Real EstateB.C.’s average residential sale price will edge up in 2019: Canadian Real Estate Association
JOANNAH CONNOLLY (BIV) - British Columbia is expected to lead a year-over-year decline in home sales in 2019, according to a national real estate forecast released this week, but sales in the province will increase slightly.
The average sale price of a B.C. home sold on the Multiple Listing Service next year will be $720,000 – an increase of 0.9 per cent over 2018’s figure, according to the forecast by the Canadian Real Estate Association (CREA).
That’s following a year-over-year increase of 0.6 per cent in 2018 to $713,700 – despite sales plummeting on an annual basis in many of the province’s major markets.
CREA said that, following an overall 24.2 per cent annual decline in home sales across B.C. in 2018, resale transactions would drop in the province by a further 5.2 per cent in 2019. That’s the second-steepest predicted sales drop of all the provinces, after Newfoundland at -7.2 per cent, and a much bigger total volume decline.
This contradicts a B.C. Real Estate Association forecast issued in November, which predicted home sales in the province would bounce back somewhat after a slow 2018.
Across the country next year, CREA predicted that the national average price for a Canadian home sold via the MLS would rise 1.7 per cent to $496,800. Only Newfoundland, Alberta and Saskatchewan are expected to see a lower average sale price next year compared with 2018.
The association revised its projected national residential sales across 2018 to a decline of 11.8 per cent versus 2017, which is 458,000 homes – the lowest in nine years.
"The national forecast has been revised lower... as an anticipated rebound in sales in British Columbia has so far failed to materialize, the recovery in Ontario sales this summer has now run its course and sales activity in Alberta has edged lower. These developments were partially offset by stronger-than-expected sales activity in Quebec," CREA said in its report.
Next year, the total number of sales in Canada is forecast to decline another 0.5 per cent to 456,000 units.
“In 2019, home sales activity and prices are expected to be held in check by recent policy changes from different levels of government, in addition to additional interest rate increases,” said the association.
While B.C. is set to drive that projected decline in resale transactions, followed by Alberta, Ontario is expected to see a recovery in home sales after a weak 2018, and Quebec is predicted to continue its strong activity.
It appears a city council motion to stop allowing duplexes in a huge swath of Vancouver is on the way to passing, even as the city battles an ongoing housing crisis.
Between the five votes of the Non-Partisan Association, including the mover of the motion, Colleen Hardwick, and Green party leader Adriane Carr, the motion appears to have the votes to overcome opposition from the city’s independent mayor.
Hardwick bristled at suggestions that the motion, which would undo a change by the previous council on the eve of the Vancouver election, would limit housing options for Vancouverites.
“I’m not putting forward any kind of motion against duplexes,” Hardwick told reporters outside the inaugural city council meeting on Tuesday. “I myself live in a duplex. That’s not the point. The point is we have a clean slate now and an opportunity to revisit the way we’re planning for our city based on the actual needs of the community.”
Vancouver’s mayor, Kennedy Stewart, had said during the campaign that he supported allowing duplexes in what had previously been single-family homes.
“We’ll see where we get to tomorrow,” Stewart told reporters. “I was disappointed there wasn’t more consultation, but I did say I would support what the previous council passed. We are in a housing crisis here.”
Vancouver City Council under Gregor Robertson legalized duplexes in some 99 per cent of previously single-family zones in September – a sweeping change to some 67,000 properties. At the time he said the idea was to include homes in the “missing middle” and allow citizens more options between condos and expensive single family homes, which in Vancouver are often more than $2 million.
The motion was to be debated on the same day the B.C. government put almost half a billion dollars to create 4900 subsidized homes across the province, with some 1,100 homes in Vancouver, which got some $110 million in investment.
It doesn’t make sense for Vancouver to limit housing options and preserve legal restrictions that prevent density, said UBC housing economist Tom Davidoff, especially as Vancouver grows.
“One owner for a 3,000 square foot lot is not going to cut it as Vancouver moves forward,” Davidoff said. “To go backwards is a bit of a headscratcher."
Adriane Carr of the Green Party told CTV News that she was voting for the motion because she wants there to be a city-wide plan, which could result in more density even without the duplexes.
“The motion is not about saying no to duplexes. The motion is about saying no to a process, which was a very last-minute addition into a plan without any due public consultation,” she said.
