BC Population Growth to Q4 2012

BC Stats released its quarterly population estimates and BC continues sluggish growth through Q4 2012.

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):

The most recent Q4-2012 data indicate continued negative net interprovincial migration (2234 net out of the province). The low international component was in big part due to a large net negative NPR component of -5597

Here is the annual graph:

Population growth through fourth quarter of 2012 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. Annual growth has dropped 50% since its recent local peak in 2007, meaning annual population growth in 2012 was about 38,000 fewer than 2007. This will have a direct and negative impact on housing demand in the coming quarters. Interprovincial out-migration is of continued concern, with more people leaving the province for others than arriving.

BC Employment by Sector February 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 not recovered. Work by Calculated Risk indicates that most of the decline in participation rate in the US is demographic-based and not necessarily a sign of long-term "disillusioned" unemployed. I would expect a similar demographic effect to exist in Canada and BC.

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 near highs of at least the past 20 years. The service producing sectors (NSA) (12 month average):

Greater Vancouver Market Snapshot February 2013

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to February 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. I would not be surprised to see the Teranet HPI down between -6% and -4% year-on-year by February or March of 2013.

Commentary:

February sales continued with relative weakness compared to not only 2011 but also past years from 2005 (except the residual emerging from the recession of 2008-2009). February sales are near lows in at least the past decade, though above levels seen in 2009.

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

This February saw another weak report. Sales for the year are bad and this has direct effects on incomes of those who depend on resale turnover for income.

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. (Credit Unions are one notable exception though it appears BC CUs will comply with the brunt of OSFI guidelines.) Further stress in current conditions can be attributed to China's slower economic growth, though it looks like growth is set to resume some entering 2013; for how long this growth can continue is uncertain.

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 the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.

Asian economies are currently meting out another round of investment spending through coordinated government stimulus measures -- and not only in Asia but also in other jurisdictions -- and that can plausibly lead to a renewed, but in my view temporary, bout of current account flows into Vancouver-area property investments. Investment trends in China are difficult to ascertain.

My estimates for February were for inventory of 14335 (actual 14789) and sales of 1891 (actual 1797) based on estimating average changes from January of years 2005-2012. Using the same technique estimates inventory and sales for March of 16067 and 2237 respectively (MOI=7.2). March is typically the nadir for MOI in recent years, the exception being 2009 that saw MOI decrease throughout the year. If 2013 turns into 2012 redux, but at a lower base of sales and a higher base of inventory, that portends more seasonally-adjusted price drops. To hit some forecasters' call for flat to rising sales volumes for REBGV in 2013 compared to 2012, there are going to need to be some rabbits on order.

BC Employment by Sector January 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 not recovered. Work by Calculated Risk indicates that most of the decline in participation rate in the US is demographic-based and not necessarily a sign of long-term "disillusioned" unemployed. I would expect a similar demographic effect to exist in Canada and BC.

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).

And the service producing sectors (NSA) (12 month average):

Greater Vancouver Market Snapshot January 2013

Below are updated sales, inventory and months of inventory graphs for Greater Vancouver to January 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. I would not be surprised to see the Teranet HPI down between -6% and -4% year-on-year by February or March of 2013.

Commentary:

January sales continued with relative weakness compared to not only 2011 but also past years from 2005 (except the residual emerging from the recession of 2008-2009). January sales are near lows in at least the past decade, though above levels seen in 2009.

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

This January saw another weak report. Sales for the year are bad and this has direct effects on incomes of those who depend on resale turnover for income.

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. (Credit Unions are one notable exception though it appears BC CUs will comply with the brunt of OSFI guidelines.) Further stress in current conditions can be attributed to China's slower economic growth, though it looks like growth is set to resume some entering 2013; for how long this growth can continue is uncertain.

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 the advent of the removal of accommodative overnight rates starts entering the purview of the 5 year time horizon.

Asian economies are currently meting out another round of investment spending through coordinated government stimulus measures -- and not only in Asia but also in other jurisdictions -- and that can plausibly lead to a renewed, but in my view temporary, bout of current account flows into Vancouver-area property investments. Investment trends in China are difficult to ascertain; some analysts and academics like Michael Pettis are pointing to some worrying signs in the coming years regarding hard commodity demand and investment growth there. If that analysis proves correct, that would have a direct and negative impact on Vancouver-bound remittances and externally-generated-capital-based residential investment.

My estimates for February are for inventory of 14335 and sales of 1891 based on estimating average changes from January of years 2005-2012.