During the first quarter, the industry lost jobs in key sectors for the first time since mid-2018, the British Columbia Real Estate Association reports
Commercial real estate is holding up better than many other B.C. industries during the COVID-19 pandemic. But as some ugly new numbers show, this is no time to gloat.
In a recent briefing, the British Columbia Real Estate Association reports that its BCREA Commercial Leading Indicator (CLI) plunged from 134.2 to 123.2 during the first quarter of the year. The index—which aims to forecast changes in broad commercial real estate activity throughout the province—fell 4.8 percent compared to the same period in 2019.
As the BCREA explains, variation in the CLI consists of three components: economic, employment and financial. The employment component follows the overall trend of the B.C. economy, reflecting changes shown to lead commercial real estate activity. The employment piece reflects industry changes due to shifts in the broader business cycle, while the financial component offers early warnings from financial markets that could signal turning points for commercial real estate.
When the province shut down in the second half of March as the pandemic took hold, all three CLI components turned negative.
When it came to economic activity, manufacturing sales led the downturn, with a 2.4-percent decline. The loss of about 13,500 jobs in key commercial property sectors like finance, insurance, real estate and leasing drove the employment drop. This marked the first negative employment growth for those sectors since the summer of 2018, the BCREA notes.
The biggest drag on the CLI index: its financial component, thanks to a February meltdown in financial markets that pushed Canadian real estate investment trust (REIT) prices lower and private borrowing costs higher.
The takeaway? “This suggests that going forward, the environment for commercial real estate activity in the province will be weak as the economy gradually reopens and temporarily unemployed individuals slowly return to work,” the BCREA says.
The provincial economy was already slowing in the last quarter of 2019, the briefing observes. With the pandemic making things worse, B.C. retail sales tumbled 10 percent in March, Statistics Canada reports, after growing for the first two months of this year.
The variables that make up the CLI, which is revised quarterly, reliably forecast B.C. commercial real estate activity at a lag of two to four quarters, according to the BCREA. For the full CLI report, click here.
TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
