Bank of Canada reiterated its commitment to leaving the overnight rate at 0.25 percent until slack in the economy is absorbed and inflation sustainably returns to its 2 percent target. The Bank is now projecting that will occur in the second half of 2022 rather than in 2023.
The image for this post belongs to the Bank of Canada website:
This curve demonstrates the home price index in the Greater Vancouver Region reported by the Real Estate Board of Greater Vancouver, which clearly indicates that the trend of home price increase has been accelerated tremendously since January 2021.
This situation can partly be attributed to an economy that is showing signs of recovery, historically low interest rates, high demand for homes, and increased household savings.
Home buyers and sellers activity reached unprecedented levels across Metro Vancouver in March. The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region were 126.1 % what they were in March 2020, and 53.2 % more compared to that one in February 2021.
Last month’s sales were the highest monthly sales total ever recorded in the region. While we noticed a record number of listings enter the market last month, at the same time, the demand is so high that it isn’t allowing home inventory to accumulate.
That’s why the overall inventory of homes for sale decreased compared to last year.
The current real estate market situation can partly be attributed to an economy that is showing signs of recovery, historically low-interest rates, high demand for homes, and increased household savings.
An economic report by British Columbia Real Estate Association
It was a strong start for the Canadian economy as real GDP expanded 0.7 percent on a monthly basis in January, which was the ninth consecutive month of positive economic growth. However, total economic activity is still about 3 percent below its pre-COVID-19 level.
With the acceleration of vaccinations, pent-up spending throughout the economy will also be unleashed, driving a strong economic recovery. As a result, we are expecting the Canadian economy to enjoy the 2nd year of very strong growth with the economy expanding by more than 5% this year and about 4.5 % in 2022 (the following figure).
1- Expect further mortgage rates increase as economic growth expectations revised higher
2- Growth in the Canadian economy set to take-off in 2021
3- Bank of Canada remains on hold but may be tested by increased inflation
Below is the yield in 5-year government bond in Canada vs the US
Watch this 3-minutes-long video by the Real Estate Board of Greater Vancouver presenting the resilience of the housing market and its impact on BC’s economy in 2020.
On January 20, the Bank of Canada maintained its overnight rate at 0.25 percent. The Bank projects that it should keep this low rate until slack in the economy is absorbed, which will not probably occur until 2023.
The Bank is also continuing its quantitative easing (QE) program, purchasing at least $4 billion of Government of Canada bonds per week. As a result, the Bank expects the Canadian economy will grow 4 percent in 2021 and 5 percent in 2022.
It is generally believed that as vaccinations accelerate in the coming months, the Canadian economic recovery will gain steam in the second half of 2021. Depending on the strength of the recovery, we may see the Bank taper its purchases of government bonds in 2022, which could put moderate upward pressure on 5-year fixed mortgage rates. However, that still means the current extremely low interest rate environment will be around for quite some
Watch this short video by the chief economist of the British Columbia Real Estate Association updating housing market statistics.
Watch this short video regarding the most recent housing market update by the BC Real Estate Association Chief Economist, Brendon Ogmundson.
The British Columbia Real Estate Association (BCREA) has reported that:
Residential unit sales in November 2020, increased by about 42 % compared to the same month in 2019, and the average residential home price raised by about 9 % compared to November 2019.
According to the BCREA Chief Economist, Brendon Ogmundson, home sales were unseasonably strong in November with several markets setting records for the month, with demand for the home continues to be strong, and the supply of listings reached near-record lows in several regions of the province, causing home prices rising sharply.
- Bank of Canada's actions has pushed mortgage rates to record lows.
- Canadian economy bounced back in the third quarter, but the second wave looms.
- The BCREA is anticipating that the prime borrowing rate and variable mortgage rates will likely be flat over the next year, but the 5-year fixed rates may rise modestly by the middle of 2021.
- It is expected that the promising results from vaccine trials should lead to very strong economic growth in 2021 as pent-up spending floods back into the economy. We expect Canadian real GDP will grow by an average of 4 percent over the next two years.
- Bank of Canada on hold and is not sure when it should end its quantitative easing policy.
The public health order restricting social gatherings in BC was extended this week to January 8. The mask mandate, in outdoor public spaces, will remain as well with no definite end date.
This order restricts social gatherings in homes, suspends certain group indoor physical activities, and asks people to avoid non-essential travel. It also asks businesses to avoid sending staff back to work in-person at offices where possible.
The provincial government has deemed real estate agents as an essential service during the pandemic. Accordingly, we can still conduct a showing of homes so long as we and our clients wear masks and strictly follow the safety protocols established for our profession to date.
The Bank of Canada maintained its overnight rate at 0.25 percent this morning. The Bank is also continuing its quantitative easing (QE) program, purchasing at least $4 billion of Government of Canada bonds per week and re-affirmed its commitment to holding the policy rate at 0.25 percent until slack in the economy is absorbed.
In the statement accompanying the decision, the Bank noted that the recovery underway will be choppy due to rising cases of COVID-19 and will continue to require extraordinary monetary support from the bank
According to The British Columbia, Real Estate Association (BCREA) in August 2020 the number of sales showed an increase of 43% from August 2019. Total sales dollar volume in August showed a 61% increase over 2019.
BCREA Chief Economist says while pent-up demand from the spring is driving much of the increase, we anticipate a sustained strong level of sales through the fall.
Watch the following short video for the most recent housing market report (September 15, 2020) reported by the British Columbia Real Estate Association (BCREA)
Watch the following video to view the August 2020 market insights.