BC Multiple Listing Service (MLS) sales rose 1.9% in October to 9,237 units. The increase follows a 5.4% rise in September. This was the highest level since July 2016 and reflected the push of a strong economy and some pull forward in sales after recent mortgage rate hikes as buyers locked in pre-approved rates.
With a continued dearth in resale inventory, active listings lower than a year ago and the market retaining two-thirds of levels observed three years ago, sellers remained in the driver’s seat. The average provincial home value rose to $740,901, up 1.5% from October and 18% year-over-year. While average values are influenced by geographic and product composition of sales, prices have climbed in most areas. The favoured constant-quality MLS home price index (HPI), available for select markets, pointed to positive but slowing momentum, with Lower Mainland HPI value up 0.6% month-to-month, but nearly 14% above year-ago levels. Victoria’s HPI was flat for the second straight month, but similarly up 14% year-over-year.
A strong economy and demographic factors will support demand but a declining trend is expected to take root. Recent mortgage rate hikes and the announcement of tighter federal mortgage regulations, which take effect in the new year, will be a net drag in 2018 and lead to slower but still positive price growth.
Meanwhile, B.C. manufacturing sales rose 0.4% to $4.25 billion in September following a 0.9% rise in August. While nearly on par with the national increase, B.C. generally underperformed compared with most other provinces during the month. September’s gain adds to an upward trend going back to 2016. Year-to-date dollar-volume sales are 7.8% higher through three quarters relative to same-period 2016. This compares with a 6.2% national increase. Primary drivers include a 7.6% growth in wood products, primary metals (up 19%) and transportation equipment (up 14%). On the non-durables front, food manufacturing is up 4.9% over the period; paper production is up 7.3%. Various factors have contributed to the gain, including increased demand from a competitive Canadian dollar, demand from economic expansion in other countries and provinces, capacity growth and higher commodity prices.
Manufacturing sales momentum will remain positive despite some drag from gains in the Canadian dollar and uncertainty about the North American Free Trade Agreement’s future. Central 1 Credit Union forecasts real manufacturing sector growth of about 2% in 2018, with sales up 5%. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.