BC Population Growth to Q1 2013

BC Stats released its quarterly population estimates and BC continues sluggish growth through Q1 2013.

Population growth consists of the following bulk components:

• Natural increase (births - deaths)
• Net interprovincial migration
• Net international migration (including permanent and non-permanent residents (NPRs))

So let's look at how recent quarters look in a historical context, here graphed since 1961 to show longer-term trends (there is seasonality so quarters are best compared to each other, also do not integrate these graphs, the total population is periodically adjusted during census counts). 4 quarter rolling averages are additionally shown for the aforementioned components and total population growth.

The most recent Q1-2013 data indicate continued negative net interprovincial migration (1611 net out of the province).

Population growth through first quarter of 2013 is below its peak of late last decade, due in most part to net out-migration to other provinces and below-average net international migration, though in the broader historical context immigration is still high compared to past decades, partially offsetting declining natural increases. Annual growth has dropped 50% since its recent local peak in 2007. This will have a direct and negative impact on provincial housing demand in the coming quarters. Interprovincial out-migration is of continued concern, with more people leaving the province for others than arriving.

April 2013 CMHC Data - Vancouver CMA

Here is the chart for housing starts, completions, and under construction for Vancouver Census Metropolitan Area (CMA) to April 2013 with May 2013 preliminary housing starts:

Below we can see a continued high level of multi-unit construction compared to detached construction. The long-term trend for detached construction has been down.

The last three years have seen an increasing amount of starts and under construction volume, the former of which now looks to have crested. Completions are trending upwards, as expected -- completions typically lag starts, so if starts are trending higher that will likely mean completions will trend higher as well. 12 months of completions are now 30% above the trough in 2011. (The actual trough was in early 2011.) With this increased level of completions, and what looks like either a plateaued or further-increasing level of completions into this year, we can expect increased competition among sellers continuing through 2013, as compared to 2012.

Despite recent resale malaise starts remain healthy -- at least not morbid -- pointing to continued construction activity -- and new supply -- over the coming quarters. Units under construction remain high.

Completed and unabsorbed for single and semi detached dwellings have eclipsed the highs seen during the last recession but are below levels seen in the 1990s.

BC Employment by Sector May 2013

Below are some graphs highlighting Vancouver's and BC's employment over the past 15 years in various sectors. But first here are the historical employment, participation, and unemployment rates (CANSIM tables 282-0117 and 282-0087)

The participation rate has dropped of late.

The labour rate spreads between the rest of BC and Vancouver CMA are graphed below. A positive number means the rest of the province has a higher number than Vancouver. In terms of unemployment Vancouver has typically been about 50bps lower than the rest of the province, but lately that differential has been negative.

Here are the contributions of the two major goods producing sectors (construction and manufacturing) as a percentage of total employment. These are seasonally unadjusted with 3 month moving average applied (CANSIM table 282-0111).

Construction employment as a percentage of total employment is once again waning. The service producing sectors (NSA) (12 month average):

Greater Vancouver Market Snapshot May 2013

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to May 2013. (see REBGV news releases.). (My "next month estimate" numbers are what I think next month will be. Also note these graphs update automatically so older blog posts from previous months will show the same graphs as the ones below.)

The scatterplot of price changes and months of inventory is below. As the Teranet data roll in, look for more points appearing the right-hand side. April 2013 reported was about -2% year-on-year, which is slightly higher than I expected but not what I would consider anomalous. This gives us some indication on how elevated MOI must become to elicit meaningful price drops.

Commentary:

May sales continued with relative weakness compared to most past years from 2005 however have improved enough to be unchanged compared to last year. May sales are near lows in at least the past decade. It is unclear whether or not we can expect similar behaviour in 2013; early indications are for normal seasonal patterns to prevail, with sales remaining lacklustre.

To partially compensate for weekend framing effects I have plotted sales per working day on a month-by-month basis.

This May saw another weak report. Cumulative sales for the year are bad and this has direct effects on incomes of those who depend on resale turnover for income. As the months progress it becomes more and more difficult to hit yearly sales targets in-line with those seen in the last decade. That stated a nascent resurgence in listings volumes is underway and if strength continues, the second half of the year will make up for the sluggish start.

As a recurring reminder, there are some worrying clouds on the horizon: population growth is falling, dwelling completions are set to increase over the next year if not longer, and banks have implemented stricter mortgage guidelines via changes to government-underwritten mortgage insurance qualification criteria and via implementation of stricter mortgage lending guidelines under OSFI's new directives, and it looks like they're not done tightening. Further stress in current conditions can be attributed to China's slower economic growth.

On the other hand mortgage rates remain low, near net zero real territory, and it is possible for rates to remain low for a prolonged period (i.e. several years). That stated, longer-term 5-year-term loan rates may have some room to move up in the coming year (as they did, at least acutely, with a vengeance in May) as the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.

Emerging Asian economies are starting to stall again after last year's stimulus from China has mostly run its course. I expect this will start wearing on foreign-derived income that could end up financing Vancouver-area property purchases. I expect further stimulus bouts in the years to come.

My estimates for April were for inventory of 17729 (actual 17222) and sales of 2911 (actual 2882) based on estimating average changes from March of years 2005-2012. Using the same technique estimates inventory and sales for June of 17410 and 2406 respectively (MOI=7.2). June only has 20 working days so the monthly numbers will appear worse than they are on a rolling basis. The spring is typically the nadir for MOI in recent years, the exception being 2009 that saw MOI decrease throughout the year. Taking a "hybrid" approach would suggest June's MOI, adjusted for additional working days, being slightly higher than May.