The British Columbia Real Estate Association (BCREA) reports that a total of 7,884 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in June, a 32.5 per cent decrease from the same month last year. The average MLS® residential price in BC was $716,326, down 1.3 per cent from June 2017. Total sales dollar volume was $5.6 billion, a 33 per cent decline from June 2017.

“The impact of the B20 stress test is still being felt across the province,” said Brendon Ogmundson, BCREA Deputy Chief Economist. “Lower demand as the result of higher mortgage rates and stringent mortgage qualification rules are bringing most markets around the province back into balanced conditions.”

Although the supply of active listings in the province is on the rise, inventory remains low by historical standards and markets like Vancouver Island and the Okanagan remain undersupplied.

Year-to-date, BC residential sales dollar volume was down 18 per cent to $32 billion, compared with the same period in 2017. Residential unit sales decreased 20 per cent to 43,863 units, while the average MLS® residential price was up 2.4 per cent to $730,492.

June 2018 Residential Average Price, Active Listings and Sales-to-Active-Listings Data by Board

*Numbers may not add due to rounding

Click here for more....

Provided by: BCREA

The trend in housing starts was 222,041 units in June 2018, compared to 216,701 units in May 2018, according to Canada Mortgage and Housing Corporation (CMHC). This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

"The national trend in housing starts increased in June, reflecting a jump in the SAAR of multi-unit dwellings in urban centres in June to a historical high," said Bob Dugan, CMHC's chief economist. "Notably, the national inventory of newly completed and unabsorbed multi-unit dwellings has remained below its 10-year historical average so far in 2018, indicating that demand for this type of unit has absorbed increased supply."

Monthly highlights

Vancouver

Housing starts trended lower in June 2018 as fewer multi-family projects got underway during the month. For the first half of 2018, total housing starts matched the level of activity in the same period in 2017. Particularly high home prices and strong demand from a growing population so far in 2018 have incentivized some new supply, maintaining an elevated pace of new home construction in the Vancouver Census Metropolitan Area (CMA).

Victoria

Metro Victoria housing starts reached mid-year 45% ahead of 2017 levels, driven by substantially higher multi starts. Rental starts were double the rate seen in the first half of 2017 in response to low vacancy rates. Elsewhere, relatively more affordable housing types dominated construction. Condo construction was nearly 60% higher due to the relative affordability of condos over single detached units, which were down 15%. The generally lower average prices in Langford coincided with 44% of all construction in the metro area. Ground-oriented, freehold multi-unit construction was also up 41%, pointing to densification.

Calgary

June housing starts were down in Calgary year-over-year, but year-to-date (YTD) there has been 8% growth over 2017. Single-detached units were on par with the previous year, while there were roughly half as many rental units initiated. The growth in total housing starts has been driven by the condo market. Condo starts grew 36% YTD over 2017.

Winnipeg

The trend measure of housing starts declined further in June after the pace of both single-detached and multi-family starts slowed from the previous month. Following a strong performance in 2017, total housing starts in the Winnipeg CMA continued to moderate during the first half of 2018, down 32% from a year earlier. The decline was most pronounced in the multiples sector where production through June 2018 declined by 38% from the same period of 2017.

Province of Québec

For the first six months of the year, the relatively strong rate of residential construction in Quebec is attributable to the apartment market segment, including rental and condominium. Favourable economic conditions, decreasing supply in the resale market and population aging have all contributed to increased housing starts.

Kingston

Housing starts in Kingston trended higher in June as more multi-unit housing starts, including starts of rental apartments, got underway. Builders have started rental projects in four out of the last six months reflecting a very low vacancy rate, which stood at 0.7% in fall 2017, the lowest among 16 Ontario CMAs.

Toronto

Primarily led by apartment starts, the total number of housing starts in the Toronto CMA trended up to reach a near two year high in June. Driven by condominium apartment starts which recorded a 30 year high for the month. The majority of these apartment starts were spread evenly across the City of Toronto, Mississauga, and Vaughan, highlighting the broad spread of high rise construction in the Toronto CMA.

Hamilton

Apartment starts increased in June, causing overall housing starts to trend up. Apartment starts have reached a very high level in Hamilton due to strong demand from first-time buyers, downsizers, and rental property investors. Faced with fewer options in the resale market at their price point, more first-time buyers and downsizers have purchased new condominium apartments. Rental property investors are looking to take advantage of the extremely low vacancy rates in the region.

St. Catharines

Total housing starts in the St. Catharines CMA trended slightly lower in June. Nevertheless, they were nearly 50% above the ten year average. The mild slowdown was generated by the single-detached sector, while all multi-family housing types saw increases this month. Stronger migration flows from other parts of Ontario continue to fuel demand for new homes in the area.

