable declines in Alberta (-1.6%) and New Brunswick (-3.7%).

In B.C., seasonally-adjusted retail sales fell by 0.2% to $7.2 billion in September, driven by a decline in sales at motor vehicle and parts dealers and in food and beverage stores. Vancouver also reported a monthly decrease of 0.9% in sales. Declining provincial sales were reported in all sub-sectors except for building material and garden equipment. Compared to the same time last year, B.C. retail sales were down by 0.8% in September.


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Canadian retail sales decreased by 0.1% in August to $51.5 billion, driven largely by lower sales at food and beverage stores and at gasoline stations. Retail sales were down in 6 of 11 sub-sectors, representing 51% of sales. Regionally, 4 of 10 provinces reported a decrease in August with notable declines reported in Ontario (-0.8%) and Manitoba (-1.6%).

In B.C., retail sales rose by 0.8% to $7.2 billion in August, ending four consecutive months of declines. Vancouver also reported a monthly increase of 1.7% in sales. Provincial sales were up in 7 of 11 sub-sectors, largely driven by sales at food and beverage stores and to a lesser extent, in furniture and home furnishings. On a year-over-year basis, B.C. retail sales were down by 0.4% in August.


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Please visit our Open House at 601 7888 SABA RD in Richmond.
Open House on Saturday, November 16, 2019 2:00PM - 4:00PM
OPAL at Richmond Centre. Steps to shopping & Canada Line Station. 2 bdrms/study room+ 2 full baths, highly functional and efficient floor plan, wood flooring in living & dining room, granite counters, glass kitchen cabinets and stainless steel appliances. Huge balcony with city & mountain view.
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Canadian housing starts decreased by 8.7% in October to 201,973 units at a seasonally adjusted annual rate (SAAR). The decline was due to a pullback in the multi-unit segment. The trend in national housing starts continues to be healthy, averaging 218,598 units SAAR over the past six months. 

In BC, housing starts declined by 16% on a monthly basis to 33,174 units SAAR, largely due to falling construction in the multi-unit segment. The decline is an unwinding of developers pushing forward activity in the previous months to get ahead of a new development charge in Vancouver. Compared to the same time last year, provincial starts were up by 9%. On a monthly basis, multi-unit starts were down by 22%, while singles were up by 10%.

Looking at census metropolitan areas in BC: 

Housing starts in Vancouver were down by 37% in October at 15,657 units SAAR, driven entirely by the multi-unit segment. Compared to last year in October, housing starts in Vancouver were down by 11%. 

In Victoria, housing starts were down by 36% on a monthly basis to 3,880 units SAAR, following last month's highest recording of starts since December 2018. Compared to a year ago, housing starts were up by 43%.

In Kelowna, housing starts increased by 155% in October to 3,870 units SAAR. Year-over-year starts were up by 423% in the region. 

Monthly housing starts in Abbotsford-Mission were up by 13% at 2,335 units SAAR. Compared to this time last year, new home construction was up by 34%.

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Please visit our Open House at 601 7888 SABA RD in Richmond.
Open House on Saturday, November 9, 2019 2:00PM - 4:00PM
OPAL at Richmond Centre. Steps to shopping & Canada Line Station. 2 bdrms/study room+ 2 full baths, highly functional and efficient floor plan, wood flooring in living & dining room, granite counters, glass kitchen cabinets and stainless steel appliances. Huge balcony with city & mountain view.
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I have listed a new property at 601 7888 SABA RD in Richmond.
OPAL at Richmond Centre. Steps to shopping & Canada Line Station. 2 bdrms/study room+ 2 full baths, highly functional and efficient floor plan, wood flooring in living & dining room, granite counters, glass kitchen cabinets and stainless steel appliances. Huge balcony with city & mountain view.
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The British Columbia Real Estate Association (BCREA) released its 2019 Fourth Quarter Housing Forecast today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 1.8 per cent to about 77,100 units this year, after recording 78,505 residential sales in 2018. MLS® residential sales are forecast to increase 10.9 per cent to 85,500 units in 2020, just below the 10-year average for MLS® residential sales of 85,800 units.

“After a slow start to 2019, MLS® home sales in BC have embarked on a sustained upward trend since the spring,” said Brendon Ogmundson, BCREA Chief Economist. “The dampening effects of federal mortgage rules mean that rather than a return to the heights of recent years, home sales are simply returning to trend after sustaining a significant shock.”  

