The BCREA Commercial Leading Indicator (CLI) rose from 150 to 155 in the second quarter of 2021, representing the fourth consecutive increase as the economy recovered from the COVID-19-induced recession. Compared to the same time last year, the index was up by 25 per cent.

It is important to note that while the economy is posting a very strong recovery, we are still in a very abnormal and uncertain environment for commercial real estate. Normally, the type of growth we see reflected in the CLI would imply an improvement in demand for retail and office space. However, the complexities of the COVID-19 pandemic and related public health restrictions are driving a wedge between what we see in the data and what is being experienced on the ground.

Overall manufacturing sales rose 5 per cent in Q2 on higher sales in the wood products, food manufacturing, and chemical products sectors. The economic activity component of the CLI was also positively driven by a 4.8 per cent increase in wholesale trade, while retail sales were flat on continued non-essential retail lockdowns in the quarter and considerable quarterly declines in motor vehicle sales due to the ongoing semiconductor chip supply shortage.

Employment in key commercial real estate sectors such as finance, insurance, real estate (FIRE) and leasing increased by about 13,800 jobs in Q2. For a second consecutive month the office employment component of the index has hit an all-time high. However, the effect of this strong employment growth on the demand for office space remains unclear as many nominal “office workers” continue to work remotely. Manufacturing employment also jumped by 9,200 workers as quarterly manufacturing sales figures continued to hit all-time records.

The CLI’s financial component was positive in Q2 of 2021 for the third consecutive month. REIT prices approached all-time records and risk spreads between corporate and government debt continued to narrow.

For more information, please contact: Gino Pezzani.

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The Canadian economy contracted in the second quarter with output falling 1.1 per cent on an annualized basis. That decline follows three prior quarters of very strong growth. Most of the decline in real GDP was driven by slowing home sales and lower exports. After rising to record levels, home sales activity across the country have moderated. However, the downshift from record activity to lower, but still strong sales was significant enough to negatively impact economic growth.  That shift in the housing market was compounded by lower exports , which fell 4 per cent largely due to supply chain disruptions, as well as flat household spending due to COVID-19 restrictions put in place in the second quarter in large eastern provinces.  Household incomes grew 2.2 per cent in the second quarter, well outpacing just 0.7 per cent growth in spending. As a result, the Canadian savings rate remains in double digits for the fifth straight quarter. The eventual spending of at least some of the accumulated savings across the Canadian economy will be a key determinant of how the recovery unfolds from here.

Most of the factors that led to a decline in GDP over the second quarter were either one-time changes or due to what should be temporary supply chain disruptions.  Early data for June is showing strong growth, but the pace of the recovery remains uncertain due to the pandemic and especially the Delta variant driven rise in cases around the country.  While Inflation continues to run ahead of the Bank of Canada's 2 per cent target, the fourth-wave of COVID-19 cases is inserting a significant amount of uncertainty into the outlook and may cause a delay in the Bank of Canada's plans, pushing monetary tightening further into 2023.



Link: https://mailchi.mp/bcrea/canadian-real-gdp-growth-q22021

For more information, please contact: Gino Pezzani.

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According to the COVID-19 Recovery Dashboard, in July most BC housing markets continued to calm from a peak in March. While sales and new listings continued declining, the seasonally adjusted 6-month moving-average for housing starts hit a record level in the province for a second consecutive month. Rents are also beginning to rise sharply in major centers across the province. The average rate for a 1-bedroom apartment rose 6.5% in Vancouver and 8.9% in Victoria in July.

Retail sales continue to post strong figures, with July sales 13% above February 2020 levels. Throughout the month of July and most of August, restaurant reservations have trended upward in Toronto, Montreal, and Vancouver. Google’s average measure of movement trends in BC are at the highest level since March of 2020.

Seasonally adjusted aggregate employment in BC is now at roughly pre-pandemic levels, although high-wage workers are still doing much better than low-wage workers. Manufacturing and exports continue to post very strong figures in the province, with both hitting record levels in July for a second consecutive month. Consumer confidence is approaching pre-pandemic levels, while business confidence is well-above pre-pandemic levels.



For a more comprehensive overview of BC's economic recovery, click here

For more information, please contact: Gino Pezzani.

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As health restrictions eased, Canadian retail sales rose 4.2% m/m to $56.2 billion on a seasonally-adjusted basis in June. Due to declines in April and May, sales remained 3.5% below the March peak. Sales rose in 8 of 11 retail sectors measured by Statistics Canada, with the largest gains occurring in clothing sales (+49.1%), caused by loosening restrictions on non-essential retail. In June, 5.2% of Canadian retailers reported being closed for at least one business day, down from 5.6% in May. Statistics Canada's preliminary retail sales estimate for July, based on just 38% of respondents reporting, is for a 1.7% decline.

In BC, seasonally-adjusted retail sales were largely flat, rising just 0.2% m/m but nonetheless hitting a provincial record for a second consecutive month in June. BC retail sales were up by 12.6% compared to the same month last year. In metro Vancouver, sales were up 1.6% while in the rest of the province sales declined 1%. 

In June, Canadian e-commerce sales declined 10.6% as consumers switched to brick-and-mortar retail. E-commerce accounted for 5.8% of total retail sales in June, down from 7% in May. 


For more information, please contact: Gino Pezzani.
Link:  https://mailchi.mp/bcrea/canadian-retail-sales-june-2021

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BCREA 2021 Third Quarter Housing Forecast Update

Vancouver, BC – August, 2021 The British Columbia Real Estate Association (BCREA) released its 2021 Third Quarter Housing Forecast Update today.

Multiple Listing Service® (MLS®) residential sales in the province are forecast to rise 26 per cent to 118,350 units this year, after recording 94,007 sales in 2020. In 2022, MLS®residential sales are forecast to pull back 15 per cent to 100,150 units.  

