BCREA ECONOMICS Mortgage Rate Forecast
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unemployment rate and inflation near its 2 per cent target— would not normally engender speculation of looser monetary policy. However, when the outlook for the global economy can change with a Tweet, markets trade on fear rather than data. While interest rates have recently bounced off their lows, global risk remains tilted to the downside. Our baseline forecast is for 5-year fixed rates to remain relatively constant over the next year at 2.77 per cent. As for the 5-year qualifying rate for insured mortgages, its lack of variation remains a puzzle. While underlying 5-year bond yields were once a reliable guide to movements in the qualifying rate, that relationship appears to have changed. The statistical relationship between 5-year fixed rates and the 5-year government bond yield has deteriorated since the financial

Mortgage Rate Outlook Canadian mortgage rates continued to decline in the third quarter as rising trade tensions between the United States and China fed growing fears of a global economic slowdown. Those fears pulled long-term Canadian interest rates low enough to invert the Canadian yield curve, a frequent— though not infallible—pre cursor to recession. As bond yields fell, the average 5-year contract rate offered by Canadian lenders declined to an average of 2.86 per cent, with 5-year fixed rates as low as 2.25 per cent currently available. The 5-year insured rate, however, which given the decline in contract rates is currently the stress test rate for both insured and uninsured borrowers, has remained stubbornly unflinching. As a result, borrowers subject to the B20 stress test are now forced to qualify at a risk buffer (stress test rate minus contract rate) of approximately 250 basis points. The unpredictability of US trade policy makes the future direction of interest rates cloudier than usual. Indeed, current Canadian economic conditions—a historically low crisis of 2008 and even more so with the introduction of tighter qualifying rules for insured borrowers in 2016. Our base case is therefore for the qualifying rate to remain unchanged over the next year.

Economic Outlook After faltering for two quarters, Canadian economic growth appeared robust in the second quarter, registering a twoyear high of 3.7 per cent. However, the details underlying the near 4 per cent rise in real GDP were less optimistic. Business investment contracted nearly 7 per cent at an annualized rate, driven by a 16 per cent decline in spending on non-residential structures, and machinery and equipment. Second quarter household spending slowed to just 0.5 per cent, the lowest reading since the first quarter of 2015. A 13 per cent jump in exports following nearly a year of flat or even negative quarters was the main driver of growth, a feat which is unlikely to be repeated. Given those details, we expect that growth will moderate to between 1.5 and 2 per cent in the second half of 2019. We expect the Canadian economy will post trend growth of about 1.8 per cent in 2020, though significant downside risks remain due to elevated trade tensions and their consequent impact on exports and investment.

Interest Rate Outlook The Bank of Canada has remained on hold for much of the past year, opting to not follow the majority of other global central banks in lowering its policy rate. However, it has left the door open to lowering rates should developments in the global economy warrant doing so. Whether the US Federal Reserve opts to follow up its recent 25 basis point rate cut with something more aggressive will be important to how the Bank of Canada sets its own rate going forward. With the US Federal Funds rate now essentially parallel to the Bank of Canada’s policy rate, a further cut by the Fed may place upward pressure on the Canadian loonie, which would exacerbate an already strained climate for exports and lower the outlook for Canadian economic growth. Currently, the baseline outlook for the Canadian economy is not signalling the need for further stimulus. Core inflation is expected to trend at the Bank’s 2 per cent target and growth is near potential. Moreover, policymakers remain weary of re-igniting a build-up in household debt, particularly after imposing policies designed to bring those debt burdens down. We expect the Bank will therefore remain on hold as long as the Bank’s assessment of economic risk does not reach a tipping point.

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BCREA-Housing Market Update September 2019

Watch BCREA Deputy Chief Economist Brendon Ogmundson
discuss the August 2019 statistics.

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September 4, 2019 Metro Vancouver housing market sees summer uptick in sales

Home buyer activity increased to more typical levels in Metro Vancouver throughout the summer months.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 2,231 in August 2019, a 15.7 per cent increase from the 1,929 sales recorded in August 2018, and a 12.7 per cent decrease from the 2,557 homes sold in July 2019.

Last month’s sales were 9.2 per cent below the 10-year August sales average.

“Home sales returned to more historically normal levels in July and August compared to what we saw in the first six months of the year,” said REBGV President Ashley Smith. 

