The Canadian economy grew 0.1 per cent in November, matching the rate of growth in October. In contrast to the pandemic economy of the previous two years, the services sector is now leading the economy while goods producing sectors struggle.  Overall, growth was fairly broad-based with 14 of 20 Canadian industrial sectors posting positive growth. Rising interest rates continue to impact highly rate-sensitive sectors like residential construction and real estate. Residential construction activity contracted 1.8 per cent in November and output from offices of Real Estate Agents and Brokers fell 4.2 per cent, the ninth consecutive monthly decline in that sector.

With November's data and Statistics Canada's preliminary estimate of zero growth in December, the final quarter of 2022 likely saw growth of 1.6 per cent on an annualized basis. While GDP data is showing signs of a slowing economy, that slowdown has yet to show up in the labour market where job gains remain robust and the unemployment rate is at a historical low. However, we expect that as higher interest rates begin impacting the wider economy this year, slowing growth will catch up to the labour market. That outlook is shared by the bond market where long-term rates have been falling as investors price in expectations of a slowing economy. If that trend continues, we should see further relief on fixed mortgage rates this year while variable rate holders will have to wait for a pivot to lower rates from the Bank of Canada.

Link:  https://mailchi.mp/bcrea/canadian-real-gdp-growth-november-2022

For more information, please contact: Gino Pezzani.

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Metro Vancouver home sales set or neared historic records in 2021 and 2022 on both ends of the spectrum. Sales activity hit a record high in March of 2021 and closed 2022 near historic lows after accounting for typical seasonal variation.

The key economic variable most responsible for this oscillation between extremes has been the spike in mortgage rates, as a result of the Bank of Canada rapidly raising the policy interest rate to quell inflationary pressures not seen in the country in more than thirty years.

At the time of publication, inflation remains stubbornly high, despite the Bank of Canada’s historically monumental efforts to bring inflation back to their preferred target range of between one and three per cent. Largely because of this, mortgage rates are expected to remain higher than market participants had been used to in recent times.

Home sales in 2023 will remain in line with last year while prices may see small increases, according to the Real Estate Board of Greater Vancouver’s first 2023 Residential Market Forecast.

The forecast looks at current and historical market trends alongside economic factors like inflation and risk of recession to predict what 2023’s housing market will look like.

A second forecast will be coming in the second half of the year.

Key highlights 

1. The Bank of Canada is at, or very near, the peak of the current interest rate tightening cycle.

2. Apartment sales are forecast to decrease over last year, while detached homes are forecast to increase. 

3. While increasing mortgage costs are decreasing purchasing power, other factors will continue to put upward pressure on prices. 

For more information, please contact: Gino Pezzani.

The link of the report: Read the report

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The Bank of Canada raised its overnight policy rate by 25 basis points to 4.5 per cent this morning. In the statement accompanying the decision, the Bank noted that recent economic growth in Canada as been stronger than expected and labour markets remain tight but it sees growing evidence that monetary policy is working to slow the economy. The Bank expects the economy to stall through the middle of 2023 before picking up later in the year.  The Bank sees improvement in the inflation outlook with signs that core inflation has peaked and it projects a significant decline in inflation this year. It expects inflation to return to its 2 per cent target by 2024.

Most importantly, the Bank stated that it expects to hold its policy rate at 4.5 per cent as it monitors the impact of the last year of rate increases. While the door remains open to further rate increases should the outlook for inflation change, the Bank for now is on hold.  From here, the trajectory of mortgage rates will depend on the outlook for the economy. With growth expected to slow in 2023, markets are pricing in Bank of Canada rate cuts by the end of this year and average five-year fixed mortgage rates have declined in January from their peak of 5.5 per cent to 5.19 per cent and will likely fall further in coming months. However, the average variable rate mortgage, now at 6.35 per cent will stay elevated until the Bank of Canada begins lowering its policy rate.

Link:  https://mailchi.mp/bcrea/bank-of-canada-interest-rate-announcement-24s8ethx68

For more information, please contact: Gino Pezzani.

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The speculation and vacancy tax is an annual tax based on how owners use residential properties in areas in B.C. affected most by the current housing shortage crisis. 

The B.C. government announced the expansion of areas where the speculation and vacancy tax applies. Owners in these areas will not have to declare until 2024. See taxable regions for specific municipalities and regions. 

Find out more about how the speculation and vacancy tax applies to you.

You can declare as soon as you receive your declaration letter. It includes your Letter ID and Declaration Code, which can be found at the top right corner of your letter.

Find out when to expect your letter.

It only takes a few minutes to declare online. It's faster than calling and your information will be safe and secure.

Button link to declare now

Here is the link from the Gorvernment site: https://alpha.gov.bc.ca/gov/content/taxes/speculation-vacancy-tax

For more information, please contact: Gino Pezzani.

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Canadian seasonally-adjusted retail sales fell 0.1 per cent in November to $61.8 billion. Sales fell in 6 of 11 subsectors, but were led by lower sales at food and beverage stores (-1.6 per cent) and building material and garden equipment and supplies dealers (-3.8 per cent). Core retail sales, which strips out gasoline and motor vehicle and parts dealers, declined 1.1 per cent. In volume terms, sales fell 0.4 per cent in November. 

