B.C.’s housing recovery continued in most parts of the province following exceptionally weak activity earlier this year.
Multiple Listing Service sales rose 8% in September to 2,538 seasonally adjusted units, marking the fifth gain over the last six months. Year-over-year, levels were up 25%.
While sales are 80% of levels observed prior to implementation of federal stress tests, recent momentum has lifted sales back to the 10-year average. Deep cuts to mortgage rates over the past year and sufficiently strong increases in employment and population underpinned growth. These trends, alongside introduction of the federal first-time home buyer incentive will continue to lift sales into 2020.
Passthrough of lower mortgage rates, which have declined to 2.7%, to sales remains constrained by mortgage stress tests, given the posted rate has barely budged at 5.19%. Nevertheless, for those who still qualify, the lower contract rates have found an opportune time to enter the market, particularly in areas where prices have declined.
Sales growth in September was led by the Lower Mainland-Southwest (up 9%) and the Southern Interior (up 2.7%). In contrast, sales fell on Vancouver Island outside of Victoria (down 6.6%) and in northern B.C. (down 2.2%).
Rising home sales reduces inventory. Outside of pockets of northeast B.C. and the South Okanagan, sales-to-inventory ratios are firmly planted at levels generally consistent with balanced or seller’s market conditions. Current levels and a firming trend in the ratio point to higher prices.
The average provincial price edged up 0.4% to a seasonally adjusted $718,134 and up less than 1% from a year ago. The average price has climbed since March, partly because of a rising share of home sales in higher-priced regions. Among regions, price growth was mixed with gains in the Fraser Valley and the Okanagan, but with declines on the Island.
B.C. consumer prices re-accelerated in September after an August pause. Year-over-year growth in the consumer price index (CPI) jumped to 2.4% from 2% the prior month. In comparison, CPI inflation in Canada was 1.9% year-over-year. Metro Vancouver CPI inflation came in at 2.3%; Victoria’s was 2.4%.
Contributors to higher headline inflation included higher food prices, which were up 4% year-over-year in August and 4.6% in September. Gasoline prices also increased from August, marking less of a drag on inflation than in previous months. Rental accommodation costs rose 3.1% year-over-year, compared with a 1.3% increase in ownership costs, which have been tempered by low mortgage rates. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