There hasn’t exactly been a stampede of people building duplexes since they were allowed. City staff told CTV News there have been only three applications.
The motion was slated for discussion at Tuesday’s council meeting, but will be delayed until Wednesday. If it passes the change will go to public hearing.
The Bank of Canada can finally see “home” on the horizon.
Governor Stephen Poloz and his deputies on the Governing Council raisedthe benchmark interest rate a quarter-point to 1.75 per cent on Wednesday, as expected.
They said they feel pretty good about the economy, now that politicians in Canada, Mexico, and the United States have agreed on a revised trade agreement, and that evidence suggests households are adjusting well to higher borrowing costs. Policy makers raised their outlook for business investment and exports, suggesting the economy is becoming less reliant on debt-fuelled spending and the housing market.
“The Canadian economy continues to operate near its capacity, and growth is relatively broad-based across sectors and regions,” Carolyn Wilkins, the senior deputy governor, said at a press conference in Ottawa. “What stands out is that, even with today’s increase … monetary policy remains stimulative.”
Wilkins’s emphasis on the still-low level of borrowing costs was a reminder that the public needn’t panic at the sight of marginally higher interest rates, and a gentle warning that no one should expect interest rates to stay at this level.
The economy is growing a little faster than the Bank of Canada predicted a few months ago, and “vulnerabilities” from elevated levels of household debt are “edging lower,” it said. Policy makers reiterated that interest rates must rise, and for the first time offered a more definitive notion of where it wants to go.
“Governing Council agrees that the policy interest rate will need to rise to a neutral stance to achieve the inflation target,” the bank said in a statement explaining the latest policy decision.
Poloz, who took over as the governor of Canada’s central bank in 2014, has talked wistfully about returning interest rates to a level that economists associate with normal, a place where the cost of money is neither stimulating expansion nor curbing growth. The central bank estimates that “neutral” interest rate — which Poloz has characterized as “home” — is something between 2.5 per cent and 3.5 per cent.
There will be a debate on Bay Street and Wall Street about how fast the Bank of Canada wants to close the gap between the neutral rate and the current setting. Analysts tended to call the central bank’s latest communication “hawkish,” a widely used term that implies the central bank is more apt to raise interest rates than to cut them or leave them unchanged. The value of the dollar jumped in the minutes following the release of the policy statement, as traders noticed that “gradual” had been dropped from the text. Policy makers had used that modifier in three consecutive policy statements to make sure the public knew that the economy was facing a lot of headwinds.
There will be a temptation to assume the central bank’s decision to take out the eraser is a signal that interest-rate increases will become more frequent. In fact, the Bank of Canada’s outlook is about the same as it was a few weeks ago; if there’s a shift, it’s that policy makers are more confident that outlook will come true.
More likely, Poloz, who has made a point of avoiding explicit guidance, wanted to keep investors and others from reverting to their old habits of putting textual analysis ahead of number crunching. The new policy statement says the pace of interest-rate increases will be determined by “how the economy is adjusting to higher interest rates, given the elevated level of household debt” and “global trade policy developments.” The resolution of the North American trade dispute is a relief, but the central bank expressed heightened concern of the U.S. trade war with China.
“You may have noticed that we have not used the word ‘gradual’ to describe the pace of policy adjustments,” Wilkins said. “This is to avoid the impression that we are following a preordained, mechanical path.”
Poloz acknowledged that the new wording gives the Governing Council more flexibility, but that he and his lieutenants have no idea how they will use that maneuverability. He said he was prompted to make the change because the Street had come to associate “gradual” with an increase every couple of meetings. “This is serving notice that it could be faster or it could be slower,” Poloz said.
That’s probably right. The numbers suggest interest rates could be higher, but that understanding of how the economy works is based on periods when household debt was much lower than it is now. The central bank went out of its way to say that even though it’s comfortable with the way Canadians are adjusting to higher borrowing costs, household vulnerabilities “remain elevated.” Wilkins also said stronger business investment probably means the economy has more capacity to produce inflation-free growth. If so, the central bank’s path “home” could still be gradual, although policy makers might refrain from calling it that.
“It’s amazing how markets can focus on one word,” Tom O’Gorman, director of fixed income at Franklin Bissett Investment Management in Calgary, said. “They are going to be data dependent and that makes sense.”
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