In BC, seasonally-adjusted sales rose 0.9 per cent in November. Compared to the same month last year, retail sales were up 4.4 per cent in the province. In the Greater Vancouver region, sales rose 0.9 per cent month-over-month and were up 4 per cent year-over-year. 

In November, in the run-up to the holiday shopping season, Canadian e-commerce sales rose 26 per cent to $4.4 billion, corresponding to 6.5 per cent of retail sales. This percentage remains elevated relative to pre-pandemic levels, but is lower than during core months of the pandemic in 2020 and 2021.

Link: https://mailchi.mp/bcrea/canadian-retail-sales-november-2022-january-20-2023.

For more information, please contact: Gino Pezzani.

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To view the latest Market Intelligence report PDF, click here.

As the Bank of Canada aggressively raised rates over the past year to fight multi-decade-high inflation, fears are mounting that tighter monetary policy will push the Canadian economy into recession. Indeed, central banks have a poor historical track record in achieving “soft landings” following tightening cycles. That is, amid high inflation, central banks often struggle to “thread the needle” of raising rates enough to bring inflation back down to 2 per cent without tipping the economy into a recession.

In this Market Intelligence, we summarize how past Canadian recessions have impacted the BC economy and housing market and look forward to how the BC housing market may perform during a potential 2023 recession.

Summary Findings

High interest rates mean that recession anxiety is mounting:

  • Historically, home sales tend to lead the business cycle, starting to decline many months before the start of a recession. By the time the recession begins, sales are typically near their nadir.

  • Prices follow a less predictable pattern surrounding recessions. The early 1980s involved a large run up and crash in prices, but subsequent recessions involved a modest softening or plateauing of prices before the ascent resumed.

  • Historically, home sales tend to post substantial recoveries following a recession as interest rates are cut to support the economy.

Strong economic fundamentals and demographics support the housing sector in British Columbia.

For more information, please contact: Gino Pezzani.

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Canadian prices, as measured by the Consumer Price Index (CPI), rose 6.3 per cent on a year-over-year basis in December, a decrease from the 6.8 per cent rate in November. Falling gasoline (-13.1 per cent month on month) and fuel oil prices drove the decline, while softening costs for durable goods such as furniture and used vehicles also slowed price appreciation. Rising interest rates contributed to an increase in mortgage interest costs, which were up 18 per cent year-over-year as Canadians renewed or initiated higher-rate mortgages. In contrast, the Homeowner's Replacement Cost, which tracks home prices, continued to slow, pushing the CPI downwards. Month-over-month, on a seasonally-adjusted basis, prices were down 0.1 per cent in December. In BC, consumer prices rose 6.6 per cent year-over-year, down from 7.2 per cent last month.

While sharply declining gasoline prices were mostly responsible for the drop in CPI in December, there are encouraging signs that price appreciation is slowing in other sectors of the economy as well. Prices for household furnishings and equipment fell from last month amid ameliorating supply chain issues. The Bank of Canada's measures of core inflation, which strip out volatile components, ticked down in December for the first time since the summer. Weighing CPI numbers against a strong December jobs report, most analysts are expecting a final modest increase in rates on January 25th before the Bank concludes the tightening cycle. 

Link: https://mailchi.mp/bcrea/canadian-inflation-december-2022

For more information, please contact: Gino Pezzani.

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Canadian housing starts declined 5.5 per cent to 248,625 units in December at a seasonally-adjusted annual rate (SAAR). Starts were up 1.4 per cent from December of 2021. Single-detached housing starts fell 10.4 per cent to 58.5k, while multi-family and others fell 3.9 per cent to 190.1k (SAAR). 

In British Columbia, starts rose by 20.7 per cent in December to 58.6k units SAAR in all areas of the province. In areas in the province with 10,000 or more residents, single-detached starts rose 2.7 per cent m/m to 7.2k units while multi-family starts rose 25.1 per cent to 47.4k units. Starts in the province were 5 per cent above the levels from December 2021. Starts were up by 10k in Vancouver, 1.2k in Kelowna, and 0.9k in Abbotsford, while declining by 4k units Victoria. The 6-month moving average trend rose 0.8 per cent to 50.5k in BC in November. 

Link: https://mailchi.mp/bcrea/canadian-housing-starts-december-2022

For more information, please contact: Gino Pezzani.

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At a glance: (2 minute read)

Vancouver property owners can now start making their Empty Homes Tax (EHT) property status declarations for the 2022 tax year.

All residential property owners are required to complete a declaration every year, even if they live in their property or rent it out.

Over the coming weeks, declaration instructions are being mailed to property owners along with their advance property tax notice. Owners who have signed up to receive eBills will also receive their notice direct to their email inbox.

Declarations are due by February 2, 2023. 

Current tax rate three per cent

Properties declared or deemed vacant in the 2022 tax year will be taxed at a rate of three per cent of the property's 2022 assessed taxable value. 

2023 tax rate five per cent

The rate for the 2023 tax year will increase to five per cent.

How to declare

Declare online at vancouver.ca/eht-declare. Need help? Chat live with an advisor on the city’s website, or call 311.

