The BCREA Commercial Leading Indicator (CLI) rose 1.4 index points to a new record high of 118.4, surpassing the previous high of 117.1 set in the second quarter of 2014.

 

“Momentum has been building in
sectors most important to commercial
real estate,” said BCREA Economist
Brendon Ogmundson, “That momentum
should translate to a strong year for the
commercial market in 2015.”

 

The CLI has now advanced for seven consecutive quarters. That trend signals significant strength in the economic environment underlying the commercial real estate market.

 

A rising trend in the CLI generally points to growth in investment, leasing and other commercial real estate activity two to four quarters ahead. Given the current trend, we would expect growth in the commercial real estate market for the remainder of 2014 and the first half of 2015.

 

For more information, please contact:

Brendon Ogmundson
Economist
Direct: 604.742.2796
Mobile: 604.505.6793
Email: bogmundson@bcrea.bc.ca

 

Damian Stathonikos

Director, Communications and Public Affairs

Direct: 604.742.2793

Mobile: 778.990.1320

Email: dstathonikos@bcrea.bc.ca

 

 

 

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BCREA reports on mortgage rates:

 

In stark contrast to the consensus of economists’ expectations at the end of last year, bond yields have spent most of 2014 trending downward. Indeed, perhaps weary of previous false starts, bond markets have even shrugged off recent signs of a strengthening economy, an acceleration of inflation and the unwinding of stimulus from the US Federal Reserve. Lenders have responded in kind, offering homebuyers record low mortgage rates.

 

 

Given well anchored inflation expectations and near consensus that short-term rates will be higher next year, the continued downtrend in bond yields this year is difficult to explain. One factor could be that investors are acclimating to the idea that the neutral rate, or the Bank of Canada’s preferred destination for interest rates once it tightens,
is likely much lower than in the past and that realization is being priced into expectations and therefore long-term interest rates.

 

Additionally, the performance of Canada’s financial and banking system post-financial crisis has won it a reputation among foreign investors as a safe harbor. Foreign holdings of Canadian government bonds and treasury bills have jumped from 15 per cent to over a quarter of outstanding debt since the global financial crisis. As uncertainty mounts in other areas of the world due to weak economic growth or unresolved conflicts, assets have crowded into both US and Canadian debt securities, forcing yields lower. Given these factors, rates could remain below historical average levels even as the Bank of Canada begins tightening.

 

While we do not expect the Bank to act on interest rates until late in 2015, bond yields could rise modestly before then in anticipation of higher rates, particularly if economic growth is stronger than expected. If so, we expect to see a slight increase in five-year and one-year fixed mortgage rates by the end of 2014.

 

For more insight, please click through to the BCREA report here.

 

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The British Columbia Real Estate Association (BCREA) reports that a total of 7,341 residential sales were recorded by the Multiple Listing Service® (MLS®) in August, up 7 per cent from August 2013. Total sales dollar volume was $4.1 billion, an increase of 12.4 per cent compared to a year ago. The average MLS® residential price in the province rose to $560,318, up 5 per cent from the same month last year.

 

“Consumer demand remained relatively robust in August,” said Cameron Muir, BCREA Chief Economist. “The Okanagan and Chilliwack board areas posted the strongest year-over-year gain of 22 to 25 per cent in unit sales, while Victoria and Vancouver increased around 10 per cent respectively.” Home sales last month were the highest for the month of August since 2009.

 

“Low mortgage rates, increased net-migration and improving economic conditions continue to underpin housing demand in the province,” added Muir.

 

Year-to-date, BC residential sales dollar volume was up 22.8 per cent to $28.5 billion, compared to the same period last year. Residential unit sales were up 15.8 per cent to 57,715 units, while the average MLS® residential price was up 6.1 per cent at $564,466.


See more here.

 

 

 

 

 

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The BCREA posted a report on the current state of the mortgage industry and I'd like to share some of that with you today.

 

Mortgage Rate Outlook

 

"Low long-term interest rates and heightened competition in the mortgage market pushed both posted and discounted mortgage rates to record lows during the second quarter. The posted five-year fixed rate reached a historical low of 4.79 per cent in May and many lenders have advertised sub-3 per cent five-year fixed rates as well as steeply discounted variable rates."

 

 

For the full report, and more information on economic outlook please click here.

 

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Muted Impact Expected From Cancelled Investor Immigrant Program

 

The British Columbia Real Estate Association (BCREA) reports that a total of 4,244 residential sales were recorded by the Multiple Listing Service® (MLS®) in January, up 24.5 per cent from January 2013. Total sales dollar volume was $2.4 billion, an increase of 36.8 per cent compared to a year ago.  The average MLS® residential price in the province rose to $565,036, up 9.9 per cent from the same period last year.

 

"Residential sales activity in the province posted the strongest January since 2010,” said Cameron Muir, BCREA Chief Economist. “Consumer demand has recovered from last year’s lower levels and is now trending at the long-term average.” The ten-year average for January is 4,276 unit sales.

 

"Stronger economic conditions are expected to underpin a modest uptick in home sales later this year,” added Muir.

 

The demise of the federal Immigrant Investor Program is expected to have little impact on the Metro Vancouver housing market. “The only impact we foresee is less pressure on the inventory of detached homes in Vancouver’s West Side, Richmond and West Vancouver,” said Muir.

 

The number of investor immigrant landings peaked at 5,876 in 2008 before declining to just 2,644 in 2012, with a similar number expected for 2013. These numbers include spouses and dependents. The total number of added households is estimated to be between 900 and 1,000 per year since 2011.

