Monday, January 23, 2012
2012 MARKET FORECAST
FOR IMMEDIATE RELEASE – From the desk of Amalia Liapis
2012 MARKET FORECAST
As we move forward into 2012, the year of the Dragon, I thought it helpful to review some global activity that will have a measurable effect on our local real estate market.
China’s fourth quarter gross domestic product (GDP) rose 8.9% from a year earlier, beating analysts’ expectations of 8.6% growth. For the full year of 2011, China’s GDP rose by 9.2% compared to a 10.4% rise in 2010. It always amazes me how China can produce statistics so quickly but market analysts are always skeptical on how accurate the data is out of China as there is no way to reliably check the accuracy.
USA reporting season is in full swing for the December quarter and results here will direct US and world markets over the next few weeks. The US still has the world’s largest economy and, while it has slowed, guidance from the corporate world during reporting season will give a better idea of future recovery. Again the next two weeks will be vital here, but so far so good. Economic data has been better than expected and this has been reflected in the US equities market now at five month highs. This is the year for the Presidential elections, so we can expect to see lots of big promises from both parties that should also help equity markets and real estate activity.
Europe’s financial problems will be with us all during 2012 as there appears no easy fix. The International Monetary Fund (IMF) is hoping to raise $500 billion US to help with the European crisis. The US Treasury and some non-euro zone European countries, such as Britain, are reluctant to contribute and this could leave Asian and other developing countries to make up the shortfall.
Greece is trying to work out with its creditors how much they will write off. An agreement of sorts was reached last year as a part of the Greek bailout fund that bond holders would take a “hair cut” of 50%. Now, Greece wants that to be taken out to 68% and could be close to an agreement; however Greek Banks don’t want to be included. No one does, but most will agree if everyone else will. The European Central Bank (ECB) is the largest holder of Greek bonds with a total of around €50 billion ($61.5 billion US). Hedge funds are threatening to sue the Greek Government to make good on bond payments so this issue could hang over any deal made. We could then expect Portugal to be the next to stand up for Portuguese bond holders to also take a “cut,” perhaps then followed by Ireland. If Spain and Italy start looking for a deal then the world economy will be in turmoil for a long time which will have an effect on the stock markets. During these economic times people start to move their money into other investments and so real estate is an obvious choice. Demand for investment properties will create a momentum in our local market.
Tuesday, October 25, 2011
Bank of Canada Interest Rate Announcement
As was universally anticipated, the Bank of Canada opted to hold its target overnight rate at 1 per cent this morning. Ongoing uncertainty in the Euro-zone continues to weigh heavily on the Bank's outlook. In its statement accompanying the interest rate decision, it was noted that the bank is now projecting a contained Euro-crisis, but also a brief recession in the Euro-area due to ongoing deleveraging and fiscal austerity. The Bank also expects continued weakness, but no recession, in the United States through the first half of 2012 before a resumption of stronger growth. Given various challenges in the global economy, the Bank of Canada trimmed its outlook for Canadian economic growth to 2.1 per cent in 2011, 1.9 per cent in 2012 and 2.9 per cent in 2013 which is in line with our own forecast. On inflation, the Bank now expects slack in the economy to persist longer than originally forecast, leading to a closing of the output gap at the end of 2013. This implies softer than expected inflation in coming quarters, with consumer price growth moderating before returning to the Bank's 2 per cent target by the end of 2013.
Overall, this morning's statement shows a very cautious Bank of Canada that is unlikely to make any significant movements on interest rates over the next two to three quarters. Further monetary tightening will be highly contingent on a brighter growth outlook in the United States and a credible solution to the Euro sovereign debt crisis. Therefore we expect the Bank of Canada to remain on the sidelines through the end of 2011 and the first half of 2012.
BCREA, Chief Economist
Thursday, July 21, 2011
14.8% Drop in Vancouver House Prices Predicted
On July 13, Economics issued a report predicting a 10.2% decrease in the housing market over the next two years.
The economists specifically focused on Vancouver and Toronto saying that they will experience an even larger decrease ...with a whopping drop of 14.8 % for Vancouver.
Among the twelve major markets profiled in this report, Vancouver and Toronto look poised for larger-than-average declines over the next few years, reflecting in part their exposure to the condominium segment, which appears particularly ripe for a correction.
The rationale for this prediction is ...
