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BANK OF CANADA RELEASE - The Bank of Canada today increased its target for the overnight rate to ½ %, with the Bank Rate at ¾ % and the deposit rate at ½ %. The Bank is continuing its reinvestment phase, keeping its overall holdings of Government of Canada bonds on its balance sheet roughly constant until such time as it becomes appropriate to allow the size of its balance sheet to decline.
The unprovoked invasion of Ukraine by Russia is a major new source of uncertainty. Prices for oil and other commodities have risen sharply. This will add to inflation around the world, and negative impacts on confidence and new supply disruptions could weigh on global growth. Financial market volatility has increased. The situation remains fluid and we are following events closely. Global economic data has come in broadly in line with projections in the Bank’s January Monetary Policy Report (MPR). Economies are emerging from the impact of the Omicron variant of COVID-19 more quickly than expected, although the virus continues to circulate and the possibility of new variants remains a concern. Demand is robust, particularly in the United States. Global supply bottlenecks remain challenging, although there are indications that some constraints have eased. Economic growth in Canada was very strong in the fourth quarter of last year at 6.7%. This is stronger than the Bank’s projection and confirms its view that economic slack has been absorbed. Both exports and imports have picked up, consistent with solid global demand. In January, the recovery in Canada’s labour market suffered a setback due to the Omicron variant, with temporary layoffs in service sectors and elevated employee absenteeism. However, the rebound from Omicron now appears to be well in train: household spending is proving resilient and should strengthen further with the lifting of public health restrictions. Housing market activity is more elevated, adding further pressure to house prices. Overall, first-quarter growth is now looking more solid than previously projected. CPI inflation is currently at 5.1%, as expected in January, and remains well above the Bank’s target range. Price increases have become more pervasive, and measures of core inflation have all risen. Poor harvests and higher transportation costs have pushed up food prices. The invasion of Ukraine is putting further upward pressure on prices for both energy and food-related commodities. All told, inflation is now expected to be higher in the near term than projected in January. Persistently elevated inflation is increasing the risk that longer-run inflation expectations could drift upwards. The Bank will use its monetary policy tools to return inflation to the 2% target and keep inflation expectations well-anchored. The policy rate is the Bank’s primary monetary policy instrument. As the economy continues to expand and inflation pressures remain elevated, the Governing Council expects interest rates will need to rise further. The Governing Council will also be considering when to end the reinvestment phase and allow its holdings of Government of Canada bonds to begin to shrink. The resulting quantitative tightening (QT) would complement increases in the policy interest rate. The timing and pace of further increases in the policy rate, and the start of QT, will be guided by the Bank’s ongoing assessment of the economy and its commitment to achieving the 2% inflation target.  Future Hudson's Bay Store in Vancouver (Image: Perkins & Will-Hudson's Bay Company-Streetworks Development) FRANCES BULA (GLOBE & MAIL) - Hudson’s Bay is proposing to turn its flagship Vancouver store into a part-office tower, part-retail space, part-event space and part-green commuter hub – the latest move in the continuing transformation of department stores and city downtowns.
Company officials announced Wednesday they will be putting in a formal application to the city to redevelop the historic nine-storey store building (three underground) by adding 12 storeys of office space, transforming the top floors of the existing building into more office and reworking the interior to create a large event space and a three-storey atrium. The retail space will be reduced almost in half, from about 600,000 square feet to 350,000 square feet. “Hudson’s Bay will become a discovery destination. We are fully reimagining the Hudson’s Bay experience,” said company president Wayne Drummond. The architects for the Vancouver store are Perkins and Will, an architecture firm that specializes in sustainable building. This has transportation advocates excited, because the plan at the moment is to add no new parking for motor vehicles and instead provide space for 1,500 bicycles, as well as improve transit and pedestrian experiences. The decision is also being enthusiastically welcomed by some city politicians and downtown advocates, who have seen the city’s central retail and business core battered by two years of the pandemic. The Downtown Vancouver Business Improvement Association president, Nolan Marshall, says his organization “is incredibly optimistic and encouraged by the investment.” City councillor Sarah Kirby-Yung, one of several local politicians who came out to the formal announcement at the store, said she saw it as the next evolution of downtown – one that could help bring a different kind of life to the nearby Granville entertainment district. “Having people energizing it is important,” Ms. Kirby-Yung said. Hudson’s Bay, with its real-estate development arm Streetworks Development, has been redeveloping or departing from various historic properties across the country as retailers struggle to survive in the online world, depending on the potential in each market. The Victoria store was redeveloped almost 10 years ago, with rental apartments added. In Alberta, the Calgary store is being downsized to only three floors and the Edmonton store has been closed. The Winnipeg store has been shuttered since November, 2020, and, while the city would like to see it redeveloped, there are no takers yet. And there are redevelopment plans, with an added office tower, for the Montreal store. The stores are often the biggest buildings in Canadian central cities – the legacy of both the grand department-store