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BCREA: Strong Demand, Dwindling Supply for BC Housing Markets

Vancouver, BC – June 14, 2021. The British Columbia Real Estate Association (BCREA) reports that a total of 12,638 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in May 2021, an increase of 178.2 per cent over May 2020 when the onset of the COVID-19 pandemic prompted a lockdown of the provincial economy. The average MLS® residential price in BC was $916,340, a 26.2 per cent increase from $726,335 recorded in May 2020. Total sales dollar volume was $11.6 billion, a 251 per cent increase from last year.

“Provincial housing markets continue to calm after peaking in March,” said BCREA Chief Economist Brendon Ogmundson. “The implementation of a stricter mortgage stress test in June may have a minor impact on home sales but we expect strong market activity over the second half of the year.”

Total active residential listings were down 17 per cent year-over-year in May and dipped lower on a seasonally adjusted basis following two prior months of rising active listings.

“On the supply side, markets in the Lower Mainland are seeing a strong supply response, with new listings rising,” said Ogmundson, “however, new listings in markets outside of Metro Vancouver have started to flatten out.”

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BCREA: “Bank of Canada Interest Rate Announcement – June 9, 2021”

“The Bank of Canada maintained its overnight rate at 0.25 per cent this morning, a level it considers its effective lower bound. The Bank reiterated what it calls “extraordinary forward guidance” in committing to leaving the overnight rate at 0.25 per cent until slack in the economy is absorbed and inflation sustainably returns to its 2 per cent target. The  Bank projects that will not occur until the second half of 2022. The Bank is also continuing its quantitative easing (QE) program, purchasing at least $3 billion of Government of Canada bonds per week. In the statement accompanying the decision, the Bank expects that growth should pick up considerably after the second quarter in which growth was hampered by renewed lock-down measures.  On inflation, the Bank expects to see headline CPI growing at near 3 per cent for much of the summer, though largely due to “base-year” effects as prices in the recovery are measured against prices, particularly gasoline prices, from last year during the COVID-19 induced recession.  However, the Bank expects inflation will ease later in the year.

The most recent inflation data, as measured by the Consumer Price Index (“CPI”), showed a significant uptick of inflation to its highest level in a decade at 3.4 per cent, though largely due to a jump in energy prices compared to the early months of the pandemic. The question of whether higher than usual inflation is a temporary or more persistent is currently one of the most hotly debated topics in economics. The answer has significant implications for the conduct of monetary policy in Canada and therefore the trajectory of Canadian mortgage rates. The prevailing majority view on inflation seems to be tilted toward recent increases being a temporary phenomenon which should settle over the next year. If so, we should see an orderly unwinding of monetary stimulus with a gradual upward trajectory for mortgage rates beginning next year.”

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REBGV: Home sale and listing activity in Metro Vancouver moves off of its record-breaking pace

The Metro Vancouver housing market saw steady home sale and listing activity in May, a shift back from the record-breaking activity seen in the earlier spring months.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 4,268 in May 2021, a 187.4 per cent increase from the 1,485 sales recorded in May 2020, and a 13 per cent decrease from the 4,908 homes sold in April 2021.

Last month’s sales were 27.7 per cent above the 10-year May sales average.

“While home sale and listing activity remained above our long-term averages in May, conditions moved back from the record-setting pace experienced throughout Metro Vancouver in March and April of this year,” Keith Stewart, REBGV economist said. “With a little less intensity in the market today than we saw earlier in the spring, home sellers need to ensure they’re working with their REALTOR® to price their homes based on current market conditions.”

There were 7,125 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in May 2021. This represents a 93.4 per cent increase compared to the 3,684 homes listed in May 2020 and a 10.2 per cent decrease compared to April 2021 when 7,938 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 10,970, a 10.5 per cent increase compared to May 2020 (9,927) and a 7.1 per cent increase compared to April 2021 (10,245).

“With sales easing down from record peaks, a revised mortgage stress test that reduces the maximum borrowing amounts by approximately 4.5 per cent, and the average five-year fixed mortgage rates climbing back over two per cent since the beginning of 2021, we’ll pay close attention to these factors leading into the summer to understand what affect they’ll have on the current market cycle,” Stewart said.

For all property types, the sales-to-active listings ratio for May 2021 is 38.9 per cent. By property type, the ratio is 29.8 per cent for detached homes, 53.8 per cent for townhomes, and 43.5 per cent for apartments.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

“The seller’s market conditions experienced throughout much of the pandemic highlight the need for increasing the volume and variety of housing supply across our region,” Stewart said. “Doing this requires a more disciplined focus on planning, reducing building costs, understanding demographic changes, and expediting the building approval process.”

The MLS® Home Price Index1 composite benchmark price for all residential properties in Metro Vancouver is currently $1,172,800. This represents a 14 per cent increase over May 2020 and a 1.5 per cent increase compared to April 2021.

Sales of detached homes in May 2021 reached 1,430, a 166 per cent increase from the 537 detached sales recorded in May 2020. The benchmark price for a detached home is $1,800,600. This represents a 22.8 per cent increase from May 2020 and a 1.7 per cent increase compared to April 2021.

Sales of apartment homes reached 2,049 in May 2021, a 213 per cent increase compared to the 653 sales in May 2020. The benchmark price of an apartment home is $737,100. This represents a 7.9 per cent increase from May 2020 and a 1.2 per cent increase compared to April 2021.

Attached home sales in May 2021 totalled 800, a 168 per cent increase compared to the 298 sales in May 2020. The benchmark price of an attached home is $936,300. This represents a 16.3 per cent increase from May 2020 and a 1.8 per cent increase compared to April 2021.