Vancouver, BC – September 16, 2013.

The British Columbia Real Estate Association (BCREA) reports that a total of 6,863 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during August, up 28.6 per cent from August 2012. Total sales dollar volume was 39.7 per cent higher than a year ago at $3.66 billion.

The average MLS® residential price in the province was $533,400, up 8.6 per cent from August 2012.

"After sitting on the sidelines for much of 2012, home buyers were out in force during the summer months,” said Cameron Muir, BCREA Chief Economist. “Fear of a housing market hard landing has given way to a sense of urgency to lock-in a mortgage at a low interest rate."

While higher mortgage interest rates are on the horizon, BCREA forecasts the five-year posted mortgage rate to be 50 basis points higher a year from now. The impact on consumer demand is expected to be largely offset by stronger economic conditions and the associated employment growth.

Year-to-date, BC residential sales dollar volume was up 1.5 per cent to $26.5 billion, compared to the same period last year. Residential unit sales were down 0.6 per cent to 49,849 units, while the average MLS® residential price was up 2 per cent at $532,130.

The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 1 per cent. In its accompanying statement, the Bank highlighted that an uncertain global economy is delaying an expected rotation of growth in Canada toward exports and investment.

This means that the burden of economic growth will remain on households at a time when most households are de-leveraging and looking to slow consumption. All of this adds up to a Canadian economy that will grow below trend in 2013, likely at a rate of around 1.5 per cent.

Below trend growth will translate to continued subdued inflation, which the Bank anticipates will return slowly to its 2 per cent target in 2014. As for the Bank's tightening bias, language around the withdrawal of monetary stimulus has been significantly moderated.

The Bank anticipates a gradual normalization of policy interest rates as conditions for inflation, growth and household debt normalize.
Rising long-term Canadian interest rates, along with somewhat soft economic growth through the first half of 2013, have taken some urgency out of future monetary policy tightening.

In particular, higher long-term rates will further slow growth in household debt via higher mortgage and other key lending rates which will allow the Bank to push increases in its overnight out to late 2014 or early 2015.