B.C. Economic Briefing
Volume 23 • Issue 16 • Week of April 16-21 2017 | ISSN: 1981-35
HIGHLIGHTS:
•
•
•
•
Home prices rise as market conditions
remain tight in B.C.
B.C. MLS® Activity
Units
12,000
10,000
Consumer price inflation eases to two per
cent from 2.3 per cent over the previous
two months.
8,000
New vehicles sales remained elevated in
February signalling persistence of strong
consumer demand.
2,000
Non-residential investment slides in the
first quarter.
6,000
4,000
MLS® Sales (L)
0
2007
2009
2011
Average Price (R )
2013
2015
Source: CREA, Central 1 Credit Union, seasonally-adjusted
Dollars
800
700
600
500
400
300
200
100
0
2017
Latest: Mar/17
B.C. MLS® Sales by Region
Units (000s)
Prices on rise with higher home sales and
inventory collapse
The heat is rising for the southern B.C. and
Vancouver Island housing markets as crushingly
low inventories and moderate-to-strong demand
in most markets drive home prices higher.
Provincial MLS® home sales rose significantly
for a second straight month in March with gains
spread widely across most markets to confirm an
upturn in sales after nine months of deceleration.
Seasonally adjusted sales rose 3.6 per cent from
February to 7,990 units. While year-over-year
sales were down 26.5 per cent, this marked
a narrowing from February. As we have often
repeated, sharp year-ago declines are not a
concern given this compares to a surge in sales
a year ago. In fact, current provincial sales are
similar to levels observed during the robust 2005
to 2007 period, reflecting demand driven by a
strong economy and population inflows to larger
urban areas.
At the real estate board level, month-to-month
sales growth was led by the Lower MainlandSouthwest real estate boards with a 4.1 per cent
increase in Greater Vancouver, 9.1 per cent in
Fraser Valley, and 7.9 per cent in Chilliwack. Sales
8
7
6
5
4
3
2
1
0
2000
Lower Mainland
2004
2008
Other B.C.
2012
Source: CREA, Central 1 Credit Union, seasonally-adjusted
2016
Latest: Mar/17
B.C. Active Listings
Units (000s)
35
30
25
20
15
10
5
0
2000
Lower Mainland
2004
2008
Source: BCREA, Central 1 Credit Union, seasonally-adjusted
Other B.C.
2012
2016
Latest: Mar/17
also picked up in the Kamloops area (5.5 per
cent) and Vancouver Island, excluding Victoria
(2.6 per cent).
1
Central 1 Credit Union
Looking beyond the monthly figures, regional
housing markets show significant strength in
much of the province. Despite a sharp year-overyear decline, sales in the Lower Mainland region
are still near the 10-year average. Meanwhile,
Vancouver Island and Thompson-Okanagan sales
trends have fallen from early-2016 peaks but are
tracking previous cycle highs observed in the
mid-2000s. Kootenay-area sales are higher on a
trend basis, while northern B.C. activity remains
relatively subdued.
A key story in regional housing markets has been
a stunning drop in resale housing inventory as
sales have outpaced new listings. While potentially weather related, new listings in March fell
21 per cent from a year ago and active listings
declined 18 per cent. Outside northern B.C. and
the Kootenay, active listings in all real estate
boards have fallen to near or below previous
cycle lows in the mid-2000s. Low inventories
are a constraint to higher sales, but more importantly are triggering strong price gains in hotter
markets as buyers chase low supply.
The average provincial MLS® price reached a
seasonally adjusted $651,480 in March, marking
a one per cent gain from February, but 11 per
cent lower than a year ago. While seemingly
at odds with tight market conditions observed
in certain regions, the decline reflects a sales
composition shift, both away from the Lower
Mainland markets, and fewer luxury and detached home sales, rather than pure price erosion. Regional average prices, while an imperfect
measure, point to year-over-year price growth
of 10 per cent on Vancouver Island and the
Thompson-Okanagan, which is consistent with
tight sales-to-inventory ratios.