As demand normalizes, the accumulation of resale inventory has reversed course in many markets around BC. We anticipate that this trend will continue in 2020, with sales and listings finding balance. For most markets, this will mean price growth that is in-line with inflation, though for some supply-constrained areas we are forecasting strong price growth. We anticipate that the MLS® average price will decline 2 per cent in 2019 before rising modestly by 3.6 per cent to $723,000 in 2020. 
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The Bank of Canada held its overnight rate at 1.75 per cent this morning. In the statement accompanying the decision, the Bank noted that ongoing trade conflicts have weakened the global economic outlook, which is expected to drag Canadian economic growth below its potential in the second half of this year. The bank is further projecting that growth will register under 2 per cent over the next two years. Inflation is expected to trend at the Bank's target of 2 per cent.

With the expectation that the US Federal Reserve will be lowering its own policy rate later today, the third rate cut this year, there may be extra pressure for the Bank to begin loosening monetary policy at its next meeting.  As reflected by the Bank's statement, while current trade conflicts will test the resilience of the Canadian economy, the Bank does not as yet foresee the need for lower interest rates. However, the Bank stands ready to act if the impact of trade conflicts spreads beyond trade and investment and begin to slow consumer spending or housing activity. Thus far, the Bank appears to judge those risks as contained, which likely mean no change in interest rates this year.
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I have sold a property at 806 819 HAMILTON ST in Vancouver.
819 Hamilton, built by the reputable BOSA Developments, located in the heart of downtown, steps way from Yaletown, Robson Street, Gastown and BC Place. This well laid out and well kept suite, has open kitchen flows into large living/dining area. Sunny Den connect to bedroom is a perfect space for reading/working. Building amenities include a fully equipped gym and sauna making your self-care that much more convenient! In suite laundry, in suite storage room, 1 parking, 2 storage lockers, a pro-active strata and an on-site caretaker round out this complete package. Come see for yourself!
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Canadian inflation, as measured by the Consumer Price Index (CPI), rose by 1.9 per cent compared to the same time last year, equaling the increase in August. Excluding the impact of lower energy prices, the CPI was up 2.4 per cent year-over-year. The Bank of Canada's three measures of trend inflation were all slightly higher in September, averaging 2.1 per cent. In B.C., CPI inflation ticked higher to 2.4 per cent in September compared to a year ago.

A recent surge in national employment growth combined with inflation at its 2 per cent target, plus some quieting of trade tensions globally, means that the Bank of Canada will likely remain on hold at its October meeting.


 
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The British Columbia Real Estate Association (BCREA) reports that a total of 6,938 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in September, an increase of 24 per cent from the same month last year. The average MLS® residential price in the province was $697,943, an increase of 2.1 per cent from September 2018. Total sales dollar volume was $4.84 billion, a 26.5 per cent increase from the same month last year.

“Markets across BC built on momentum from the summer,” said BCREA Chief Economist Brendon Ogmundson. “While the year-over-year increase in provincial sales was quite strong, home sales in most areas are simply returning to historically average levels.”

MLS® residential active listings in the province were up 4 per cent from September 2018 to 39,117 units and were essentially flat compared to August on a seasonally adjusted basis. Overall market conditions remained in a balanced range with a sales-to-active listings ratio of about 18 per cent.    
 
Year-to-date, BC residential sales dollar volume was down 12.4 per cent to $39.7 billion, compared with the same period in 2018. Residential unit sales were 8.9 per cent lower at 57,773 units, while the average MLS® residential price was down 3.9 per cent year-to-date at $687,530.    
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Canadian employment increased in September by 54,000 jobs, driven by Ontario (41,000). This brought the unemployment rate down from 5.7% in the previous month to 5.5% in September. Leading the increase in September was full-time employment, while part-time fell. Most of the increase was reported in healthcare, and accommodation and food services.  

Employment in BC fell by 8,400 jobs in September. This marks the fourth consecutive monthly decline, driven by a decline in part-time employment (-17,200), while full-time employment rose (+8,800). By Industry, the most significant employment losses were in information/culture/recreation. The provincial unemployment rate fell by 0.2 percentage points to 4.8%. Compared to one year ago, employment in BC is up by 1% (33,400 jobs).   


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The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.