There were 3,747 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in August 2019. This represents a 3.5 per cent decrease compared to the 3,881 homes listed in August 2018 and an 18.8 per cent decrease compared to July 2019 when 4,613 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 13,396, a 13.3 per cent increase compared to August 2018 (11,824) and a 5.9 per cent decrease compared to July 2019 (14,240).

For all property types, the sales-to-active listings ratio for August 2019 is 16.7 per cent. By property type, the ratio is 12 per cent for detached homes, 18.4 per cent for townhomes, and 21.2 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“With more demand from home buyers, the supply of homes listed for sale isn’t accumulating like earlier in the year. These changes are creating more balanced market conditions,” Smith said.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $993,300. This represents an 8.3 per cent decrease over August 2018 and a 0.2 per cent decrease compared to July 2019.

Sales of detached homes in August 2019 reached 706, a 24.5 per cent increase from the 567 detached sales recorded in August 2018. The benchmark price for detached homes is $1,406,700. This represents a 9.8 per cent decrease from August 2018 and a 0.7 per cent decrease compared to July 2019.

Sales of apartment homes reached 1,116 in August 2019, an 8.9 per cent increase compared to the 1,025 sales in August 2018. The benchmark price of an apartment property is $771,000. This represents a 7.4 per cent decrease from August 2018 and a 0.1 per cent increase compared to July 2019.

Attached home sales in August 2019 totalled 409, a 21.4 per cent increase compared to the 337 sales in August 2018. The benchmark price of an attached unit is $654,000. This represents a 7.8 per cent decrease from August 2018, a 0.2 per cent increase compared to July 2019.Download the August 2019 stats package.

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Bank of Canada Interest Rate Decision – September 4, 2019

The Bank of Canada left its target for the overnight rate unchanged at 1.75 per cent this morning.

In the statement accompanying the decision the Bank noted escalated trade tensions between the US and China has resulted in weakened  business investment, lower commodity prices and heightened global risk.  While the Canadian economy posted strong growth in the second quarter of this year, the Bank attributes that growth to temporary factors unlikely to be repeated in the back half of the year. Overall, the Bank judges that the economy is operating close to its potential and inflation is in line with its target.  However, rising uncertainty in the global economy is impacting economic growth and further escalation may require additional monetary stimulus.

While the Bank of Canada, as expected, opted to not follow other central banks in lowering its policy rate, it has left the door open to lowering rates should developments in the global economy warrant doing so. Currently, economic conditions in Canada do not require further stimulus, and policymakers remain weary of re-igniting a build-up in household debt particularly after imposing policies designed to bring those debt burdens down.  We expect the  Bank will therefore remain on hold as long as current economic risk does not reach a tipping point, such as an impending recession in the United States.  As the uncertain global outlook keeps bond yields down, Canadian mortgage rates should stay near their current sub-3 per cent level for some time.

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Housing supply up, home sales and prices down in June

With home buyer demand below long-term historical averages in June, the supply of homes for sale continued to accumulate in Metro Vancouver.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 2,077 in June 2019, a 14.4 per cent decrease from the 2,425 sales recorded in June 2018 and a 21.3 per cent decrease from the 2,638 homes sold in May 2019.

Last month’s sales were 34.7 per cent below the 10-year June sales average. This is the lowest total for the month since 1998.

“We’re continuing to see an expectation gap between home buyers and sellers in Metro Vancouver,” said Ashley Smith, REBGV president. “Sellers are often trying to get yesterday’s values for their homes while buyers are taking a cautious, wait-and-see approach.”

On the supply side, there were 4,751 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in June 2019. This represents a 10 per cent decrease compared to the 5,279 homes listed in June 2018 and an 18.9 per cent decrease compared to May 2019 when 5,861 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 14,968, a 25.3 per cent increase compared to June 2018 (11,947) and a 1.9 per cent increase compared to May 2019 (14,685).

“Home buyers haven’t had this much selection to choose from in five years,” Smith said. “For sellers to be successful in today’s market, it’s important to work with your local REALTOR® to make sure you’re pricing your home for these conditions.”

For all property types, the sales-to-active listings ratio for June 2019 is 13.9 per cent. By property type, the ratio is 11.4 per cent for detached homes, 15.8 per cent for townhomes, and 15.7 per cent for apartments.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $998,700. This represents a 9.6 per cent decrease over June 2018 and a 0.8 per cent decrease compared to May 2019.

This is the first time the composite benchmark has been below $1 million since May 2017.

