Canadian Housing Starts (Mar) - April 8, 2020

Canadian housing starts decreased by 7.3% m/m in March to 195,174 units at a seasonally adjusted annual rate (SAAR). The decrease was broad-based with starts down in 7 of 10 provinces, signalling early signs of the impact of COVID-19 on construction activity. The trend in national housing starts fell to a still healthy average of 205,000 units SAAR over the past six months. 

In BC, housing starts fell by 20% m/m to 34,014 units SAAR, following a 44% rise in the previous month. The decrease was entirely driven by multi-units (-25%), while singles increased (1%). Given the rapidly evolving circumstances brought on by COVID-19, Statistics Canada released early estimates of March building permits for select regions (covering 29% of total building permit values). Early estimates show permits falling by 23% in Canadian cities compared to the same time last year. The strongest declines were in Ontario (-51%), BC (-27%) and Quebec (-38%), likely due to recent announcements in Ontario and Quebec to halt many construction projects. Meanwhile in BC, earlier reported cases of COVID-19 compared to other regions likely started to slow construction intentions. In the near term, new construction activity will continue to slow across the country as physical distancing measures persist.  

Looking at census metropolitan areas in BC:

Housing starts in Vancouver were up by 3% in March to 21,236 units SAAR, driven entirely by multi-units (6%), while singles were down (-10%). Compared to last year in March, housing starts were up by 1%. 

In Victoria, housing starts were down by 79% m/m to 1,226 units SAAR, which follows last month's strong showing of 5,931 units. Compared to a year ago in March, housing starts were down by 41%.

In Kelowna, housing starts decreased by 61% m/m to 1,504, following a 1,129% increase in the previous month. Starts were up by 161% in the region compared to the same time last year. 

Monthly housing starts in Abbotsford-Mission were down by 79% at 669 units SAAR, following last month's 2,738 units. Compared to the same time last year, new home construction was down by 64%. 

Pandemic Halts Sales Activity in March 2020

Vancouver, BC – April 15, 2020. 

The British Columbia Real Estate Association (BCREA) reports that a total of 6,717 residential unit sales were recorded by the Multiple Listing Service^® (MLS^®) in March 2020, an increase of 17.2 per cent from March 2019. The average MLS^® residential price in BC was $789,548, a 15.1 per cent increase from $685,892 recorded the previous year. Total sales dollar volume in March was $5.3 billion, a 35 per cent increase over 2019.

“Provincial housing markets started the month very strong before the COVID-19 pandemic put a halt to activity,” said BCREA Chief Economist Brendon Ogmundson. “Activity will slow considerably in April as households and the real estate sector implement measures necessary to mitigate the spread of this virus.”

“While we don’t know when this unprecedented period will end, markets will be boosted by pent-up demand and historically low interest rates when it does,” added Ogmundson. “The ultimate strength of the recovery will depend on how long the economy remains effectively shut down, as well as the efficacy of federal and provincial measures to bridge households through the financial difficulties brought on by the pandemic.”

Year-to-date, BC residential sales dollar volume was up 37.1 per cent to $12.9 billion, compared with the same period in 2019. Residential unit sales increased 21.7 per cent to 16,866 units, while the average MLS^® residential price was up 12.6 per cent to $763,031.  

Mortgage Rate Forecast

Mortgage Rate Outlook

The growing fears of the potential impact of COVID-19 resulted in a full market meltdown in late February, sending equity markets into free fall and global bond yields plummeting. On top of an already volatile situation, two of the world's largest oil producers, Saudi Arabi and Russia, have engaged in a price war that sent oil prices to levels not seen since the late 1990s.

That panic sent Canadian bond yields down sharply and prompted emergency rate cutting by the Bank of Canada. Variable and 5-year fixed qualifying mortgage rates have followed bond yields lower with the 5 year fixed rate reaching 2.59 per cent, its lowest level since 2016 and very near its lowest level on record.How prolonged and just how serious this outbreak will be is still unknown, which makes forecasting extremely difficult. What we do know is that the economy is in for at least a quarter of significant loss of economic output as measures to stop the spread of COVID-19, such as social distancing, sheltering in place and mandatory business closures, put a halt to economic and social activity.

