On the economic front we were waiting for August’s inflation numbers which were announced last Friday. The inflation numbers were right on consensus at an increase of 2.8% year-over-year. Core inflation increased to 2.1% from last year, it is now above the Bank of Canada’s 2% limit, we expect a green light for Prime to increase by 0.25% on October 24th.
Since Labour Day the North American Stock markets have been on a tear! This is pushing bond yields upwards. Should this continue we may see an increase in longer term fixed rates. Despite trade uncertainties, consumer and business sentiment remain positive. With an increase in Prime expected Oct 24th the yield curve between short and longer term rates remains flat. When there is little difference between short and long term interest rates, its important for us as mortgage brokers to explore risk and make it relevant to your situation. For example, will floating and long term rates continue to increase or will the economy start to slow and long terms rates fall? Exploring scenarios and establishing the right plan for your needs could save you thousands in interest costs!
Looking at Vancouver Real Estate, our market remains balanced with some exceptions. The higher end and luxury markets are continuing to feel the pinch of government intervention (taxes, stress test) and are experiencing lower sale prices. Conversely, condos and single family homes in the $1.5M and below price segment remain active. In looking at our market and sorting through the static, we found an interesting statistic on the need for household formation numbers for the GVRD.
What is interesting is that these numbers really haven’t changed. Approximately 17,000 new homes are needed annually to meet demand based on population growth. Most of these new units take the form of strata such as condos and townhomes. Single family homes only become an option outside the urban core. With migration to our region expected to continue and Millennials buying more homes, long term housing supply in our region remains a concern.
To create more housing Vancouver City Councillors voted last week to rezone 99% of Vancouver’s single family homes as duplex lots. The idea behind the new bylaw is to allow the creation of more affordable homes with ground oriented amenities in established neighbourhoods. We welcome the move as Vancouver has seen an ever increasing gap between strata and single family homes. Most strata properties are located on or near busy routes and intersections. The new duplex zoning will allow conversion of single family homes to smaller 2 unit buildings which can be sold separately in a variety of locations.
Approved laneway and secondary suites under existing programs will remain in place. This means up to 4 individual residences may now be permitted. The new zoning affects some 67,000 homes with details on implementation to follow. Opponents to the new bylaw are expressing concerns over the increase in value the new density will bring. We expect the city will impose development cost levies and community amenity contributions that will ensure a portion of increased lot value goes back into the community. We will share more info on this as implementation guidelines are released.
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