Vancouver, B.C. – January, 2022 – The increased activity seen in the Lower Mainland’s commercial real estate market in the first half of 2021 carried into the third quarter (Q3) of the year across all categories.

There were 640 commercial real estate sales in the Lower Mainland in Q3 2021, a 64.1 per cent increase from the 390 sales in Q3 2020, according to data from Commercial Edge, a commercial real estate system operated by the Real Estate Board of Greater Vancouver (REBGV).

The total dollar value of commercial real estate sales in the Lower Mainland was $3.250 billion in Q3 2021, a 30.7 per cent increase from $2.487 billion in Q3 2020.

"Commercial real estate activity recovered steadily in the first three quarters of 2021 against 2020 levels as consumer and business confidence returned from the initial uncertainty that the COVID-19 pandemic caused," Keith Stewart, REBGV economist said. “In particular, the strength of land acquisition activity points to new development interest across the region.”

Q3 2021 activity by category

Land: There were 228 commercial land sales in Q3 2021, which is a 137.5 per cent increase from 96 land sales in Q3 2020. The dollar value of land sales was $1.839 billion in Q3 2021, a

15.5 per cent increase from $1.592 billion in Q3 2020.

Office and Retail: There were 235 office and retail sales in the Lower Mainland in Q3 2021, which is up 42.4 per cent from 165 sales in Q3 2020. The dollar value of office and retail sales was $489 million in Q3 2021, a 41.7 per cent increase from $345 million in Q3 2020.

Industrial: There were 153 industrial land sales in the Lower Mainland in Q3 2021, which is a 43 per cent increase from 107 sales in Q3 2020. The dollar value of industrial sales was $544 million in Q3 2021, a 116.7 per cent increase from $251 million in Q3 2020.

Multi-Family: There were 24 multi-family land sales in the Lower Mainland in Q3 2021, which is up 9.1 per cent from 22 sales in Q3 2020. The dollar value of multi-family sales was $378 million in Q3 2021, a 26.4 per cent increase from $299 million in Q3 2020.

For more information, please contact: Gino Pezzani.

In BC in December, sales, new listings, and housing starts all declined somewhat from November. While sales rose slightly in the lower mainland, declines in all other regions of the province caused a decline overall. Rental rates in Victoria and Vancouver remain elevated relative to pre-pandemic levels amid generally high consumer price appreciation. 

Retail sales rose in November in BC to a fresh record, with sales 12 per cent above February of 2020 prior to the onset of the pandemic. As of January, restaurant reservations in Vancouver are at roughly 50 per cent of the pre-pandemic level, dropping by roughly a third since December due to Omicron. By contrast, Toronto is about 95 per cent below the prior year's restaurant activity due to fresh restrictions. Google's measure of movement trends is currently about 22 per cent below pre-pandemic levels in BC. 

Although aggregate employment has recovered in BC to pre-pandemic levels, the accommodation and food service sector was about 14 per cent below the pre-pandemic level in December. The labour market has served high-income workers much better than low-income workers. Employment in high-income industries is about 7 per cent above pre-pandemic employment levels, while employment in low-income industries is about 5 per cent below pre-pandemic employment levels. Manufacturing in BC remained constant from last month, as with exports and imports. Business confidence stayed flat in December, while consumer confidence drifted downwards. The number of US and non-US tourists has been rising each month since restrictions were eased last summer, reaching about 45 per cent of pre-pandemic levels in November.

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

For more information, please contact: Gino Pezzani.

While the majority of expert opinion had swung toward the Bank of Canada raising its overnight rate this morning, the Bank instead maintained its overnight rate at 0.25 per cent. However, in the statement accompanying the decision the Bank noted that slack in the economy has been absorbed and it is ending what it calls its "exceptional forward guidance" on the policy interest rate. This is a clear signal that the Bank will begin raising its overnight policy rate, likely at its next meeting in March. The Bank also noted that the Canadian economy grew much faster than expected over the second half of 2021 and has entered 2022 with considerable momentum. While the Omicron variant is weighing on activity in the first quarter, its impact is expected to be modest. Importantly, the Bank expects inflation to remain close to 5 per cent (annualized) over the first half of 2022 before declining to 3 per cent by the end of the year.