Though mortgage rates have started rising as risk increases, we anticipate that measures implemented by the government, the Bank of Canada and other global central banks will help to calm fears over financial system liquidity and stem a longer-term spike in bank funding costs and mortgage rates will once again decline as the economy recovers.

Of note, the Canadian government has postponed changes to the mortgage stress test. The qualifying rate for insured mortgages was set to change from the 5-year posted mortgage rate to the average 5-year fixed rate plus 200 basis points on April 6, with the B-20 stress test for uninsured mortgages to follow suit. By postponing this change, the government has muted the passthrough from monetary policy to the housing market, particularly since the 5-year posted rate has maintained at 5.19 per cent, despite the average 5-year contract rate falling to near historical lows. The impact of dramatically lower rates will still help those renewing or refinancing mortgages at lower rates by freeing up monthly cash-flow due to lower mortgage payments.

Economic Outlook

Economic growth in Canada slowed sharply to end 2019, even before supply chain disruptions due to both COVID-19 and interrupted rail service. Those factors alone were expected to slow growth in the first half of the year and now the Canadian economy is also dealing with plummeting oil prices resulting from a price war between Saudi Arabia and Russia.

There is tremendous uncertainty around the economic outlook beyond the first half of 2020 and a viral outbreak is not something that macroeconomists can model. The measures needed to stem the spread of infections are at odds with robust economic activity, which means we will see a sharp decline in retail sales, tourism, and other activity in the coming months. Adding to that uncertainty is the dramatic drop in oil prices, which in the past has been enough on its own to turn Canadian GDP growth negative.

In model simulations, we estimate the combined impact of COVID-19 and the oil shock will tip the Canadian economy into a recession, including what may be a historic drop in output in the second quarter, followed by a robust recovery as activity returns to normal and the impact of the government's fiscal stimulus kicks in.

Interest Rate Outlook

The Bank of Canada lowered its overnight rate by 100 basis points in the span of a week, an unprecedented action that is likely to be followed by subsequent rate reductions. With the economy facing a sudden stop in economic activity, most other considerations for the Bank are on the back burner and we expect the Bank to bring its overnight policy rate to 0.25 per cent.

In the past, when the Bank has aggressively lowered its policy rate, it has taken up to 24 months before there was a rate increase. If economic activity does post a strong recovery in the second half of 2020, we expect the Bank will maintain its policy rate at 0.25 per cent for the remainder of the year

Source: https://www.bcrea.bc.ca/economics/mortgage-rate-forecast/

Market Momentum Continues into the Fall

Vancouver, BC - October 15, 2019. 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.   

Vancouver, BC - September 5, 2019. The British Columbia Real Estate Association (BCREA) released its 2019 Third Quarter Housing Forecast Update today.

Multiple Listing Service^® (MLS^®) residential sales in the province are forecast to decline 5 per cent to about 75,000 units this year, after recording 78,505 residential sales in 2018. MLS^® residential sales are forecast to increase 11 per cent to 82,700 units in 2020, just below the 10-year average for MLS^® residential sales of 85,800 units.

"BC markets are showing signs of recovery after nearly a year and a half of policy-induced declines," said Brendon Ogmundson, BCREA Deputy Chief Economist. "We expect that recovery to continue into next year, with home sales normalizing around long-term averages."

A recovery in home sales has slowed the accumulation of resale inventory, with active listings still well short of the previous peak in 2012. That leaves market conditions at the provincial level essentially balanced with little upward pressure on prices. We anticipate that the MLS^® average price will decline 2.4 per cent in 2019 before rising modestly by 3 per cent to $718,000 in 2020.

Markets at a Glance: August 2019

These charts provide year-to-date information on the pace of MLS^® home sales for the province as well as in each of the BCREA member board regions and a comparison of current year sales with the previous year.