Real (Estate) Talk with Ryan Berlin - January 2019

In last month’s rennie review we featured a few highlights from 2018. These included market conditions having normalized after a long period of price gains; buyers becoming more discerning when making purchase decisions; and a slew of provincial government policies that created uncertainty for all market participants.

Statistically-speaking, 2018 represented another down year for residential real estate in the Lower Mainland (Greater Vancouver and Fraser Valley board areas). In terms of transactions, there were 39,490 total sales in 2018, 31% below 2017, which itself was 9% below 2016. On the value front, benchmark prices crested in June before declining by 6% by the end of 2018. For the previous 12 months, benchmark prices were down by 1% versus December 2017, which itself was up 17% above values in December of 2016.

So, what’s in store for 2019? While price prognostication can be a perilous pursuit, there are a couple of factors that we think will be front and centre in shaping the regional housing market over the coming 12 months. 

Interest Rates. Since the middle of 2017 the Bank of Canada has raised its benchmark overnight rate five times, taking it from 0.5% to 1.75% today. South of the border, the Federal Reserve has been even more aggressive, raising its target rate nine times since late 2015, which has moved it into the range of 2.25-2.5% today. At the same time, Canadian government bond yields—which strongly influence fixed-term mortgage rates—were steadily rising through November 2018. At the time, the general consensus was that we better get comfortable with the established trajectory in rates because it was here to stay.

Despite a reasonable outlook for economic growth nationally, however, a number of headwinds facing the Canadian and US economies have shifted this perspective. From international trade conflicts, a sluggish energy sector, and fading inflation to slowing consumer spending, middling job growth, and a normalizing national housing market, the outlook for the Bank of Canada’s benchmark rate has changed: there is now the potential for no rate hikes through 2019, down from three just a couple of months ago. Similarly, the yield on 5-10-year Government of Canada bonds has recently dipped, falling from 2.30% in November to 1.96% in December. Put this all together and it appears that interest rates could be more accommodative than previous thought in 2019. This would serve to ease some of the rate-based pressure many purchasers were feeling on the heels of the new mortgage qualification rules that came into effect Jan 1, 2018.

Migration. British Columbia and its Lower Mainland region continue to see healthy population growth. At the national level, international migration has been robust in recent months, resulting in the fastest quarterly growth in Canada’s population since data were first collected back in the early-1970s (184,000 additional people was recorded between July and September 2018). Also being driven by international people flows, BC's population has now crossed the 5-million-person mark, with the 23,422 residents added through net international migration in Q3 2018 representing the highest number recorded since data were first collected.
With the federal government targeting 330,000 immigrants this year, and upwards of 350,000 immigrants annually by 2021, we expect migration—and, hence, population growth—to remain strong. And with an average of 90% of BC’s immigrants settling in the Lower Mainland, these national changes will have implications for our local real estate market.

Barring any further downward revisions to the economic outlook, combined with a more positive interest rate outlook and (fingers-crossed) no more substantive government policy intervention, the Lower Mainland’s housing market will be in for a soft landing in 2019.

The rennie review is produced each month by rennie intelligence, which includes the latest real estate data for Vancouver and the Lower Mainland's housing market. View the latest edition of the rennie review.

Our rennie intelligence division empowers individuals, organizations, and institutions with data-driven market insight and analysis. Experts in urban land economics, community planning, shifting demographics, and real estate trends, their strategic research supports a comprehensive advisory service offering and forms the basis of frequent reports and public presentations. Their thoughtful and objective approach truly embodies the core values of rennie.

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A brief monthly summary of the latest regional housing sales and listing activity, produced the same morning as the data is released.


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