Inflation continues to run ahead of the Bank of Canada's 2 per cent target and inflation expectation are noticeably rising.  That has prompted the Bank to bring its rate tightening forward by several months. We expect the Bank will begin tightening in March, ultimately bringing its overnight rate to 1.75 per cent by early 2023.  Canadian fixed-rate mortgages have already been rising in anticipation of a higher Bank of Canada rate and are now closing in on their pre-pandemic level of 3 per cent. For an analysis of how this rate-tightening cycle may impact the BC housing market, please see our most recent Market Intelligence Report, "Too Tight? The Impact of Bank of Canada Tightening on BC Housing Markets"

For more information, please contact: Gino Pezzani.

Link:  https://mailchi.mp/bcrea/bank-of-canada-interest-rate-announcement-y3ely6wsnh

Canadian seasonally-adjusted retail sales rose 0.7% to $58.1 billion in November. The rise was driven by sales at gasoline stations (+4.9%), building material and garden equipment and supplies dealers (+3.0%) and food and beverage stores (+1.0%). Core retail sales, which strips out gasoline and vehicle and parts sales, increased 0.5% in November. Part of this growth was due to price growth--retail sales rose 0.2% in volume terms.

In BC, seasonally-adjusted sales rose 0.8% in November. Compared to the same month last year, retail sales were up 3.3% in the province. In the Greater Vancouver region, sales rose 0.7% month-over-month and were up 9.4% year-over-year. 

In November, Canadian e-commerce sales rose from $3.3 billion to $4.3 billion. As a result, e-commerce increased from 5.4% of total retail sales in October to 6.9% in November. This percentage remains elevated relative to pre-pandemic levels. 

For more information, please contact: Gino Pezzani.

Canadian prices, as measured by the Consumer Price Index (CPI), rose 4.8% on a year-over-year basis in December, up from 4.7% in November. On a month-over-month basis, the CPI declined 0.1% in December, the first monthly decline since December 2020. The Bank of Canada's preferred measures of core inflation (which use techniques to strip out volatile elements) rose an average of 2.9% year-over-year in December. Higher prices for food (+5.2%), passenger vehicles (+7.2%) and homeowners' home and mortgage insurance (+9.3%) were major drivers of growth in the headline CPI. Supply-chain difficulties continued contributing to price gains, as well as the flooding and infrastructure damage in BC. In BC, consumer prices were essentially flat month-over-month, and up 3.9% on a year-over-year basis. 

Inflation continues to run ahead of the Bank of Canada's 2 per cent target. Although transportation costs appear to be trending down, food and shelter costs are on the rise. While the food prices may reflect temporary supply chain issues, a recovery in Canadian rents and rising mortgage costs mean the shelter component of CPI may continue to rise in 2022. As a result, we expect this elevated level of inflation to persist through 2022 before prices begin moderating. The Bank of Canada has signaled that it will begin raising its policy rate this year, and markets are now expecting those rate increases to happen much earlier than previously anticipated, perhaps as early as the Bank of Canada meeting next week.

For more information, please contact: Gino Pezzani.

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

Canadian housing starts fell to 236.1k units in December at a seasonally-adjusted annual rate (SAAR). This brings the total number of housing starts in 2021 to 271.2k, 16% above the previous record in 2004. Housing starts were down by 67.7k (22.3% m/m) in December (SAAR). Comparing year-over-year, starts were up slightly from December of 2020 (1.3% y/y). Single-detached housing starts dipped 3.4% in December to 70.8k, while multi-family and others dropped 28.3% to 165.3k (SAAR). 

