expected, new stress-testing requirements for conventional mortgage loans at federally regulated lenders eroded home sales in January.
While comparing favourably with the 14.5% national decline from December, B.C.’s 10.3% drop in Multiple Listing Service (MLS) sales to 8,487 units was still substantial, as loss of potential borrowing capacity forced some prospective buyers without additional sources of savings to delay purchases. Further magnifying the decline were sales pulled forward into late 2017 by buyers getting ahead of the mortgage changes.
January’s decline was most pronounced in the Lower Mainland-Southwest and on Vancouver Island, including Victoria. This is not surprising, given homebuyers in less affordable markets would be more constrained by tighter credit conditions.
Despite the significant drop, sales remained moderately high, underpinned by solid economic growth, low – albeit rising – interest rates and population gains.
Moreover, market conditions remained tight across the province as inventory shrank further due mostly to a record 30% plunge in new listings from December. Tighter mortgage policy may have limited the ability of owners to trade up, lessening the flow of new listings.
While the average provincial price eased 1.6% from December to a seasonally adjusted $727,450, changes in sales composition factored into the decline. MLS benchmark home price indexes continued to track higher for markets where data is available.
B.C. exports finished strongly in 2017 as December dollar-volume sales bounced higher following a moderation for most of the second half. We estimate a 10% increase from November to the highest level since March. December’s gain lifted annual exports to $43.8 billion, marking a 13% increase from 2016 and the strongest gain since 2011. The main contributor was a 45% rise in energy product sales, which accounted for more than two-thirds of the net gain.
While sales growth was stellar, higher product prices were the key driver. Coal shipments, which represent about half of all energy sales, rose 55% last year, but shipments rose a moderate 6.5%. Natural gas growth of 44% almost entirely reflected an increase in physical shipments. We estimate real energy export growth of about 15%. Similarly, wood product export growth was lifted by higher lumber prices as real shipments fell 9% from 2016.
The pricing landscape adds complexity to growth estimates, but we estimate real international goods exports rose 5%, compared with the nominal gain of 13%. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
