Friday, October 31, 2014

BCREA ECONOMICS NOW Canadian Monthly GDP (August) - October 31, 2014

Halloween brought a ghastly GDP report for August. The Canadian economy contracted 0.1 per cent in August following an  essentially flat July. Declines at the industry level were led by manufacturing, and oil and gas extraction.

Based on the first two months of GDP data for the third quarter, we would estimate that the Canadian economy grew a modest 2 per cent from July to September. That would mark a significant slowdown from second quarter growth of 3.2 per cent and provides additional cover for the Bank of Canada to keep rates unchanged for a considerable amount of time. “Copyright British Columbia Real Estate Association. Reprinted with permission.” 

Thursday, October 30, 2014

BCREA ECONOMICS NOW US Economic Growth (Q3) - October 30, 2014

US real GDP grew at a very healthy 3.5 per cent annual rate in the third quarter, following even more robust growth of 4.6 per cent in the second quarter.  Growth was led higher by strong consumer spending, exports, fixed investment and government spending.

Growth in the US economy has been sharply higher over the past six months, averaging over 4 per cent at an annual rate.  While inflation remains muted, the US labour market is picking-up and  job growth has been trending higher. The US Federal Reserve announced the end of its quantitative easing program yesterday, and while it noted that interest rates would not rise for a considerable time, a continuation of strong growth likely means the Fed will act on rates as early as mid-2015. If so, long-term rates in both the US and Canada should rise from current lows, bringing mortgage rates with them. “Copyright British Columbia Real Estate Association. Reprinted with permission.”

Tuesday, October 28, 2014

Ancient property-transfer tax adds another burden for Vancouver buyers

For Vancouver home buyers who get the shivers at high prices for even run-down houses, there is also the haunting sight of a tax goblin.
The B.C. government’s property-transfer tax has become a growing burden for buyers in the Vancouver region’s housing market over the past 27 years. The province introduced the PTT as a way to generate revenue, especially targeting the upper crust of B.C. house purchasers.
But the province-wide formula for the tax hasn’t changed since 1987, when Vancouver-area homes were much cheaper. Today, on the purchase of a $5-million home, the buyer has to pay $98,000 for the PTT. On a $2-million home, the tax rings in at $38,000, and on a $1-million property, the extra outlay is $18,000.
The B.C. government collected $937-million in the 2013-14 fiscal year from the tax. Housing industry observers note that the province’s coffers get an added lift when wealthy buyers, including those offshore, acquire high-end homes.
The PTT formula works like this: On the initial $200,000 of the purchase price, the home buyer must fork over 1 per cent of that first tier and then pay a 2-per-cent tax rate on the amount above $200,000.
The Real Estate Board of Greater Vancouver estimates that 96 per cent of properties in the region sold for at least $200,000 last year. That contrasts sharply with 5 per cent of properties in 1987 that changed hands for $200,000 or higher.
Far from being a targeted tax on the wealthy, the PTT’s net captures the vast majority of buyers of detached homes, townhouses and condos in Greater Vancouver, the board argues.
In this past February’s provincial budget, the B.C. Liberal government announced an improved break for eligible first-time home buyers. Those who qualify could save up to $7,500 on buying their first house, as long as that property is acquired for $475,000 or less, up from the previous threshold of $425,000.
B.C. Finance Minister Mike de Jong tweaked one aspect of the broader tax system in February to make up for the revenue lost from giving tax relief to some first-time home buyers. The province decreased the threshold for phasing out the homeowner grant from $1.295-million to $1.1-million in a property’s assessed value, effective the 2014 tax year. In short, the change means that more homeowners will be paying higher municipal property taxes annually.
Despite the tax burden, housing demand remains robust in Vancouver, says Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Group.
Mr. Scarrow doesn’t see a Vancouver housing bubble because many existing homeowners have lived in their abodes for at least 15 years, before the sharp run-up in prices. With small or non-existent mortgages, there isn’t financial pressure on those long-time homeowners to sell, and they can afford to hold out for higher offers when they do decide to move for whatever reason, he reckons.
“It comes down to huge demand globally and restricted supply locally,” Mr. Scarrow says.
The benchmark home price index last month hit a record $633,500 for detached homes, townhouses and condos sold in Greater Vancouver, which includes suburbs such as Richmond, Burnaby and Coquitlam. On Vancouver’s west side in September, the index hit a record of nearly $2.3-million for detached properties.
Having grown accustomed to a cash cow, the B.C. government isn’t about to dramatically revise the PTT formula any time soon. The province conservatively forecasts that revenue from the PTT will be $854-million in 2014-15. That would be down 9 per cent from the previous fiscal year but still more than double the revenue garnered in 2002-03. From the province’s viewpoint, the tried-and-true PTT isn’t a scary trick, but a valuable treat inside its revenue bag.

