rennie outlook 2020

RENNIE OUTLOOK 2020

With all of 2019’s data in, we are pleased to share the 2020 edition of the rennie outlook, which presents our predictions for a selection of housing, economic, and demographic indicators for BC and Metro Vancouver based on the latest trends and information about our market. What does the change in resale market trajectory in the second half of 2019 mean for 2020? After a decidedly slow year for pre- sales last year, what can we expect this year? Will our robust rates of population growth continue? And after deceleration as 2019 came to a close, will regional economic growth pick back up again in 2020? In making these assessments, we would be remiss not to acknowledge the significant uncertainty imparted on our market, and economies around the globe, due to the emerging global health crisis. As the ultimate scope of the impact cannot be known at this time, our outlook rests on an evidence-based approach to projecting market changes in 2020. We will continue to monitor how the situation evolves and its impact on this range of economic and demographic indicators. For each element considered, our outlook is indicated by either an increase over recent trends (an “up” arrow), a decrease (“down” arrow), or a similar level (a “side-to-side” arrow).

table of contents .

2 INTRO

3 HOUSING

5 POPULATION

7 ECONOMY

We hope you find the 2020 rennie outlook useful.

Ryan Berlin Senior Economist rberlin@rennie.com

Andrew Ramlo VP Intelligence aramlo@rennie.com

Copyright © 2020 rennie group of companies. All rights reserved. This material may not be reproduced or distributed, in whole or in part, without the prior written permission of the rennie group of companies. Current as of January 6, 2020. All data from RealEstateBoardof Greater Vancouver and Fraser Valley & Rennie. While the information and data contained herein has been obtained from sources deemed reliable, accuracy cannot be guaranteed. rennie group of companies does not assume responsibility or liability for any inaccuracies. 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 contained within this report should not be used as an opinion of value, such opinions should and can be obtained from a rennie and associates advisor. All information is subject to change and any property may be withdrawn from the market at any time without notice or obligation to the recipient from rennie group of companies. E.&O.E. 2

RENNIE OUTLOOK 2020

housing: momentum carrying into 2020

RESALES

Following a sluggish start to 2019, Metro Vancouver’s resale market gained some momentum through the second half of the year. Overall, the 40,043 MLS sales in 2019 were 1.5% above those in 2018, with single-family up 5% and multi- family down 1%. After sales having been 23% lower on a year-over-year basis during the first six months of 2019, total year-over-year sales in the second half of 2019 were 37% above those in the same period of 2018. This was not unexpected given the region’s strong underlying demographic and economic fundamentals.

OUR 2020 OUTLOOK With recent below-average per capita sales ratios reflecting pent-up housing demand, we expect sales in 2020 to exceed those from 2019 by up to 15% as these gaps in per capita sales ratios close. Year-end resale totals are therefore expected to be upwards of 46,000, comprising 17,000 single-family sales (19% below the past-decade average) and 29,000 multi-family sales (11% above average).

RESALES

PRE-SALES

The 7,722 pre-sales across Metro Vancouver in 2019 were half the number achieved in 2018, and were 62% lower than 2016 (when there was an all-time high of 20,280 pre-sales across the region). There were 3,558 concrete and 4,164 woodframe/townhome sales in 2019. While the pre-sale segment of our housing market continues to face headwinds in the aftermath of stricter mortgage regulations (which have now being loosened) and provincial/local policy interventions that conspired to erode consumer confidence, the recent buoyancy of the resale market has had trickle-down effects on pre-sale activity, with year-to-date site traffic and pre-sale counts up over last year.

OUR 2020 OUTLOOK In acknowledgement of our region’s strong economic and demographic fundamentals and the persistence of an active resale market—which is already nudging prices upwards—we expect regional pre-sale counts to exceed 11,000 in 2020. This would comprise a floor of 6,000 concrete pre-sales and 5,000 woodframe/townhome pre-sales (both still below their past-decade average).

