Brian White

2015 First Quarter Housing Forecast Update

Vancouver, BC – February 11, 2015.

The British Columbia Real Estate Association (BCREA) released its 2015 First Quarter Housing Forecast Update today.

"Stronger economic conditions both at home and abroad combined with favourable interest rates and population growth are expected to bolster housing demand over the next two years,” said Cameron Muir, BCREA Chief Economist. “After a year in which housing demand ratcheted higher across the province, the retrenchment of oil prices is expected to attenuate housing demand in some regions while bolstering it in others."

Multiple Listing Service® (MLS®) residential sales in British Columbia are forecast to rise 2.4 per cent to 86,050 units this year and a further 3.9 per cent to 89,400 units in 2016. The ten-year average is 82,100 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.  

The average MLS® residential sales price is forecast to rise 4.5 per cent to $594,000 this year, with most of the upward pressure being exhibited on the South Coast. Elevated consumer demand is expected to be partially offset by resale inventories and additions to the housing stock in 2016.

As a result, the average MLS® residential sales price is forecast to increase by 2.4 per cent to $608,500 next year. So now is the time to be looking at moving up or down depending on your familiy's needs.

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Canadian and US Economic Growth - January 30, 2015

The Canadian economy contracted 0.2 per cent in November. Falling energy prices resulted in declining output in the oil and gas sector, while manufacturing and mining production was also lower. Given available data, the Canadian economy likely expanded 1.9 per cent in the fourth quarter of 2014, and about 2.4 per cent for the year as a whole. While export growth will be helped this year by a significant fall in the loonie, we expect growth will decelerate slightly in 2015 to about 2.2 per cent as low oil prices drag investment and employment lower. 

Uncertainty around the impact of the dramatic decline in oil has most market watchers expecting a further loosening of policy by the Bank of Canada, with a second rate cut coming in March.  Whether that comes to fruition likely depends on where the trend in oil is over the next month. If prices continue to fall, we expect the Bank will opt for more "insurance" by reducing its overnight rate to 0.5 per cent. However, if oil prices firm up and core inflation remains above 2 per cent, the Bank may opt to hold steady.

In the United States, real GDP grew at a healthy 2.6 per cent annual rate in the fourth quarter, following 5 per cent growth in the third quarter.  Growth was led higher by the strongest rate of consumer spending since 2006.  Note that today's report is the preliminary release and will be revised, perhaps substantially in coming months. Given that growth was actually tracking closer to 3.5 per cent for the quarter, we expect fourth quarter GDP will be revised higher with subsequent releases. 

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Over the weekend, the Royal Bank of Canada dropped its five-year fixed rate mortgage to just 2.84 per cent. No other banks have jumped on the rate dropping trend. Will it have an impact on how the housing market performs in 2015? Time will tell.

I don’t believe a quarter-point will make a significant difference, First-timer buyers are already expecting low rates and other government incentives . This adjustment is just giving people a little more confidence in being able to take on a mortgage.

The market in 2015 should pick up where last year left off, with low inventory being the driving force behind the hot market both in Vancouver and the Fraser Valley.

The market in the Lower Mainland is going to be active whether interest rates are high or low, growing families still need to up-size and seniors still need to downsize.

If people want to move up and can afford a detached house now, I highly recommend it. Money will be much cheaper now than down the line, But, people need to be proactive in paying down their mortgage, because while it’s cheap now, you have to be aware that higher rates are coming. Don’t sit on a huge mortgage or line of credit thinking rates are going to stay low forever.

January 21, 2015

In a bombshell announcement this morning, the Bank of Canada announced that it is lowering its target overnight rate to 0.75 per cent. The surprise loosening of monetary policy is in response to the recent dramatic decline in oil prices and the consequent negative impact on Canadian growth and inflation. The Bank expects the Canadian economy to grow 2.1 per cent in 2015 and 2.4 per cent in 2016. Given the initial drag on growth from lower oil prices, it does not expect the Canadian output gap (the difference between actual GDP and GDP at full capacity) to close until the end of 2016. 

While we expected the sharp decline in oil prices and the uncertainty regarding when they might stabilize would keep the Bank of Canada from raising interest rates in 2015, the Bank has instead opted for a more aggressive approach.  How long the Bank intends to keep its overnight rate at 0.75 per cent is unclear, but given strong underlying growth pre-oil shock, if oil prices rise as expected in the second half of the year we could see this move reversed by the end of 2015.   For now, the BC housing market should continue to benefit from low and now likely lower mortgage rates

Surrey Board of Trade Applauds Prime Minister Harper’s Announcement Today of the Canada Apprentice Loan Program

The Surrey Board of Trade was present at today’s announcement at BCIT – Annacis Island where Prime Minister Stephen Harper announced the Canada Apprentice Loan program. 

“This will enhance the much needed support for skilled trades training, ensuring our industries and resource sectors have the skilled labour that they need. If Canada is to successfully tackle its skills gap and ensure its economic growth, we have to give special attention to the largest cohort of labour force entrants each year: young people. There is a growing understanding that closing the skills gap means better aligning our education and training systems to our labour market needs. The Canada Apprentice Loan Program is an important ingredient in the overall recipe,” said Anita Huberman, CEO, Surrey Board of Trade. 

Canada is falling short in addressing the current and future skills requirements of the workplace. Critically, we need to increase training spaces to ensure sufficient qualified replacement workers for the retiring workforce and to meet anticipated growth in labour needs in BC. This initiative will help those already apprenticing to complete their training and encourage more Canadians to pursue a career in the skilled trades, allowing participants to take advantage of the many job opportunities across Canada.

The Canada Apprentice Loan Program, which was introduced in Canada’s Economic Action Plan 2014, will provide apprentices in Red Seal trades across Canada with access to interest-free loans. These loans will help apprentices address the costs they encounter during technical training, including educational fees, tools and equipment, living expenses and forgone wages. The Canada Student Loans Program, within the Employment and Social Development Canada Ministry, will manage this initiative. 

Apprentices registered in a Red Seal trade apprenticeship will be able to apply for loans of up to $4,000 per period of technical training. The loans are interest-free until after loan recipients complete or leave their apprenticeship-training program, for up to a maximum of six years.

Those interested in applying for the Canada Apprentice Loan can do so through the Canada Apprentice Loan Online Service, which is available through Canada.ca/apprentice.

Bank of Canada Interest Rate Announcement - Dec 3, 2014

The Bank of Canada announced this morning that it is holding its target overnight rate at one per cent. This marks the longest period without a change in the Bank’s policy rate since the 1950s. In the statement accompanying its decision, the Bank noted that inflation has been stronger than expected in the past year, though mainly due to temporary factors. The Bank also stated that slack in the Canadian economy appears to be lower than projected in October due to upward revisions to growth as well as a broadening Canadian economic recovery. The Bank cited falling oil prices and household financial imbalances as key risks to its outlook. 

Perhaps the most pressing development for the Canadian economy, and therefore monetary policy, is the recent downturn in oil prices. Untangling the macroeconomic consequences of declining oil prices can be complex for an oil-producing country like Canada. However, the recent decline in oil prices will likely be felt strongest on growth through decreased output in the oil and gas industry and on inflation through lower prices for energy products, particularly gasoline.  This suggests a delay in inflation returning to the Bank's 2 per cent target. We expect the Bank will begin slowly raising its overnight rate, starting late next year with perhaps a 25 basis point increase. That should translate to modestly higher mortgage rates in 2015.