“The pace of home sales in the province has slowed in recent months but an unprecedented start to the year still has BC on track for a record-breaking year,” said Brendon Ogmundson, BCREA Chief Economist.

With strong demand being supported by low mortgage rates and a rapidly rebounding post-COVID economy, the more significant concern is whether there will be an adequate supply of listings in the market. The supply situation is especially severe in markets outside the Lower Mainland, where new listings activity has been lackluster. As a result, the average price in 2021 is on track to post a second consecutive year of double-digit gains. We are forecasting the provincial average price to rise 16.6 per cent to $911,300 this year, followed by a 2.9 per cent gain next year to $937,300.

For more information, please contact: Gino Pezzani.

For the complete news release, including detailed statistics, click here.


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Canadian prices, as measured by the Consumer Price Index (CPI), rose 3.7% on a year-over-year basis in July, hitting the highest rate since prior to the pandemic. Overall, the upward bias of "base-year effects" are no longer substantially influencing the year-over-year CPI changes, although they still have an effect on certain subcomponents such as gasoline. On a seasonally adjusted month-over-month basis, the CPI was up 0.5% in July. The Bank of Canada's preferred measures of core inflation (which use techniques to strip out volatile elements) rose an average of 2.5% year-over-year in July. In BC, consumer prices were up 0.7% month-over-month, and up 3.1% on a year-over-year basis in July. The homeowner replacement cost index, which measures the cost of replacing home structures, rose 13.8% year over year in July, which was the fastest rate since the 1980s. Related costs, such as commissions on the sale of real estate, also rose strongly in July. Prices of passenger vehicles rose 5.5% year-over-year in July due to the continuing challenges related to semiconductor chip supply chains. 

While inflation is currently running higher than the Bank of Canada's 2 per cent target, many economists expect this elevated rate of price increases to be transitory as economies emerge from the pandemic and supply chains normalize. Base-year effects from falling prices during the early months of the pandemic had exaggerated year-over-year changes in CPI, but these effects have now largely ended. The rate of inflation as measured by CPI is very important for the Bank of Canada's monetary policy stance over the next year. If higher inflation is not transitory but instead the result of an over-stimulated economy, the central bank could act to raise interest rates sooner than expected. However, if the uptick in inflation fades in the coming months, we expect the Bank will stay its current course.


For more information, please contact: Gino Pezzani.

Link: https://mailchi.mp/bcrea/canadian-inflation-july-2021

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Canadian housing starts dipped slightly in July, but remain elevated by historical standards. While housing starts decreased to 272.2k units (-3.2% m/m) in July at a seasonally-adjusted annual rate (SAAR), on a year-over-year basis starts were still 11% above their July 2020 levels. Single-detached housing starts increased 7.1% from June, but this growth was not large enough to offset a 3.1% decline in multi-unit starts, resulting in an overall decline. 

In British Columbia, starts declined 26% m/m to 50.7k units SAAR in all areas of the province. This drop was driven by declines in multi-unit starts in metro Vancouver. Despite this volatility, starts in the province in July were still up 26% on a year-over-year basis. In terms of the six-month moving average, BC is at a record-high level of housing starts for a second consecutive month. In centres with at least 10,000 residents, single-detached starts were down 1%, while multi-unit starts were down 27% from last month. In Vancouver, housing starts were unchanged compared with July of 2020, while Victoria starts were up 72%, Kelowna was up 56%, and Abbotsford was up 2%.





For more information, please contact: Gino Pezzani.

https://mailchi.mp/bcrea/canadian-housing-starts-july-2021

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Vancouver, BC – August, 2021. The British Columbia Real Estate Association (BCREA) reports that a total of 9,663 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in July 2021, a decrease of 7.2 per cent over July 2020. The average MLS® residential price in BC was $891,687, a 17.1 per cent increase from $761,772 recorded in July 2020. Total sales dollar volume was $8.6 billion, an 8.6 per cent increase from last year.
 
“Provincial market activity slowed in July with both sales and listings declining on a seasonally adjusted basis,” said BCREA Chief Economist Brendon Ogmundson. “While sales remain robust, listings activity continues to be a concern as inventories trend near record lows.”

Total active residential listings were down 32.2 per cent year-over-year in July and continued to fall on a monthly seasonally adjusted basis.

Year-to-date, BC residential sales dollar volume was up 124.7 per cent to $73.4 billion, compared with the same period in 2020. Residential unit sales were up 85.4 per cent to 80,461 units, while the average MLS® esidential price was up 21.2 per cent to $912,379.
 
For more information, please contact: Gino Pezzani.
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Most Canadian provinces substantially lifted public health restrictions in the first half of July. As a result, Statistics Canada is reporting positive employment figures for the month across most indicators. Canadian employment rose by 94,000 in June (0.5%, m/m) to 18.88 million, following growth of 231,000 in June. This growth brings employment to the highest level since the onset of the pandemic. Canadian employment is now -1.3% (-246k) below its February 2020 pre-pandemic level. In July, growth was driven by gains in the private sector, the food & accommodation sector, among youth aged 15-24, and among prime working-age women. Other positive indicators included gains in hours worked (+1.3%) and a decline in the number of people working less than half their usual hours (-10.1%). The unemployment rate also declined by 0.3 to 7.5%. 

In BC, both total employment and the unemployment rate were largely unchanged from June. The province maintains one of the strongest labour markets in the country, with only Quebec reporting a lower unemployment rate for July. For the second consecutive month, BC remains the sole province with employment above its pre-pandemic level. 

For more information, please contact: Gino Pezzani.

Link: https://mailchi.mp/bcrea/canadian-employment-july-2021

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