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March 17, 2012
VANCOUVER, BC, Mar. 17, 2012, Troy Media/ – Housing market activity in the province slowed for a second consecutive month in February as MLS sales declined 2.6 per cent from January to a seasonally-adjusted 6,240 units.
Following five months of gains to the end 2011, sales turned lower in early 2012. February’s drop was led by sharp declines in the real estate board areas spanning Vancouver Island and the Capital region, the Kootenay, Kamloops and Chilliwack.
These declines more than offset sales growth in northern B.C., and stable activity in the Okanagan and Lower Mainland. It should be noted, however, that monthly sales can fluctuate substantially due to a number of factors, including weather patterns and other local events. This is particularly the case for smaller markets.
Looking past the monthly movements, housing markets generally remained weak in most areas of the province outside the Lower Mainland and northern B.C. This is not surprising given the battering of recreational and retiree demand caused by economic uncertainty, low fixed income returns, the elevated Canadian dollar, and the impact of the HST on demand for new recreational property. On a positive note, stronger economic activity in the north has yielded stronger housing activity.
The sales-to-active listings ratio is a widely used metric to gauge near-term price trends. A low ratio suggests oversupply and a soft pricing environment (buyers’ market). Outside the Lower Mainland, Capital region and the northern markets, all markets appear oversupplied relative to demand.
The sales-to-active listings ratio has increased slightly in some weak markets, suggesting an improvement, but likely not enough to stave off further downward price pressure in the near term.
Buyers’ market conditions are at odds with widespread gains in the average sale price in February. The seasonally-adjusted average sale price rose 5 per cent to $568,892 in the month with a 13 per cent jump in Kamloops, 10 per cent in the South Okanagan, and 8 per cent in Vancouver Island, excluding Victoria.
However, prices are influenced by the geographical and product composition of sales, especially by a few high-priced homes. The price trend during the past several months in most markets in B.C. is flat with a downward bias. One exception is the Northeast region.
Looking ahead, activity will rise marginally in 2012. Recreational markets will receive a boost from the new transitional HST rebate which will pare down standing inventory, while competition between lenders for market share and associated declines in mortgage rates will attract some buyers into the market.
The province’s recently announced first-time buyer tax credit of $10,000 should have a positive impact as well. However, high housing prices, moderate economic growth along with the downshift in population growth, will constrain demand growth.
Following two consecutive monthly declines, new vehicle sales in the B.C. and Territories region rebounded in January. New vehicle sales rose 11 per cent from December to 14,430 units seasonally-adjusted.
This pushed monthly activity to the highest level since September 2008 as dealers made up for two months of exceptionally weak sales. More importantly, January’s gain re-established the modest sales uptrend observed during the fall months.
We expect the modest uptrend in new vehicle sales to continue this year, pushing sales up 9 per cent from 2011, as low financing costs, industry incentives, and relatively attractive pricing combine with modest improvements in labour market conditions boost demand.
However, at a forecasted 175,000 units this year, activity will be low in both level terms and relative to the size of the population. Constraints to stronger growth remain: subdued population growth, high debt levels, and a high number of vehicles per household built up during the phase of strong sales in the mid-2000s.
The pricing environment for new vehicles remains attractive for consumers. While the average price of vehicles sold in the region has trended higher since 2009 (albeit with a sharp dip in the fourth quarter of 2011), these gains have reflected changes in sales composition and quality.
The proportion of trucks sold in the province, which have a higher average price point relative to passenger cars, has risen to about 60 per cent of the market from about 50 per cent – 55 per cent prior to 2009.
Meanwhile, the uptrend in the average price of passenger vehicles point to consumers taking advantage of incentives to purchase higher-end vehicles rather than a gain in general vehicle pricing. The vehicle purchase component of the consumer price index suggests that underlying vehicle prices have declined since early 2008 and have remained steady since 2010.
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