Poll finds support for taxing absentee property owners



Housing affordability is the most important issue for almost half of Vancouver residents, an Insights West poll concluded recently and was reported in The Vancouver Sun this week. This was the highest level of concern over housing reported in the entire Lower Mainland.
The housing “problem is not new to our city, but it certainly makes us a unique case in the country. People may still work in Vancouver, but high real estate prices have forced many of them to establish a home in adjacent cities. They may cast a ballot on Nov. 15, but will do so in a different municipality.
In the early stages of the city’s election campaign, two political parties — the Coalition of Progressive Electors and the Green Party of Vancouver — signalled their intention to deal with one of the lingering issues in the city: empty homes.
An empty house creates many problems. There is no one to rake leaves in the fall, leaving sidewalks untidy. The absence of inhabitants means fewer people are buying coffee or groceries, hurting local businesses.
The property tax is definitely present for homeowners who do not reside in Vancouver. But the reality is these people are not part of the daily life of the city. They are speculators more than members of the community.
Insights West asked Vancouverites this month about a recent debate over levying a tax on people who acquire properties in Vancouver but do not live in them. The idea was extremely popular, with 72 per cent of respondents calling it a “very good” or “good” proposal, and only 18 per cent deeming it “very bad” or “bad.”
Support for such a levy was high across genders (75 per cent for women, 70 per cent for men), all three age groups (from a low of 70 per cent among those aged 55 and over to a high of 76 per cent among those aged 18-34) and all three household incomes brackets (80 per cent in the lowest bracket, 66 per cent among those in households earning $100,000 or more a year).
While we may be unique in Canada, another world-class city is actively looking for ways to deal with empty homes.
New York City, governed by a Democrat for the first time since 1993, is considering a tax on non-resident owners. Mayor Bill de Blasio — elected on a promise to deal with what he calls the “inequality crisis” — is pondering the levy, which would be applied to anyone who spends less than half the year in the city and owns a property appraised at more than $5 million US.
The proposal is far from a done deal. It will require the backing from the two houses of the state legislature, as well as the signature of the governor, before becoming law. The main opponents so far, as expected, are developers and real estate lobbyists.
If discussions about a levy in Vancouver continue after Nov. 15, we can expect similar dissent from the industry. Insights West also found 73 per cent of Vancouverites agreed with the statement: “Developers and lobbyists have too much influence in my municipality.” This proportion is well above the Metro Vancouver average of 68 per cent, and a reminder of the way residents perceive the decision-making process at City Hall.
In the end, while a levy on absentee homeowners is decidedly popular, it will come down to reality and implementation. Just how big the absentee problem is, and what kind of measures should be taken to appease it, are matters that are still open for debate. But the data shows Vancouverites are not thrilled with the prospect of being surrounded by empty houses.
Mario Canseco is vice-president of Insights West’s public affairs division. He writes every second week in The Vancouver Sun’s business section.

Wednesday, October 22, 2014

BCREA ECONOMICS NOW Bank of Canada Interest Rate Decision - October 22, 2014


The Bank of Canada once again chose to maintain it's target for the overnight rate at 1 per cent this morning. In the statement accompanying the decision, the Bank noted that core inflation, which excludes volatile prices such as energy and food, has risen more rapidly than expected due to unexpected sector-specific factors while CPI inflation has evolved largely as expected.

While the Bank’s preferred measure of core inflation has trended above its 2 per cent target in recent  months, financial market volatility and fresh concerns over stagnant European economic growth provide some cover to maintain the status quo. Our forecast for the Canadian economy matches that of the Bank for economic growth to average 2.5 per cent for the second half of 2014 and for all of 2015. That rate of growth should eliminate much of the estimated slack in the Canadian economy by the middle of 2016. That forecast, and traditional lags in how monetary policy impacts inflation, suggests the Bank will embark on tightening monetary policy sometime toward the end of next year.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”

Friday, October 17, 2014

BCREA ECONOMICS NOW Canadian Consumer Price Inflation - October 17 ,2014


Canadian consumer prices rose 2 per cent in the 12 months to September, a modest 0.1 point decline from August. The Bank of Canada's core measure of inflation, which excludes volatile prices such as energy and food products, registered 2.1 per cent. Consumer prices in BC rose 1.2 per cent.