Property owners can sign up for an online services account and opt to receive tax notices by email. They can also check their account balances, and access other important tax information at Vancouver.ca

Late declarations for 2021

Owners who failed to declare their property status for the 2021 tax year have until July 5, 2023 to make a late declaration in the form of a Notice of Complaint. A $250 bylaw fine applies to late declarations.

Speculation and Vacancy Tax

The City of Vancouver’s EHT is separate from the provincial government’s Speculation and Vacancy Tax. For more information about the province’s tax, visit gov.bc.ca/spectax

Read the Empty Homes Tax Annual Report (opens 13-page pdf)

For more information, please contact: Gino Pezzani.

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On November 24, 2022, Bill 44, the Building and Strata Statutes Amendment Act, 2022 (the “Act”), was enacted and removed most rental and age restrictions in strata buildings.  The amendments became effective immediately on November 24, 2022.

REALTORS® need to be aware of the impact of these changes for existing owners, buyers, and sellers.

The Act removed two rights of strata corporations to pass bylaws that could control occupancy, rental and use of strata lots:

  1. Prohibition of rental restrictions; and

  2. Removing the right to have age restrictions within a strata building, other than 55+

Rental Restrictions

The Act prohibits rental restrictions in several ways. Firstly, by repealing the requirement for developers who intend to rent strata lots to prepare a rental disclosure statement. Since January 1, 2010 developers have been required to file rental disclosure statements if they intend to rent or preserve the right to rent, all strata lots (or a portion thereof) either as the developer or by successive owners of the strata lots. Since 2010 most developers have filed rental disclosure statements, except for certain developments located in areas where “owner-occupied” buildings would be more desirable to prospective purchasers.

So how did rental disclosure statements work? If a rental disclosure statement was filed with the superintendent that reserved the right to rent the units for the next 100 years (for example), then any bylaws the strata corporation approved regarding rental restrictions were unenforceable until the end of the 100-year period. Without a rental disclosure statement being filed with the superintendent of real estate, strata corporations could only impose rental restrictions through passing resolutions by a ¾ vote at an annual general meeting or special general meeting to enact bylaws related to rentals.

The second way the Act prohibits rental restrictions is by repealing any provision of the Strata Property Act, [SBC 1998] CHAPTER 43 (the “Strata Act”) which allowed for strata corporations to create bylaws related to restricting or prohibiting rental. Before the enactment of the Act, a strata corporation could:

“…restrict the rental of a strata lot by a bylaw that:

(a) prohibits the rental of residential strata lots, or

(b) limits one or more of the following:

(i) the number or percentage of residential strata lots that may be rented;

(ii) the period for which residential strata lots may be rented.”

With the Act’s enactment, strata corporations no longer have any rights to create bylaws that restrict the rental of strata lots (except for restrictions on short-term rentals (or stays) of 30 days or less).

Age Restrictions

The Act repealed existing section 123 of the Strata Act which gave strata corporations the ability to enact bylaws related to pet and age restrictions and replaced it with provisions just related to pets and animals.

 The Act added sections 123.1 and 123.2 to the Strata Act. Section 123.1 states that the only age restriction allowed is now 55 and over:

“Age restriction bylaws

123.1 (1) The strata corporation must not pass a bylaw that restricts the age of persons who may reside in a strata lot except as permitted by subsection (2).

(2) The strata corporation may pass a bylaw that requires one or more persons residing in a strata lot to have reached a specified age that is not less than 55 years.”

Previously, strata corporations were allowed to pass bylaws that restricted the age of persons who may reside in the strata lot. An example of these restrictions could be that strata lots could only be occupied by persons over the age of 19 or age 45 and over, which is not permissible under the amendments passed by the Act.

Section 123.2 provides exemptions for the age restrictions in 55+ buildings. These exemptions include caregivers who reside in the strata lot for caregiving, or people residing in a strata lot before the restriction occurred.

Other Amendments

The Act also amended other portions of the Strata Act, such as bylaws within the Standard Schedule of Bylaws related to rental restrictions, and removed the requirement for strata corporations to confirm the number of strata lots rented on the Strata Form B.

Bill 44 also allows for electronic attendance at an annual or special general meeting without needing a specific bylaw.  

What does this mean for clients?

Clients need to know the following about the new changes:

  • Bylaws that prohibit the rental of strata lots are no longer enforceable. All strata lots can now be rented out.

  • Bylaws that enforce only a certain number of rental units within a strata building are no longer enforceable.

  • Prohibitions on short-term rentals (less than 30 days) are still allowed and enforceable.

  • Any bylaws restricting the age of persons who may reside in a strata lot for persons under 55 years are no longer enforceable.

  • There is no obligation for strata corporations to update their current bylaws to reflect these changes; however, they should note that some of their bylaws will no longer be enforceable.

These changes may affect not only the use and occupancy of people’s strata lots, but also the way in which their properties are listed, marketed and valued. For strata corporations in vacation ‘hotspots’ or older buildings with noise issues, these amendments may lead to more disputes and complaints for the strata corporation to address on an ongoing basis.

For more information, please contact: Gino Pezzani.

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