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BCREA ECONOMICS NOW -- Bank of Canada Interest Rate Announcement


 

The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 1 per cent.  In its statement, the Bank once again highlighted that inflation remains stubbornly below the Bank's 2 per cent target due to significant excess supply in the Canadian economy, as well as heightened competition in the retail sector.  The Bank now see inflation returning to target in about 2 years as the effects of retail competition dissipate and excess capacity is absorbed through faster economic growth. In its concluding paragraph, the Bank notes that although the fundamental drivers of inflation appear to be strengthening, inflation remains below target and downside risk to inflation have grown in importance. Most importantly, the Bank notes that the timing and direction of the next change in interest rates will depend on how new information influences the balance of risk between low inflation and elevated household imbalances.

 

There has been substantial speculation of late that if inflation remains near the bottom of the Bank of Canada’s 1-3 per cent control range over the next six months, then the next move by the Bank will be a rate cut rather than the rate-hike most economists have penciled into forecasts.  Indeed, the Bank’s messaging and guidance has been much more dovish of late, essentially reversing the unequivocal tightening bias at the Bank under Mark Carney.  The macroeconomic impact of the change in messaging is significant, prompting both a decline in long-term interest rates as well as a substantial decline in the dollar.  A result that is both welcome to a slow-growing Canadian economy as well as very likely engineered by policymakers. While we are not in the rate-cut camp (though that outcome is far more likely that it was six months ago), particularly with economic growth in the global economy set to dramatically improve, we believe that an eventual rate tightening is still far out on the horizon. 

 

For more information, please contact: 

Cameron Muir

Chief Economist

Direct: 604.742.2780

Mobile: 778.229.1884

 

Till next time ...

 

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The British Columbia Real Estate Association (BCREA) reports that a total of 5,490 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during November, up 17.3 per cent from November 2012. Total sales dollar volume was 36 per cent higher than a year ago at $3.06 billion. The average MLS® residential price in the province was $557,586, up 15.9 per cent from November 2012.

 

"While home sales were up year-over-year, they eased back from October as slow economic growth and anemic job creation negatively impacted consumer demand." said Cameron Muir, BCREA Chief Economist. "Low mortgage rates, however, continue to remain accommodative to housing demand."

 

"Average prices were skewed higher last month as the composition of sales in Vancouver and the Fraser Valley tilted toward single-detached homes," added Muir. "The MLS Home Price Index points to relatively stable prices, with the year-over-year change up 1 per cent in Vancouver and down 0.4 per cent in the Fraser Valley."

 

Year-to-date, BC residential sales dollar volume was up 10.1 per cent to $36.7 billion, compared to the same period last year. Residential unit sales were up 6 per cent to 68,510 units, while the average MLS residential price was up 3.8 per cent at $535,411.

 

See more here.

 

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BC Real Estate Association (BCREA) Chief Economist Cameron Muir discusses the October 2013 statistics.

 

 

"The fall housing market is shaping up to be the most active in four years," said Cameron Muir, BCREA Chief Economist. "Persistently low mortgage interest rates and an element of pent-up demand have driven home sales higher in the province's large Lower Mainland and Vancouver Island markets."

 

"While the rebound in consumer demand has been significant, home sales are trending near the long-term average and any continued acceleration will depend on stronger economic and employment growth," added Muir.

 

See more here

 

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BC Real Estate Association (BCREA) Chief Economist Cameron Muir discusses the September 2013 statistics.. 

 

 

 

The British Columbia Real Estate Association (BCREA) reports that a total of 6,498 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during September, up 43.2 per cent from September 2012. Total sales dollar volume was 55.7 per cent higher than a year ago at $3.49 billion. The average MLS® residential price in the province was $537,458, up 8.8 per cent from September 2012.   -

 

See more on their website here.

 

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The British Columbia Real Estate Association (BCREA) reports that a total of 6,863 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during August, up 28.6 per cent from August 2012.  Total sales dollar volume was 39.7 per cent higher than a year ago at $ 3.66 billion. The average MLS® residential price in the province was $533,400, up 8.6 per cent from August 2012.

 

“After sitting on the sidelines for much of 2012, home buyers were out in force during the summer months,” said Cameron Muir, BCREA Chief Economist.“ Fear of a housing market hard landing has given way to a sense of urgency to lock - in a mortgage at a low interest rate.”

 

While higher mortgage interest rates are on the horizon, BCREA forecasts the five - year posted mortgage rate to be 50 basis points higher a year from now. The impact on consumer demand is expected to be largely offset by stronger economic conditions and the associated employment growth.

 

Year-to-date, BC residential sales dollar volume was up 1.5 per cent to $26.5 billion, compared to the same period last year. Residential unit sales were down 0.6 per cent to 49,849 units, while the average MLS® residential price was up 2 per cent at $532,130.

 

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The BCREA Commercial Leading Indicator (CLI) rose for the second consecutive quarter, increasing 1.2 points from the first quarter of 2013. The index is currently sitting at 113.4. On a year-over-year basis, the CLI is 0.2 per cent above the second quarter of 2012. The index reached an all-time high of 116.1 in the second quarter of 2007.


An increasing CLI in the first half of 2013 offset a sharp decline in the final quarter of 2012 to produce an overall flattening in the index’s underlying trend. This indicates that growth in the commercial real estate sector should continue at an average pace through the remainder of 2013.


“The second quarter saw a significant increase in the CLI as economic activity and office employment rebounded,” said Brendon Ogmundson, BCREA Economist. “However, rising long-term interest rates may present an obstacle to growth in the second half of 2013.” -

 

 

See more at www.bcrea.com.

 

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