CPI inflation continues to trend near the Bank of Canada's 2 per cent target, but should moderate substantially in coming months due to collapsing energy prices. Although core inflation is slightly above the Bank of Canada's target, we do not expect the Bank to alter its course unless inflation moves outside of its 1-3 per per cent control range. 
 “Copyright British Columbia Real Estate Association. Reprinted with permission.” 

Thursday, October 16, 2014

BCREA ECONOMICS NOW Canadian Manufacturing Sales - October 16, 2014


Canadian manufacturing sales fell 3.3 per cent in August to $52.1 billion following a record setting dollar volume of sales in July.  The dip in sales was the first monthly decline of 2014 and was largely the result of lower sales of motor vehicles and vehicle parts, though sales were lower in 16 of 21 manufacturing sub-sectors.

In BC, where manufacturing is one of the largest employers,  manufacturing sales were up 0.6 cent on a monthly basis, and were 9.4 per cent higher year-over-year.  Through the first eight months of the year, manufacturing sales are 6.6 per cent higher than last year.  
“Copyright British Columbia Real Estate Association. Reprinted with permission.”

Wednesday, October 15, 2014

Home Sales Continue on Upward Trend in September


Vancouver, BC – October 15, 2014.  The British Columbia Real Estate Association (BCREA) reports that a total of 7,636 residential sales were recorded by the Multiple Listing Service® (MLS®) in September, up 17.5 per cent from September 2013. Total sales dollar volume was $4.4 billion, an increase of 25.8 per cent compared to a year ago. The average MLS® residential price in the province rose to $574,641, up 7.1 per cent from the same month last year.

“Consumer demand remains robust in most BC regions,” said Cameron Muir, BCREA Chief Economist. “More homes traded hands last month in BC than any September since 2009, while the Okanagan had its most robust September in nine years."
“Population growth, low interest rates and strengthening economic conditions continue to be supportive of housing demand,” added Muir.
Year-to-date, BC residential sales dollar volume was up 23.2 per cent to $37 billion, compared to the same period last year. Residential unit sales were up 16 per cent to 65,353 units, while the average MLS® residential price was up 6.2 per cent at $565,655.

Friday, October 10, 2014

BCREA ECONOMICS NOW Canadian Employment - October 10, 2014


The Canadian labour market broke out of its summer slumber, adding 74,000 jobs in September,  nearly all of which were in full-time employment. Total hours worked, which is closely associated with economic growth, rose 0.3 per cent and the national unemployment rate fell 0.2 points to a 6 year low of 6.8 per cent.

The BC economy saw employment grow by 9,600 jobs in September. Moreover, recent losses in full-time work were overturned as full-time employment grew by 20,600 while part-time employment declined by 11,000. The provincial unemployment rate remained unchanged at 6.1 per cent. Year-to-date, employment in BC is up just 0.6 per cent.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”

Wednesday, October 8, 2014

BCREA ECONOMICS NOW Canadian Housing Starts - October 8, 2014


New home construction in Canada held relatively steady in September, rising a slight 0.5 per cent to 197,343 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts of 197,747 units SAAR sits slightly in excess of Canadian household growth. 

Housing starts in BC urban centers moderated from a high mark in August, falling 19 per cent to 27,570 units SAAR in September.  On a year-over-year basis, housing starts were down 7 per cent compared to September 2013. Single-detached starts,  were up 14 per cent while multiple units were down 14 per cent compared to this time last year. Year-to-date, total BC housing starts are 6 per cent higher than 2013. 

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA fell 5 per cent in September as an 11 per cent decline in multiple starts offset a 16 per cent rise in singles. Year-to-date, Vancouver housing starts are up 5 per cent. In the Victoria CMA, new home construction fell 32 per cent year-over-year due to low levels of construction in the multiples sector. Year-to-date, housing starts in Victoria are down 19 per cent. New home construction in the Kelowna CMA continued its robust pace in September, rising 46 per cent year-over-year. Year-to-date, housing starts in the Kelowna CMA are up 45 per cent . Housing starts in the Abbotsford-Mission CMA tumbled 62 per cent on a year-over-year basis due to the relative absence of new multiple unit developments in September.  Year-to-date, new home construction in the Abbotsford-Mission CMA is down 29 per cent.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”

Tuesday, October 7, 2014

BCREA ECONOMICS NOW Canadian Building Permits - October 7, 2014


The value of Canadian building permits fell 27.3 per cent in AugustPrior to Augusts's decline, building permits had posted double-digit increases for three straight months.  Lower construction intentions were primarily the result of declines in Quebec and Ontario. 

