Brian White

Bank of Canada Interest Rate Decision - September 9, 2015

The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 0.5 per cent. In the press release accompanying the decision, the Bank noted that inflation continues to evolve in-line with the Bank of Canada's forecast while economic activity continues to be underpinned by solid household spending and strong demand from the US economy. 

With the economy seemingly improving and core inflation still holding firm near the Bank's 2 per cent target, policymakers opted to stay the course and allow recent loosening of monetary policy to work its way through the system.  We expect that growth will pick-up in the second half of the year, helped out by an acceleration of the US economy and stable oil prices.  That should translate to no further action by the Bank of Canada in 2015, though recent volatility in global financial markets could prompt a shift in thinking.  That said, central banks prefer to avoid bringing interest rate close to the so-called zero lower bound. Therefore, in the absence of a major financial or economic shock, the Bank will likely hold rates constant until a healthy and sustainable rate of economic growth resumes. 

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Vancouver, BC – August 13, 2015.

TheBritish Columbia Real Estate Association (BCREA) reports that a total of 10,247 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in July, up 20.7 per cent from the same month last year. Total sales dollar volume was $6.2 billion, a 33.9 per cent increase in comparison to the previous year. The average MLS® residential price in the province rose to $608,294, an 11 per cent increase since last July.

“Consumer confidence is brimming in the fastest growing economy in the country,” said Cameron Muir, BCREA Chief Economist. “Broad-based consumer demand continues to push BC home sales higher in every region except the more resource dependent northern markets.”

“Tighter market conditions are driving home prices higher as supply struggles to keep up with demand,” added Muir.  The Fraser Valley experienced the strongest average price growth, climbing 13.5 per cent year-over-year to $571,700 on the strength of strong demand in the single-detached market. 

The year-to-date, BC residential sales dollar volume increased 36.4 per cent to $38.8 billion, when compared with the same period in 2014. Residential unit sales climbed by 22.7 per cent to 61,806 units, while the average MLS® residential price rose 11.1 per cent to $628,025.

US Economic Growth (Q2'2015)                                                                                                                         July 30, 2015

US real GDP grew at a modest 2.3 per cent annual rate in the second quarter, led by positive contributions from personal consumption, exports, and government expenditures. Most importantly, the contraction in GDP initially reported for the first quarter was revised away, with GDP now estimated to have grown 0.6 per cent.   

Improved US economic growth will help the Canadian economy regain its footing in the second half of the year, but may also prompt the US Federal Reserve to begin tightening monetary policy as early as September. If so, we could see Canadian long-term interest rates, and therefore longer-term mortgage rates, dragged higher in spite of recent action by the Bank of Canada.

It may be a good time to get off the fence and lock in that purchase that you have been looking for whether you are moving up, down or buying some recreational property for the family as a long term investment.

BCREA ECONOMICS NOW

- July 15, 2015

The Bank of Canada announced this morning that it is lowering its target for the overnight rate by 0.25 percentage points to 0.5 per cent. In the press release accompanying the decision, the Bank emphasized that while this additional stimulus is required to help return the economy to full capacity given a contraction of GDP over the first half of the year, vulnerabilities associated with household imbalances could edge higher.

Although core inflation remains close to the Bank's 2 per cent target, growth in the Canadian economy has stagnated. Today's rate cut should help to partially offset the negative impacts of low energy prices in the parts of Canada hardest hit by the dramatic decline in oil prices and oil and gas activity while providing further stimulus to regions like British Columbia that are enjoying more robust growth. 

For housing, the impact in markets like Vancouver or the Fraser Valley that are already experiencing very strong demand may be relatively muted.  For other markets that been more negatively affected by low energy prices, including some areas of Northern BC,  this may help spur housing demand. 

So if you have been sitting on the fence this may be the time to step off and get into the market.