A combination of more subdued job and household income growth, rising interest rates, the recent tightening in borrowing rules for insured mortgages and fewer first time home buyers are expected to be the chief culprits behind the slowdown. With most of these drivers expected to remain supportive to housing demand in the very near term, we anticipate that the brunt of this adjustment will take place in 2012 and into 2013.
A section of the report focused specifically on Vancouver with the title reading:
VANCOUVER - THE HOUSING MARKET THAT HAS ALL EYES WATCHING
With Vancouver consistently making all the Top 10 best city lists, it is little wonder that our housing prices are amongst the highest in Canada.
The predictions focus on the higher than average housing prices, condos and foreign investment factors that have driven the prices up.
Vancouver has been the poster child for those individuals worried about a real estate bubble here in Canada. We expect that Vancouver will post modest economic growth accompanied by subdued job and income gains. Interest rate hikes will be felt in Vancouver likely more than other places due to the fact that household debt levels are the highest across the country.
With this economic climate, we foresee a 25.4% peak to- trough decline in sales and 14.8% in prices over 2012-13, by far the worst fate of any urban centre. Still, the path to correction will likely transpire over seven to eight quarters. What's more, just as some of the recent increase has reflected a shift in the composition in sales towards higher priced homes, normalization in the sales mix going forward will disproportionately weigh on average prices. At the expected through in 2013, the average resale price is expected to sit at $675,000 - nearly double the national number and that of most other urban centres.
I hope you find this information beneficial! Please feel free to call me any time.
Tuesday, November 23, 2010
Moderate Rise in Home Sales Forecast
Vancouver, BC – November 10, 2010. The British Columbia Real Estate Association (BCREA) released its Fall Housing Forecast 2010 today.
"Consumers are responding to a double-dip in mortgage interest rates," said Cameron Muir, BCREA Chief Economist. "While housing demand waned in the province through the spring and summer, the added purchasing power from low borrowing costs combined with gradual improvement in the BC economy has trended home sales higher in recent months."
"A moderate increase in BC home sales is expected next year coinciding with employment and population growth," added Muir. "However, the 79,700 unit sales that are forecast for 2011 are well below the ten-year average of 85,500 units" A record 106,300 MLS® residential sales were recorded in 2005.
The average MLS® residential price is forecast to climb 7 per cent to $498,500 this year and remain relatively unchanged in 2011, albeit declining by 1 per cent to $495,600.
Thursday, July 29, 2010
Mortgage Rate Forecast
The Canadian economy grew at the exceptional pace of 6.1% in the first quarter of 2010, propelled by a booming housing market, strong consumer spending and the rebuilding of private sector inventories. Moreover, growth in the second quarter of 2010, while not expected to register the sizzling pace of the previous six months, should be a robust 3%-4%.
However there are signs that the economy, if not stalling out, may be slowing down. April’s monthly GDP print was disappointingly flat as consumers moved to the sidelines, sending retail sales lower by almost 2%.
Even if Canadian consumers are beginning to tire out, economic growth should be supported in coming months by projects initiated under the federal government’s infrastructure stimulus plan. This stimulus will provide a needed boost to the economy through the remainder of 2010, with projected impacts peaking in the third quarter, but will create a drag on growth in 2011 as the stimulus is withdrawn from government expenditure.
The strength of the Canadian economic recovery over the past six months is evidenced by the over 300,000 jobs created in the Canadian economy since the beginning of the year. While this exceptional rate of job creation stands in stark contrast to the gloomy employment situation of our southern neighbour, it also re-affirms the need for the Bank of Canada to begin withdrawing its emergency level of monetary stimulus by raising interest rates, particularly given the proximity of core inflation to its 2% target rate.
The withdrawal of monetary and fiscal stimulus from the Canadian economy in coming months will result in slower growth in both the second half of 2010 and into 2011. This growth slowdown may be further exacerbated by weaker than currently anticipated US and global economic growth as well as a higher Canadian dollar resulting from a rise in Canadian interest rates relative to the United States.
In all, slower economic growth and inflation that is within the Bank of Canada’s comfort zone should mean that, while interest rates are certain to rise, the pace of interest rate increases should be orderly and the level of interest rates will remain near historic lows through the remainder of the year.
By Cameron Muir, Chief Economist and Brendon Ogmundson, Economist, British Columbia Real Estate Association
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