Sales of detached homes in June 2019 reached 746, a 2.6 per cent decrease from the 766 detached sales recorded in June 2018. The benchmark price for detached properties is $1,423,500. This represents a 10.9 per cent decrease from June 2018 and a 0.1 per cent increase compared to May 2019.

Sales of apartment homes reached 941 in June 2019, a 24.1 per cent decrease compared to the 1,240 sales in June 2018. The benchmark price of an apartment property is $654,700. This represents an 8.9 per cent decrease from June 2018 and a 1.4 per cent decrease compared to May 2019.

Attached home sales in June 2019 totalled 390, a 6.9 per cent decrease compared to the 419 sales in June 2018. The benchmark price of an attached unit is $774,700. This represents an 8.6 per cent decrease from June 2018 and a 0.6 per cent decrease compared to May 2019.

Download the June 2019 stats package.

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LIABILITY FOR STRATA INSURANCE DEDUCTIBLES
Many strata owners do not know they may be personally liable to reimburse their strata corporation for its insurance deductible, the portion of the loss the insured must pay in an insurance claim, which can be many thousands of dollars. The British Columbia Law Institute’s formidable committee of strata experts (the “Committee”) recently recommended changes to the Strata Property Act, which would require most owners to insure themselves against this liability.1 The Committee observed,2 Many strata corporations have seen their deductibles, particularly for damage caused by water ingress, rise significantly. An owner who isn’t adequately insured against this risk could face a crippling liability. Background
The Strata Property Act requires a strata corporation to carry property insurance over, “(a) common property, (b) common assets, (c) buildings shown on the strata plan, and (d) fixtures built or installed on a strata lot, if the fixtures are built or installed by the owner developer as part of the original construction on the strata lot.”3 A strata corporation must also carry liability insurance against claims for injury or damage to the person or property of a third party caused by an accident or negligence.4 Each year, a strata corporation must review its insurance needs and report on its insurance coverage at the annual general meeting.5 Deductibles vary and can be large, depending on the risk insured or the strata corporation’s own claims history. If a strata corporation claims against its insurance policy for an amount exceeding the deductible, the corporation usually absorbs the deductible as a common expense to which every owner contributes through their respective strata fees or a special levy. What if the cause of the strata corporation’s insurance claim is an owner’s mishap?6 Even though the deductible is a common expense, the Strata Property Act permits the strata corporation to sue that owner to recover its deductible if the, “owner is responsible for the loss or damage” in question.7 The Act sets a low threshold, making the owner responsible for the deductible if they are the primary cause, or answerable for, the mishap.8 There is no need to prove negligence, being the failure to meet a particular standard of care. In one case, an owner’s plugged toilet caused water to back-up and escape into suites below, producing approximately $50,000 in damage. The strata corporation claimed against its insurance policy for the repairs, charging back the $10,000 deductible to the owner. The court confirmed the owner’s liability for the deductible. Since the water came from a toilet in the owner’s strata lot, he was responsible; there was no need to prove him negligent.9 A strata corporation can amend its bylaws to require a higher standard of liability, such as negligence. In one case, the strata corporation’s bylaws stated that any insurance deductible paid by the strata corporation arising from an owner’s, “act, omission, negligence or carelessness” will be charged to the owner.10 An owner’s clogged toilet over-flowed, causing $42,538 in damages to other units. To pay for the repairs, the strata corporation claimed against its insurance policy, charging back its $25,000 deductible to the owner. Even though the bylaw set a higher standard than the Strata Property Act, the court enforced the bylaw. After flushing the toilet, the owner breached the standard of care by failing to ensure the waste cleared the bowl and the water shut off. This was negligence, as required by the bylaw, and the court ordered the owner to pay the $25,000 deductible. Recommendations11
The Strata Property Act’s Schedule of Standard Bylaws constitutes the default bylaws for every strata corporation, except to the extent a corporation modifies them by filing an amended bylaw at the Land Title Office. The Committee recommends adding a new standard bylaw to require every owner to have insurance to cover payment of a deductible under the strata corporation’s property insurance policy. Where an owner is responsible for the loss giving rise to the strata corporation’s insurance claim, the Committee recommends amending the Act to allow the corporation to charge back to the owner the lesser of the cost of repairing the damage or the deductible. The Committee also recommends amending the Act to require a strata corporation each year to inform owners and tenants of any material change in the corporation’s insurance coverage, including any increase in a deductible. Pending these changes, a REALTOR® acting for a strata buyer is wise to warn the client about this liability. It’s also prudent to ask about the strata corporation’s deductibles and check the bylaws for any provision affecting this risk. A careful buyer agent will warn their client to purchase property insurance to protect the buyer against liability for the strata corporation’s deductible. Mike Mangan
B.A., LL.B.
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BC Home Sales to Rise in 2020