Benchmark constant-quality home price indices
are a better measure of price trends, but are
available only for select markets. In the Lower
Mainland, values are on the rise again after a
brief and mild slip following the introduction
of the foreign purchaser tax. Benchmark values
were still 14 per cent above a year ago, compared to a decline of about 10 per cent in the
average price. A 10 per cent drop in detached
sales share to about 33 per cent was the key
driver to the average price decline. Recent data
points to accelerated benchmark price growth
in the apartment and townhome market, with
B.C. Economic Briefing
MLS® Year-over-Year Price Growth
Per Cent
40
30
20
10
0
-10
-20
B.C. Average
-30
Victoria benchmark
2014
Lower Mainland benchmark
Other Island benchmark
2015
2016
2017
Source: CREA, Central 1 Credit Union
Latest: Mar/17
B.C. CPI Inflation
Per Cent, year-over-year
Per Cent, year-over-year
4.0
4.0
3.0
3.0
2.0
2.0
1.0
1.0
0.0
0.0
-1.0
-1.0
All-items
-2.0
2005
2008
2011
2014
2017
Goods
-2.0
2010
Source: Statistics Canada, Central 1 Credit Union
2012
Services
2014
2016
Latest: Mar/17
demand aided by a strong economy, relative affordability of product, and possibly a lift from the
B.C. Home Partnership program. Detached home
prices are flat, but remain high, underpinned by
land scarcity. Meanwhile, Vancouver Island real
estate board benchmark prices accelerated and
were nearly 20 per cent above a year ago.
Price momentum in B.C. will continue through
2017. Provincial annual average price growth will
likely be constrained by compositional factors,
unless Lower Mainland detached sales rebound
sharply, but underlying affordability in large
urban areas will continue to worsen this year as
prices rise.
CPI inflation dips in March
Consumer prices steadied in March contributing to a cooling in B.C. headline price inflation.
Year-over-year growth in the consumer price
index (CPI) declined to two per cent, compared a
2.3 per cent pace over the previous two months.
2
Central 1 Credit Union
On a seasonally adjusted basis, the general price
level has edged down after a January peak.
B.C.’s dip in CPI inflation was most pronounced in
the Vancouver CMA, which decelerated from 2.2
per cent (year-over-year) in February to 1.7 per
cent in March. Inflation eased from 2.4 per cent
to 2.2 per cent in Victoria.
Nonetheless, provincial headline inflation remains firm, near the upper end of the range observed in recent years, and third highest among
provinces. Generally, service-sector inflation has
been higher at 2.5 per cent year-over-year, likely
reflecting a tight labour market in the province
and stronger economy, while weaker inflation
was observed for goods.
Gasoline prices remained a key driver of CPI inflation. The price at the pump was 17.1 per cent
above year-ago levels, albeit a deceleration from
February. In contrast, food prices were a substantial offset, declining 1.1 per cent from a year ago,
owing to lower grocery store prices (-2.9 per
cent). For those home cooks, meat prices were
down 2.1 per cent, while fresh vegetables fell six
per cent, and fruit was down more than five per
cent. Produce prices reflect external factors such
as weather, while retail competition and a stable
exchange rate have also contributed. Restaurant
prices rose 2.8 per cent. Excluding food and
energy, prices rose two per cent from a year ago,
in line with the general performance.
Below average inflation was observed for clothing and footwear (0.5 per cent), health and personal care products (1.4 per cent), and furniture
and furnishings (-1.0 per cent). In contrast, higher
home prices lifted the owned-accommodation
index (2.2 per cent), while public transportation
costs rose 3.2 per cent, and recreational travel
services climbed 6.9 per cent from a year ago.
Consumers also faced a general rise in utilitiesrelated costs.
CPI growth in B.C. is forecast to average 2.1 per
cent for 2017, as growth in the domestic economy, low unemployment rates and higher wages,
maintain modest inflationary pressure. Inflation
averages 1.8 per cent in 2018 and 2019.
B.C. Economic Briefing
B.C. New Vehicle Sales*
Units (000s)
22
18
14
10
6
2000
2004
2008
2012
2016
Source: Statistics Canada, Central 1 Credit Union, seasonally-adjusted
Note: includes territories
Latest: Feb/17
New vehicle demand remains robust in
February
New vehicles sales remained elevated in February signalling persistence of strong consumer
demand, reflecting strong job gains, low interest rates and higher population. While data is
choppy with monthly sales falling back about
four per cent (seasonally adjusted) after a January increase, sales through the first two months
were 1.7 per cent higher than a year ago. Momentum has picked up following a mid-year lull,
pushing the trend well ahead of previous cycle
peaks observed prior the recession.
