Bank of Canada Interest Rate Announcement - April 16, 2014

BCREA ECONOMICS NOW

The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 1 per cent. The Bank's target rate has now remain unchanged for 29 consecutive meetings. In its accompanying statement, the Bank noted that inflation in Canada remains low and is expected to remain below the Bank's 2 per cent inflation target this year due to slack in the economy and heightened retail competition. The Bank left is forecast for Canadian economic growth unchanged at 2.5 per cent this year and next, citing a strengthening global economy and ramped up business investment. The Bank also noted that recent developments are in line with the its expectations of a soft landing in the housing market, though elevated household debt remains a risk should economic conditions deteriorate.

While some expected a slightly more dovish note from the Bank given continued muted inflation and a slight rise in the dollar, the Bank remains decidedly neutral. An expected second half rebound in growth and firming inflation means that the next move for interest rates is likely higher, but the timing of that move remains uncertain. Our view remains that the overnight rate will stay at its current level until at least early 2015.

BCREA Housing Market Update (April 2014)

Canadian Housing Starts - April 8, 2014

Canadian housing starts tumbled close to 18 per cent in March to 156,823 units at a seasonally adjusted annual rate (SAAR).  The trend in Canadian new home construction moved lower as well, to 184,476 units SAAR. That level of construction is in-line with demographic demand. The majority of the decline in housing starts occurred in Ontario and Quebec.

New home construction in BC urban centers rose 20 cent in March to 26,276 units SAAR. On a year-over-year basis, housing starts were up 6 per cent compared to March 2013. Single-family starts rose 35 per cent while multiple units were down 1 per cent.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA were up 2 per cent year-over-year in March, led by a 30 per cent increase in single-family units. In the Victoria CMA, total starts fell 4 per cent over March 2013. It was another solid month for new home construction in the Kelowna CMA, where starts more than doubled year-over-year on robust gains in both single and multiple unit starts.  

Housing starts in the Abbotsford-Mission CMA were sharply lower on a year-over-year basis for the second consecutive month.