COVID-19: 365 DAYS LATER
• Metro Vancouver’s pre-sale market had a bounce-back year in 2020 after a sluggish 2019, with notable increases in concrete and townhome demand • The second-half of 2020 was record-setting for Metro Vancouver’s resale market, with sales of all property types increasing as buyers pivoted towards larger homes • Unprecedented government spending and coordinated monetary policy supported household finances and drove interest rates close to zero • As interest rates begin to rise, the future of our economy and housing market will to some degree hinge on the path of immigration and inflation—both of which are set to rebound from recent temporary dips
the rennie brief
Over the past year, we were surprised by the resilience of the residential real estate market and we endlessly discussed the importance of the 3 i’s: interest rates, immigration, and inflation.
For all of us in Canada, life over the past 12 months differed dramatically from our experiences during the “pre-Covid” era. With the anniversary of our world coming to a collective halt on a Friday the 13th in March of last year, we thought we’d share some themes from, and observations we’ve made of, our housing market and economy during this unprecedented period. 1. THE MOST TOWNHOME PRE-SALES EVER There were 4,493 new and pre-sale townhomes sold throughout Metro Vancouver in 2020, an all-time high and 20% more than the next-highest total from 2016 (3,734 pre-sales). 2. MORE PRE-SALE CONCRETE SOLD THAN RELEASED While 2020 was a down year for concrete pre-sales overall compared to the recent past, the 3,692 sales outpaced the 3,456 newly-released homes, drawing down inventory from previous years. 3. NEW SUPPLY MOSTLY SOLD OUT Of the 10,065 concrete condos scheduled for completion in 2021, 88% is currently sold; of the 7,675 scheduled for 2022, 79% is sold. For woodframe condos, the sold shares are 85% in 2021 (of 5,581 completions) and 70% in 2022 (2,522). 4. INSATIABLE DEMAND IN THE RESALE MARKET The Vancouver Region tallied more sales in the second-half of 2020 (32,011) than in any similar period ever, higher by 2% than 2015’s second-half (the previous high of 31,272 resales). 5. A GROUND-ORIENTED HOUSING SHIFT As households sought more indoor and outdoor space to accommodate lives increasingly spent at home, ground-oriented sales (houses and townhomes) accounted for a larger share of sales, at 62% in 2020 versus 58% in 2019. 6. A LACKING SUPPLY RESPONSE IN THE FACE OF RISING DEMAND The coordinated fiscal and monetary policy response in the immediate aftermath of the onset of Covid helped to support
the finances of households (as Canadians boosted their savings by upwards of $175 billion in the last 3Qs of 2020) and in turn helped to constrain home listings. Last year ended with resale inventory down 20% in the Vancouver Region versus the long- run average—with detached down 38%—which supported rising prices. 7. UNPARALLELED FISCAL RELIEF MEASURES (AND NEW DEBT) Unprecedented household income support (CERB), employer wage subsidies (CEWS), rent assistance (CECRA), and other spending by the federal government helped to cushion the short-term pain associated with the Great Suppression. As a result, almost $250 billion has been added to federal government debt. 8. BANK OF CANADA CREATES CHEAP MONEY The “overnight” policy interest rate was cut from 1.75% to 0.25% over 2 weeks last March to improve liquidity in markets and encourage continued spending. 9. ROCK-BOTTOM BOND YIELDS & MORTGAGE RATES The Bank of Canada embarked on an aggressive program of quantitative easing (debt-buying), driving government bond yields and mortgage rates to historic lows. The latter reached 0.99% (5-year variable) and 1.39% (5-year fixed) and are now beginning to rise. 10. EBBS AND FLOWS IN IMMIGRATION With Canadian immigration having fallen to 184,000 in 2020— half of what had been expected before the onset of Covid— the federal government is now targeting more than 400,000 immigrants annually over the next 3 years. 11. THE BIG INFLATION QUESTION After experiencing deflation nationally in April and May 2020, consumer prices are rising again, albeit slowly. While the Bank of Canada appears confident that sustained annual inflation above 2% won’t return until late-2022/early-2023, the jury is still out on the impact that 2020’s huge expansion in money supply will have on the pace of future price increases.
For further information please contact Ryan Berlin (email@example.com) or Bowen Behan Pausey (firstname.lastname@example.org). The information set out herein (the “Information”) is intended for informational purposes only. rennie has not verified the information and does not represent, warrant or guarantee the accuracy, correctness and completeness of the information. rennie does not assume any responsibility or liability of any kind in connection with the information and the recipient’s reliance upon the information. The recipient of the information should take steps as the recipient may deem necessary to verify the information prior to placing any reliance upon the information. The information may change any time without notice or obligation to the recipient from rennie.Page 1
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