Residential Mortgage Quarterly Review – July 14, 2016

THINK OUTSIDE THE BOX:  As we head into the third quarter of 2016 we can see some of the projections from Q2 starting to take shape.

The June figures from the Canadian Real Estate Association for Toronto and Vancouver suggest the slowdown that was forecast may be creeping in.

In Toronto the number of new listings slipped 1.4% from May and 3.85% compared to a year ago.  The average price of a detached home in the city dipped about 1.6% from the previous month.  All other numbers showed robust growth with a 7.5% increase in transactions y/y and an overall average price increase 16% over last year.

Vancouver registered a drop of nearly 8% in sales in June, compared to May, and a very modest 0.5% increase y/y.  Listings are down about 40% from a year ago.  Sales of single homes fell 19% compared to June 2015.  None the less demand continues to outstrip supply and the overall average price for housing in Greater Vancouver climbed 32% y/y.

In the coming months look forward to more calls to loosen land development restrictions, especially around big cities.

CREA is maintaining the overall tone of its forecast, but adjusting some of its numbers.  National sales activity is expected to rise 6.1% for 2016.  CREA has upped its forecast for B.C. and Ontario while tempering its projections for the decline in Alberta.  The other oil-dependent provinces – Saskatchewan and Newfoundland and Labrador – will also see declines.   Manitoba, Quebec and Nova Scotia are expected to see sales increases between 5.0% and 7.0% based on improving economic conditions.

The fallout of the U.K.’s decision to leave the EU has not fully revealed itself but it is bound to affect our economy.  From a real estate and mortgage perspective it is a virtual certainty that interest rates will stay low, longer.  Canada is likely to increase in popularity as a safe haven triggering more foreign buying in real estate.

A report from global realtor CBRE shows Chinese buyers are purchasing Canadian commercial real estate at an accelerating pace.

In the first half of this year Chinese buyers purchased $1.3 billion in commercial real estate – that is about four times as much as last year.  And it is 65% of all foreign investment in the segment.

Maria Broekhof – First National        July 14, 2016

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