PRE-SALES

RENNIE OUTLOOK 2020

STARTS

The past year was a bumper year for housing starts in Metro Vancouver, with 2019’s 28,141 starts sitting alone as the most in any year over the past three decades (0.8% higher than the previous high of 27,914 in 2017). Broadly-speaking, this level of residential construction has two main benefits for the region. First, it has positive direct and indirect economic implications ranging from supporting employment and wages, to impacting growth in provincial and municipal government tax revenues. Second, and perhaps more importantly, more homes started today translate directly into more homes completed in the coming years, an essential ingredient for the growth of our economy as it relates to housing availability and affordability.

OUR 2020 OUTLOOK Based on the number of building permits issued region-wide in each of 2018 and 2019 (an average of 27,260 homes, slightly higher than the 26,400 issued in 2017), 2020 is also expected to be a strong year for housing starts. Overall, we expect a similar number of housing starts in 2020 as in 2019 (roughly 28,000).

STARTS

COMPLETIONS

In 2019, Metro Vancouver registered its second-most housing completions since 1990, at 22,603. From the perspectives of economic development and greater housing market balance, this is a positive outcome—and even more so considering the 6,311 rental completions were the most in at least three decades.

OUR 2020 OUTLOOK Given the pattern and composition of recent housing starts, we expect total housing completions in 2020 to fall below the number of new homes that completed in 2019 by about 10% (to 20,000), before increasing back towards 2019’s level in 2021 and in 2022.

COMPLETIONS

RENNIE OUTLOOK 2020

population: no end in sight for growth

TOTAL POPULATION

Over the past year, Canada’s population grew by 1.5%. While apparently a rather modest expansion, it did represent the fastest year-over-year growth Canada has seen since 1990, with the 558,590 population additions representing the most on record. Canada’s population now sits at 37.8 million—fewer people than California despite having more than 24 times the land area. The relatively large populations of British Columbia, Alberta, and Ontario all grew faster than the national average, with growth in the urban areas of these provinces accounting for 96% of their aggregate population growth.

OUR 2020 OUTLOOK We expect British Columbia’s population to grow by between 75,000 and 80,000 people, which would be similar to last year. This equates to a growth rate of approximately 1.6%, bringing the province’s population to 5.2 million.

POPULATION GROWTH

IMMIGRATION

Growth at the national, provincial, and local levels has largely been driven by immigration. For Canada as a whole, the past year saw immigration levels peak at 335,000 people, driven by federal policy shifts that moved immigration targets from 250,000 people annually towards 350,000. Here in BC, immigration has also trended up: we welcomed more than 48,000 immigrants over the past year, a number exceeded only by the 50,000 immigrants in each of 1996 and 1997. With the province’s Lower Mainland region (from Howe Sound to Hope) having historically accommodated upwards of 90% of all BC-bound international movers, immigration has also been driving population growth in the urban southwestern corner of the province. As a means of mitigating the impacts of Canada’s aging population on the size of the national workforce (and the ability of our economy to grow), the federal government will continue to move towards its immigration target of 350,000 within the next two years. In turn, this will push provincial and local immigration levels towards new highs.

OUR 2020 OUTLOOK As part of total population growth, British Columbia could add up to 50,000 immigrants in 2020, with the Lower Mainland welcoming up to 45,000.

IMMIGRATION

RENNIE OUTLOOK 2020

DOMESTIC MIGRATION

Within Canada, domestic migration flows are highly correlated with relative levels of provincial and regional economic performance, with BC (and its economic opportunities) having been a magnet for many of Canada’s domestic migrants over the past few years. The latest data show that BC attracted net inflows of population from virtually all provinces and territories in Q3 2019, which extended a remarkable run of positive net domestic migration inflows to BC in 25 of the past 26 quarters.

OUR 2020 OUTLOOK With its rate of economic growth expected to lead the country in 2020, BC’s net interprovincial migration flows are likely to remain strong over the course of the year, with the province adding upwards of 10,000 people from other parts of Canada.

DOMESTIC MIGRATION

RENNIE OUTLOOK 2020

jobs, wages, & interest rates: brighter prospects ahead

JOBS

After experiencing several months of the most robust labour market conditions in the country, Metro Vancouver’s economy is now growing at a slower pace: over the past 12 months through January 2020, the region’s job base expanded by only 0.6% (8,400 additional jobs), putting it in the bottom one-third of metro area growth in Canada. This stands in contrast to 2018, when employment grew at a 2.2% annualized rate (31,400 additional jobs).