New building permits in BC tumbled almost 28 per cent on a monthly basis and 11.1 per cent year-over-year. Both non-residential and residential permits were lower in August. On a unit basis, permits fell 22.6 per cent but were above the monthly average for 2014. The outsized monthly decline in August reflects a moderation of activity following robust construction intentions in July. 


Building permit activity was mixed in BC's four census metropolitan areas (CMA). Permits in the Abbotsford-Mission CMA fell 30.3 per cent on a monthly basis, but were 33.8 per cent higher than August 2013.  Construction intentions in the Kelowna CMA jumped 38 per cent from July but were 37.2 per cent below August 2013 levels.  In the Victoria CMA, permit activity increased 3.1 per cent on a monthly basis and was up 6.2 per cent year-over-year. Finally, in the Vancouver CMA, permits were down 32.9 per cent on a monthly basis and were 16.9 per cent lower year-over-year.
“Copyright British Columbia Real Estate Association. Reprinted with permission.” 

Friday, October 3, 2014

BCREA ECONOMICS NOW US Employment - October 3, 2014


The US economy added 248,000 jobs in September while previous months job growth was revised higher by 69,000 jobs. Over the past 3 month, US payroll growth has averaged 223,000 jobs.  The US unemployment rate fell to 5.9 per cent, the lowest reading in six  years. 
 
While inflation remains muted and considerable slack remains in other measures of employment, today's overwhelmingly positive jobs report should add further fuel to the case for the US Federal Reserve to move interest rates higher in 2015.  Moreover, if job growth continues at the current pace, long-term interest rates in both the US and Canada may begin to rise in anticipation of tighter monetary policy. “Copyright British Columbia Real Estate Association. Reprinted with permission.” 

Thursday, October 2, 2014

Home sales activity picks up the pace in September


Home buyers were active in Metro Vancouver last month, with home sales well exceeding the 10-year average for September.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver reached 2,922 on the Multiple Listing Service® (MLS®) in September 2014. This represents a 17.7 per cent increase compared to the 2,483 sales in September 2013, and a 5.4 per cent increase over the 2,771 sales in August 2014.

Last month’s sales were 16.1 per cent above the 10-year sales average for the month and rank as the third highest selling September over that period.

“September was an active period for our housing market when we compare it against typical activity for the month,” Ray Harris, REBGV president said.

New listings for detached, attached and apartment properties in Metro Vancouver* totalled 5,259 in September. This represents a 4.6 per cent increase compared to the 5,030 new listings in September 2013 and a 33.5 per cent increase from the 3,940 new listings in August. Last month’s new listing total was 0.4 per cent above the region’s 10-year new listing average for the month.

The total number of properties currently listed for sale on the MLS® system in Metro Vancouver is 14,832, an 8 per cent decline compared to September 2013 and a 0.4 per cent increase compared to August 2014.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $633,500. This represents a 5.3 per cent increase compared to September 2013.

“Gains in home values are being led by the detached home market. Condominium and townhome properties are not experiencing the same pressure on prices at the moment,” Harris said.  “Individual trends can vary depending on different factors in different areas, so it’s important to do your homework and work with your REALTOR® when you’re looking to determine the market value of a home.”

Sales of detached properties in September 2014 reached 1,270, an increase of 24.1 per cent from the 1,023 detached sales recorded in September 2013, and a 113.8 per cent increase from the 594 units sold in September 2012. The benchmark price for detached properties increased 7.3 per cent from September 2013 to $990,300.

Sales of apartment properties reached 1,188 in September 2014, an increase of 16.7 per cent compared to the 1,018 sales in September 2013, and a 75.7 per cent increase compared to the 676 sales in September 2012. The benchmark price of an apartment property increased 3.3 per cent from September 2013 to $378,700.

Attached property sales in September 2014 totalled 464, a 5 per cent increase compared to the 442 sales in September 2013, and an 88.6 per cent increase over the 246 attached properties sold in September 2012. The benchmark price of an attached unit increased 4.2 per cent between September 2013 and 2014 to $477,700