Kitchener-Cambridge-Waterloo

Total housing starts trended upwards in the Kitchener-Cambridge-Waterloo CMA for the first time in the past five months. While row starts continued trending downwards, marginal increase in single-detached starts was able to pull total starts higher. The slight pickup in full-time employment and tightening resale market conditions during late 2017 supported spillover demand for single-detached units from the resale market to the new construction market.

Halifax

After a slow start to 2018, multiples construction in Halifax picked up pace in June, the strongest month so far this year. While levels of construction remain strong on the Halifax Peninsula, the majority of new apartments starts this year have been located in the suburban market. Construction on the single-detached market remains elevated, recording a year-to-date growth of 10% compared to the same period last year.

CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of Canada’s housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.

The standalone monthly SAAR of housing starts for all areas in Canada was 248,138 units in June, up from 193,902 units in May. The SAAR of urban starts increased by 29.9% in June to 228,844 units. Multiple urban starts increased by 46.4% to 172,845 units in June while single-detached urban starts decreased by 3.5% to 55,999 units.

Rural starts were estimated at a seasonally adjusted annual rate of 19,294 units.

Data for 2017 based on 2016 Census Definitions.
Data for 2018 based on 2016 Census Definitions.
Source: Market Analysis Centre, CMHC

## not calculable/extreme value

Provided by: CMHC

Mortgage Rate Outlook

The Canadian mortgage market has seen substantial changes in the first six months of 2018, with mortgage credit both more expensive and more difficult to access. The B20 stress test for conventional borrowers has slowed overall mortgage credit growth while the five-year qualifying rate for Canadian mortgages has gone up 70 basis points in the past year. Rising mortgage rates have largely been influenced by tighter monetary policy  from the Bank of Canada as strong economic growth has fueled rising inflation.

It has been quite some time since Canada was in a true rising interest rate environment. The last cycle of prolonged rate increases was from 2004 to 2007, just prior to the global financial crisis , when the Bank of Canada increased its overnight policy rate ten times over three years. Much about the Canadian economy has changed since that time, and those changes have had substantial implications for the ultimate destination of Canadian interest rates. The Canadian workforce has aged, lowering the growth rate of the Canadian labour force. Further, the sharp decline in commodity prices has meant a scaling back in oil-sector capital investment and subsequent lower productivity growth. Both of these factors have translated into a lower potential, or long-run, rate of economic growth in Canada. That potential growth, in turn, influences the long-run level of interest rates that the Bank of Canada would like to return to once the economy is at full capacity and inflation is at its 2 per cent target. Ultimately, a lower potential growth rate means lower interest rates in the long-run. The Bank of Canada estimates the long-run level  of its policy rate at 3 to 3.5 per cent.

Based on historical averages of interest rate spreads, that implies that the five-year qualifying rate would equal between 6 and 6.5 per cent once the Bank of Canada closes the gap between the overnight rate and the Bank’s longrun or equilibrium overnight rate. Based on our outlook for Canadian economic growth and inflation, it is likely we will see the five-year qualifying rate near that destination by the end of 2020. 

Economic Outlook

It was a disappointing start to the year for the Canadian economy as first quarter growth came in at just 1.3 per cent, well below the consensus forecast of 2 per cent. Much of the observed weakness can be traced back to the impact of newly implemented mortgage stress tests, which force conventional mortgage borrowers, including those with more than 20 per cent down payment, to qualify at the greater of the five-year fixed qualifying rate or their own contract rate plus 2 per cent. These more stringent qualifying requirements have eroded as much as 20 per cent of would-be buyers’ purchasing power. Not surprisingly, that policy has blunted housing activity across Canada.

If the impact of the stress test evolves in a similar fashion to past macroprudential tightening, we expect that home sales and the wider Canadian economy will rebound in the second half of the year. Our forecast is for Canadian real GDP growth to accelerate over the next three quarters, registering 2.3 per cent for 2018 and 2.0 per cent in 2019. Above-trend economic growth will continue to put pressure on core inflation, which we forecast will rise slightly above 2 per cent over the next year.

It was a disappointing start to the year for the Canadian economy as first quarter growth came in at just 1.3 per cent, well below the consensus forecast of 2 per cent. Much of the observed weakness can be traced back to the impact of newly implemented mortgage stress tests, which force conventional mortgage borrowers, including those with more than 20 per cent down payment, to qualify at the greater of the five-year fixed qualifying rate or their own contract rate plus 2 per cent. These more stringent qualifying requirements have eroded as much as 20 per cent of would-be buyers’ purchasing power. Not surprisingly, that policy has blunted housing activity across Canada.