In British Columbia, starts were up 39.1% in December, rising to 55.3k units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 20.5% m/m to 8.7k units while multi-family starts leaped 47.9% to 42.3k units. Starts in the province were 26.7% above the levels from December 2020. Starts were up by 7.7k units in Vancouver, 3.6k in Victoria, 1.9k in Kelowna, and 1.5k in Abbotsford. The 6-month moving average trend declined 4.1% to 44.2k in December in BC. 

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

For more information, please contact: Gino Pezzani.

Later this year, the Bank of Canada is widely expected to embark on its first interest rate tightening cycle since 2018. In this Market Intelligence, Too Tight? The Impact of Bank of Canada Tightening on BC Housing Markets, we will consider how high interest rates might rise and using both historical data and model simulations, we analyze how BC housing markets may be impacted.

Click here to read the full report. 

Summary Findings:

1.The Bank of Canada is signalling that in response to elevated Canadian inflation, it will begin raising its policy rate or “tightening” monetary policy this year.

2. Historically, Bank of Canada tightening has led to falling home sales and flattening home prices.

3. With markets so out-of-balance, it will take a substantial decline in demand to return active listings to a healthy state. 

4. Model simulations show that the most likely outcome of this round of Bank of Canada tightening will be home sales falling to near their historical averages and for home price growth to moderate, but because of severely low supply, it is unlikely to result in significant home price declines.

For more information, please contact: Gino Pezzani.

For immediate release

Vancouver, BC – January, 2022. The British Columbia Real Estate Association (BCREA) reports that a record 124,854 residential unit sales were recorded by the Multiple Listing Service^® (MLS^®) in 2021, a 32.8 per cent increase from the 94,001 units sold in 2020. The annual average MLS^® residential price in BC was $927,877, an 18.7 per cent increase from $781,572 recorded the previous year. Total sales dollar volume was $115.8 billion, a 57.7 per cent increase from 2020.

“Last year was a record year for BC homes sales with seven market areas setting new highs,” said BCREA Chief Economist Brendon Ogmundson. “Listings activity could not keep up with demand throughout the year. As a result, we start 2022 with the lowest level of active listings on record.” 

A total of 6,871 MLS^® residential unit sales were recorded across the province in December down 17.6 per cent from a record-setting December 2020. The average MLS^® residential price in BC passed the $1 million mark for the first time as the average price in three of the largest markets in the province were over $1 million in December. Total sales dollar volume was $7.1 billion, a 1.2 per cent increase year-over-year. 

Total active residential listings were down 41.2 per cent to a record low of 12,179 units. The supply situation is particularly concerning in the Fraser Valley, Chilliwack and Vancouver Island where there is one month or less of supply at the current pace of sales.  

For more information, please contact: Gino Pezzani.

Canadian employment grew for the seventh consecutive month in December according to Statistics Canada, rising by 55,000 to 19.371 million (0.3%, m/m). Canadian employment had recovered to its pre-pandemic level in September and is now roughly 1.3% above that level. Since the prior survey period, public health measures were largely unchanged. The survey occurred prior to the emergence of the Omicron variant and restrictions were very low across the country. 

December employment gains were most pronounced among males aged 25-54, Ontarians, and those within the construction and education sectors. Fulltime employment increased by 123,000 (+0.8%) in December, whereas employment among those working part-time declined by 68,000 (-1.9%). The Canadian unemployment rate declined for a seventh consecutive month to 5.9%, the lowest level since the onset of the pandemic. The unemployment rate is now within 0.2% of the rate in February of 2020 (5.7%). 

In BC, employment was essentially flat (+400, m/m), remaining at the highest level since the pandemic began. The unemployment rate, however, declined in December, reaching 5.3%, the lowest level since the pandemic began. Only Quebec and Manitoba currently have a lower unemployment rate in Canada. 

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

For more information, please contact: Gino Pezzani.