era and the trading company that is considered a pillar of colonial Canada. The Vancouver store, with an assessed value of $222-million this year, will follow the path of two nearby buildings if the redevelopment is successful. The one-time Eaton’s, kitty corner from the Bay, was transformed in 2015 to a smaller Nordstrom department store that incorporated a restaurant and a bar into its layout. The top floors became offices. Vancouver’s historic main post office, down the street from the Bay on Georgia, is also being restored in the Post project, but with an office tower on top. Both have seen big tech clients like Microsoft and Amazon move in, as part of their effort to appeal to young employees who prefer to work in urban settings with lots of attractions and in spots easily reached by transit, walking or bike. There’s hope among those planning the Bay’s transformation that the Post project, which has proceeded at an unusually fast pace for a major Vancouver building development, will encourage the public and city planners to be confident about combining heritage with new additions. One heritage expert says he believes the Bay’s current design for its new building is even better than the Post’s. “I like it. If it’s handled well, it can be successful,” said John Atkin. “So far, it looks good. It’s not trying to swallow the building below. It’s respectful.” In contrast, the additions to the post office and to the Hudson’s Bay in Victoria were both “lumpy” in comparison, he said. The store’s exterior, terracotta walls with Corinthian columns, is protected by a heritage designation. The design plan is to preserve those and build a new building inside those walls. Little of the interior has heritage value and likely won’t be saved. But Mr. Atkin is hoping that one element will be: the passageway and stairs made of Manitoba limestone on the north side of the building, which was originally designed as a memorial area for store workers who died in the First World War. “I’d hate to see that little piece lost,” he said. Ryan Garner (Market News) - Metro Vancouver strengthened its status as one of Canada’s hottest housing markets in 2021, with record-breaking sales totals and home prices reaching all-time highs.
The Real Estate Board of Greater Vancouver (REBGV) recorded a total of 41,311 residential home transactions across all property types by the end of November, far exceeding the 30,944 properties that traded hands during 2020. The latest figures translate to an average of 3,755 sales per month in 2021, eclipsing last year’s monthly average of 2,578. The seeds of Vancouver’s torrid sales pace were planted at the start of the pandemic. Uncertainty surrounding COVID-19 caused a slowdown in March 2020, but shifting housing needs and historically low interest rates ramped up real estate transactions during the second half of the year. Demand remained high heading into 2021, although January’s sales total (2,389) turned out to be the lowest of the year by a significant margin, as no other month saw transactions dip below 3,100. Vancouver home sales, listings spiked in the spring A surge of spring activity saw sales peak at 5,708 in March, the highest monthly transaction total ever recorded in Metro Vancouver. Those record-setting numbers kicked off a three-month buying binge that saw 14,884 properties trade hands between March and June. Sales were spurred by increased household savings resulting from pandemic lockdowns, as well as homeowners who saw their property values increase and looked to either move up in the market or relocate to suburban areas. Listings also entered record-breaking territory during the spring, with homes hitting the market at a higher rate than Vancouver had ever seen before. However, buyer demand swallowed up the new supply before it could accumulate. For example, Vancouver properties averaged less than 20 days on the market during the month of May, reflecting the region’s insatiable demand. A summer lull saw both sales and listings recede after the spring frenzy, while fewer bidding wars caused prices to stabilize after surging during the first half of 2021. Sales totals hit an eight-month low in September (3,149) before rebounding in the fall, with unseasonably high activity causing prices to inch higher as the year comes to a close. Vancouver’s average home price hits $1.2 million mark At the start of 2021, the benchmark price for all property types in Metro Vancouver was $1,047,400. Prices have increased during each month of 2021, with the benchmark rising to $1,211,200 by December, representing a year-to-date increase of 14.6 per cent. Looking at Metro Vancouver’s housing segments, single detached homes have attracted the lion’s share of both buyer demand and bidding wars during 2021. As of December, the average detached home price sits at $1.87 million, jumping 20.2 per cent from the start of the year. Year-to-date, attached home prices have increased 21.6 per cent to reach an average of $990,300, while apartment homes hit a benchmark of $752,800 by December, representing an 11.2 per cent increase. Apartments were the only Metro Vancouver housing segment to experience any softening during 2021, with benchmark prices dipping slightly in June ($736,900) and July ($735,100) before rebounding toward the end of the year. Supply issues persist heading into 2022 While prices keep rising, inventory in the region has plummeted at the tail end of 2021, contributing to the tight housing market. As of December there were a total number of 7,144 homes listed on Metro Vancouver’s MLS system, a 35.7 per cent decrease compared to December 2020 (11,118). Policy makers have been tasked with finding solutions to increase housing supply, although there aren’t any easy answers. According to REBGV economist Keith Stewart, “it’s critical that this supply crunch remains the focus for addressing the housing affordability challenges in our region.” Interest rate hikes are expected to eventually ease demand, but Vancouver is in a unique situation because of its geographical constraints and steady population growth caused by both immigration and interprovincial migration. Those factors, as well as economic recovery and rising consumer confidence, should continue to motivate buyers and boost prices in the new year. |