Moreover, the average value of vehicles purchased continues to track higher with year-overyear growth maintaining a range of six to eight
per cent owing in part to a growing preference
for trucks (including SUVs/CUVs). That said, low
interest rates and longer financing periods
allowed for consumers to purchase higher priced
vehicles on credit.
Sales look to remain solid given strength in
demand drivers, but given already high levels
of sales, further upside for sales is less likely. By
extension, less growth in vehicle sales will likely
temper retail sales gains later this year.
Non-residential investment remains
subdued
Amidst a booming labour market, surging tourism, and strong housing markets, one area of
the economy that has curiously underperformed
is non-residential investment, both private and
public-sector.
3
Central 1 Credit Union
B.C. Non-Residential Investment
Quarterly
$(millions)
1,600
B.C. Q1 Non-Residential Investment
Growth, $2007 Constant Dollars
B.C.
Institutional
Commercial
Industrial
1,400
1,200
1,000
Victoria
Vancouver
Kelowna
Abb-Mission
800
600
Current-dollar
$2007 Constant Dollars
-35
400
-30
-25
Source: Statistics Canada, Central 1 Credit Union, seas. adj
Latest: Q1/2017
Gearing off weak related permitting activity,
estimated non-residential investment slid for a
third straight quarter in the first quarter of 2017
The inflation-adjusted investment flow fell one
per cent from the fourth quarter and 10 per
cent from the same quarter in 2016. While down
from 2016 highs across sources, the sharpest
year-over-year declines were in the industrial (-16
per cent) and institutional and government (-11
per cent) sectors, while commercial construction
was level.
Current-dollar declines were more modest due
to construction price inflation of about four per
cent. Year-over-year, current-dollar investment
was down 5.3 per cent to a seasonally-adjusted
$1.41 billion.
Non-residential investment, like building permits,
are erratic given the impact of large projects
in any given period. While recent declines followed a rise from 2015 to early 2016, the broad
trend since 2010 has generally drifted lower.
Commercial investment has only started to pick
up in the past year after multi-year weakness,
while government investment faded after a 2015
bump. Swings in the flow have reflected volatile
but range-bound Vancouver CMA activity in
recent years, which is the key driver of provincial
investment. Trends in Abbotsford-Mission are
weak, while levels have risen in both the Kelowna
and Victoria areas, but remain well below 2010
peaks.
Underperformance in building construction,
despite a rosy economy in B.C., reflects a number
of factors. The backdrop of a subdued global and
national economy in recent years constrained
B.C. Economic Briefing
-20
-15
-10
-5
0
5
10
Y/Y Per Cent Change
2000 2002 2004 2006 2008 2010 2012 2014 2016
Source: Statistics Canada, Central 1 Credit Union, sead. adj
Latest: Q1/2017
B.C. Non-Residential Investment
Quarterly, $2007 Constant Dollars
$(millions)
1,000
Vancouver CMA
900
800
700
600
500
400
2010 2012 2014 2016
$(millions)
180
Kelowna CMA
160
Victoria CMA
140
Abb-Mission CMA
120
100
80
60
40
20
0
2010 2012 2014 2016
Source: Statistics Canada, Central 1 Credit Union, seas. adj
Latest: Q1/2017
B.C. Q1 Non-Residential Investment
Units (000s, SAAR)
40
Vancouver CMA
35
30
25
20
15
10
5
0
2005
2008
Source: CMHC, Central 1 Credit Union
Other BC
2011
2014
2017
Latest: Mar/17
general investment confidence, meanwhile, low
commodity prices were negative for large scale
projects. Retail acceleration away from bricks
and mortar shops towards e-commerce may
have also marked a shift in traditional investment.
Going forward, capital intention expectations
point to some uplift in construction investment,
4
Central 1 Credit Union
despite a weak start to the year. Statistics Canada’s survey of building investment intentions was
positive for 2017 and suggested a real gain of
about three per cent. Fiscal stimulus on the part
of the federal government (albeit much related
to engineering work), increased education investment, and improved U.S. economic backdrop
are drivers. Offsetting this is concerns about U.S.
trade policy and impacts on B.C. and Canadian
businesses, which we expect to curtail activity
in the wood-product sector. Our forecast is for a
flat real non-residential building investment after
a mild two per cent increase in 2016.
Bryan Yu
Deputy Chief Economist
[email protected]
604.742.5346
Mobile: 604.649.7209
B.C. Economic Briefing
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