If the impact of the stress test evolves in a similar fashion to past macroprudential tightening, we expect that home sales and the wider Canadian economy will rebound in the second half of the year. Our forecast is for Canadian real GDP growth to accelerate over the next three quarters, registering 2.3 per cent for 2018 and 2.0 per cent in 2019. Above-trend economic growth will continue to put pressure on core inflation, which we forecast will rise slightly above 2 per cent over the next year.

Interest Rate Outlook
Although the Bank chose to hold its policy rate steady at its May 30 meeting, it did strongly signal that rates are heading higher and soon. To understand why, it is worth reviewing how central banks think about monetary policy. Most central banks set interest rates such that inflation stays at or near its target, which is 2 percent for the Bank of Canada, and the economy runs neither too hot nor too cold. The Bank of Canada measures the temperature of the economy based on the output gap, or the difference between actual real GDP and its estimate of the economy’s potential or long-run trend level. If, as is the case now, that inflation is at target and the economy has returned to its long-run trend, the Bank endeavors to return interest rates back to their long-run or equilibrium level. Given the current policy rate of 1.25 per cent, there is currently a 200-basis point gap between the Bank’s policy rate and the Bank’s preferred long-run level.

However, US trade policy remains a wildcard that may interfere with the Bank’s best laid plans. With a normally functioning international trade negotiation, we would expect the Bank to raise its overnight rate at least one more time this year, possibly as soon as its July meeting. However, the potentially negative economic impact of new tariffs or other trade disruptions could very well delay further rate hikes this year.

Click Link for more....

Provided By: BCREA

Commercial real estate sales in the Lower Mainland declined in the first quarter (Q1) of 2018 compared to the active market experienced in the region last year.

There were 523 commercial real estate sales in the Lower Mainland in Q1 2018, a 10.8 per cent decrease over the 586 sales in Q1 2017, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

The total dollar value of commercial real estate sales in the Lower Mainland was $3.031 billion in Q1 2018, a 38.5 per cent decrease from the $4.927 billion in Q1 2017.

“Our commercial market returned to more historically normal levels in the first quarter of the year compared to the heightened activity we experienced in 2017,” Phil Moore, REBGV president said. “This shift to moretypical activity is mirroring the overall economic trends we’re seeing in our province today.”

Q1 2018 activity by category

Land:

There were 221 commercial land sales in Q1 2018, which is a 3.9 per cent decrease from the 230 land sales in Q1 2017. The dollar value of land sales was $1.594 billion in Q1 2018, a 20.5 per cent decrease from $2.005 billion in Q1 2017.

Office and Retail:

There were 173 office and retail sales in the Lower Mainland in Q1 2018, which is down 15.6 per cent from the 205 sales in Q1 2017. The dollar value of office and retail sales was $1.076 billion in Q1 2018, a 51.8 per cent decrease from $2.232 billion in Q1 2017.

Industrial:

There were 113 industrial land sales in the Lower Mainland in Q1 2018, which is down 7.4 per cent from the 122 sales in Q1 2017. The dollar value of industrial sales was $0.280 billion in Q1 2018, a 12.2 per cent increase over $0.250 billion in Q1 2017.

Multi-Family: There were 16 multi-family land sales in the Lower Mainland in Q1 2018, which is down 44.8 per cent over the 29 sales in Q1 2017. The dollar value of multi-family sales was $0.081 billion in Q1 2018, an 81.5 per cent decrease from $0.441 billion in Q1 2017.

Click here for full Report.....

Provided By: REBGV

The British Columbia Real Estate Association (BCREA) reports that a total of 8,837 residential unit sales were recorded by the Multiple Listing Service® (MLS®) across the province in May, a 28.7 per cent decrease from the same month last year. The average MLS® residential price in BC was $739,783, down 1.7 per cent from May 2017. Total sales dollar volume was $6.54 billion, a 30 per cent decline from May 2017.

“BC home sales continued to slow in May because of more stringent qualifications for conventional
borrowers,” said Cameron Muir, BCREA Chief Economist. “The changes in mortgage policy are taking their toll on housing demand, not only in British Columbia, but across the country by reducing household purchasing power and housing affordability.”

While the decline in consumer demand has lifted the inventory of homes for sale, total active residential listings in the province are still relatively low by historical comparison.

Year-to-date, BC residential sales dollar volume was down 13.8 per cent to $26.4 billion, compared with the same period in 2017. Residential unit sales decreased 16.6 per cent to 35,976 units, while the average MLS® residential price was up 3.4 per cent to $733,616.

May 2018 Year-to-Date BC Residential Multiple Listing Service® Data by Board

* Numbers may not add due to rounding

Provided by: BCREA