BCREA 2019 Second Quarter Housing Forecast

Vancouver, BC – June 18, 2019. The British Columbia Real Estate Association (BCREA) released its 2019 Second Quarter Housing Forecast today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to decline 9 per cent to 71,400 units this year, after recording 78,346 residential sales in 2018. MLS® residential sales are forecast to increase 14 per cent to 81,700 units in 2020. The 10-year average for MLS® residential sales in the province is 84,300 units.

“The shock to affordability from restrictive mortgage policies, especially the B20 stress test, will continue to limit housing demand in the province this year,” said Cameron Muir, BCREA Chief Economist. “However, a relatively strong economy and favourable demographics are likely creating pent-up demand in the housing market,”

The inventory of homes for sale has climbed out of a cyclical low, leading to balanced market conditions in many areas and buyer’s market conditions in some communities and across some products types. Current market conditions are expected to provide little upward pressure on home prices this year, with the average annual residential price forecast to remain essentially unchanged, albeit down 2 per cent to $697,000. Modest improvement in consumer demand is expected to unfold though 2020, pushing the average residential price up 4 per cent to $726,000.

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Stats Centre Reports – May 2019

The Complete Stats Centre Report for Metro Vancouver click here.

To view the latest Stats Centre Report for Vancouver East, click here.
To view the latest Stats Centre Report for Vancouver West, click here.

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REBGV May 2019 market update video

Click on the image above to view the REBGV May 2019 market update video featuring Board President Ashley Smith

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May sees modest increase in home sales while housing supply reaches five-year high

Monthly Metro Vancouver home sales eclipsed 2,000 for the first time this year in May, although home buyer demand remains below historical averages.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 2,638 in May 2019, a 6.9 per cent decrease from the 2,833 sales recorded in May 2018, and a 44.2 per cent increase from the 1,829 homes sold in April 2019.

Last month’s sales were 22.9 per cent below the 10-year May sales average and was the lowest total for the month since 2000.

“High home prices and mortgage qualification issues caused by the federal government’s B20 stress test remain significant factors behind the reduced demand that the market is experiencing today,” Ashley Smith, REBGV president said.

There were 5,861 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver last month. This represents an 8.1 per cent decrease compared to the 6,375 homes listed in May 2018 and a 2.1 per cent increase compared to April 2019 when 5,742 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 14,685, a 30 per cent increase compared to May 2018 (11,292) and a 2.3 per cent increase compared to April 2019 (14,357). This is the highest number of homes listed for sale since September 2014 (14,832).

“Whether you’re a buyer looking to make an offer or a seller looking to list your home, getting your pricing right is the key in today’s market,” Smith said. “To be competitive, it’s important to work with your local REALTOR® to assess and understand the latest trends in your neighbourhood and property type of choice.”

For all property types, the sales-to-active listings ratio for May 2019 is 18 per cent. By property type, the ratio is 14.2 per cent for detached homes, 20 per cent for townhomes, and 21.2 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index2 composite benchmark price for all residential homes in Metro Vancouver is currently $1,006,400. This represents an 8.9 per cent decrease over May 2018, a 3.4 per cent decrease over the past six months, and a 0.4 per cent decrease compared to April 2019.

Sales of detached homes in May 2019 reached 913, a 1.4 per cent decrease from the 926 detached sales recorded in May 2018. The benchmark price for a detached home in the region is $1,421,900. This represents an 11.5 per cent decrease from May 2018, a 5.4 per cent decrease over the past six months, and a 0.5 per cent decrease compared to April 2019.

Sales of apartment homes reached 1,246 in May 2019, a 12.9 per cent decrease compared to the 1,431 sales in May 2018. The benchmark price of an apartment property is $664,200. This represents a 7.3 per cent decrease from May 2018, a two per cent decrease over the past six months, and a 0.5 per cent decrease compared to April 2019.

Attached home sales in May 2019 totalled 479, a 0.6 per cent increase compared to the 476 sales in May 2018. The benchmark price of an attached unit is $779,400. This represents a 7.6 per cent decrease from May 2018, a 3.5 per cent decrease over the past six months, and a 0.6 per cent increase compared to April 2019.

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