OUR 2020 OUTLOOK The region’s job base is expected to be boosted over the coming year(s) by a continued office and residential construction boom, as well as the expansion of numerous US and Canadian companies into the region, including Amazon, Mastercard, and Shopify, to name a few.

JOBS

UNEMPLOYMENT

Despite the decidedly sluggish employment growth over the past year, Metro Vancouver’s already-low unemployment rate nudged down to 4.5% in January 2020 from a recent high of 5.0% in October. Having said this, the current unemployment has risen from the floor established in the summer of 2019, when it hit 4.1%.

OUR 2020 OUTLOOK Due to our aging population (and the headwind it is creating for labour force growth), as well an expected rebound in job growth, we see the unemployment rate remaining in the range of 4.0-5.0% for the remainder of 2020.

UNEMPLOYMENT RATE

JOB VACANCIES

With current labour market conditions favouring workers, employers in Metro Vancouver are facing an elevated job vacancy rate of 4.7%—the highest in Canada. This translates to 72,745 jobs that are unfilled, or the equivalent of almost nine years of regional job growth at the current rate. Approximately one-third of these vacancies are in retail trade and food and accommodation services, with an additional 9% in construction.

While a high and increasing job vacancy rate is not ideal for a smoothly functioning economy, it does indicate that employers remain positive about the region’s economic prospects.

OUR 2020 OUTLOOK Through the remainder of 2020 we expect the job vacancy rate to remain elevated, but given our expectations of increased migration we do not see the regional job vacancy rate surpassing its current ceiling.

JOB VACANCY RATE

RENNIE OUTLOOK 2020

WAGES

Tight labour market conditions provincially and locally have resulted in BC’s median weekly wage rate (for full-time positions) increasing by 6.8% on an annualized basis through January 2020—the second-fastest growth in Canada, behind only Ontario’s 7.7%. Lead by growth in tech sector wages, as well as those in finance and real estate, this is more than three times the annual average growth achieved in the past half-decade and considerably faster than consumer price inflation, translating into healthy real wage improvements.

OUR 2020 OUTLOOK With there being little upward pressure on consumer prices given relatively modest expectations of provincial GDP growth in 2020, combined with tight labour markets, we see BC’s annualized rate of real wage growth remaining in the neighbourhood of 5.0% over the coming year.

WAGES

INTEREST RATES

After months of stable and low interest rates due to a steadily growing national economy, we have now entered a period of elevated uncertainty and market volatility. With fading expectations for global economic growth due to the ongoing health crsis, short-term and long-term rates will decline from current levels through the remainder of 2020.

OUR 2020 OUTLOOK By the end of 2020 we expect the Bank of Canada’s policy interest rate to be between 0.75% and 1.25%. Should mortgage rates follow in lock-step, household purchasing power would rise by between 4.2% and 8.3% as a result.

INTEREST RATES

RENNIE OUTLOOK 2020

the data behind rennie

The rennie intelligence team is comprised of our in-house demographer, senior economist, and market analysts. Together, they empower our developer clients, rennie advisors, institutional advisory clients, and the entire rennie team with comprehensive data and a trusted market perspective. With data as the backbone to our thoughtful real estate practice, we help our clients form and execute sound, well-considered plans to help them achieve their goals. Stay in the know with our other publications: THE RENNIE REVIEW is a detailed monthly report providing insights into sales, listings, and pricing trends throughout Metro Vancouver’s housing resale market. THE RENNIE ADVANCE is a brief monthly update on the latest regional sales and listings activity, produced the same morning as the previous month’s data are released. THE RENNIE OUTLOOK is our annual compendium of housing demographic, and economic predictions for the year ahead. THE RENNIE LANDSCAPE is in-depth research on a range of real estate, economic, land use, and planning policy forces that shape our communities. THE RENNIE BRIEF is a topical research brief on issues relevant to our industry as they emerge. WHITE PAPERS are in-depth research papers on a range of real estate, economic, land use, and planning policy forces that shape our communities.

Reach out to your rennie representative to learn more and to receive these publications on a regular basis, or visit us at intelligence.rennie.com

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