The Rennie Landscape Report Summary: What Do Real Estate Investors Need to Know

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Synopsis of Rennie Report: Why Is This a Great Time to Invest in Canadian Real Estate?

This edition of rennie landscape focuses on local indicators of housing market while reviewing international events that cause uncertainty, and short and long term global economic growth.

Even though investors aren’t confident globally, the Canadian and local Metro Vancouver economies are resilient.

Metro Vancouver’s labour market is the strongest in Canada compared to other large metro areas. Unemployment down to 4.0%, with increasing wages, and growing at more than twice the national average.

This report is a strategic decision-making tool for individual home buyer/seller, developer, builder, municipal planner, and other people involved in the industry.

This report covers the following topics:

1. Economy

Canada is one of the richest countries in the world, but must invest in its workers and technology to stay rich.

Experts observe changes in a country’s gross domestic product (GDP is the total value of all goods and services produced) to assess its economic growth and overall well-being. Changes in per-capita GDP is a better indicator of the economic well-being of a country’s residents than overall GDP.

Out of all the countries in the G20 (a club of 19 individual countries and the European Union), Canada’s per capita GDP is $44,051 ranking fifth behind Australia, Germany, Saudi Arabia, and the United States ($55,681).

Canada’s per capita GDP is growing by only 0.8% annually over the past 5 years—compared to the US (1.7%) and China (6.3%).

Jobs and Labour Market

Metro Vancouver’s job growth rate is three times the national rate

Metro Vancouver’s labour market is growing in employment at 6.5% year-over-year according to the July 2019 data (by Labour Force Survey and Statistics Canada), and ranks second, just behind Calgary’s at 6.6%.

Abbotsford-Mission area is also growing at 4.8%. These are positive signs for the Lower Mainland’s housing market.

Unemployment Rates

Metro Vancouver stats

  • Population growth: +45,000 per year
  • Employment growth: +6.5%,
  • Unemployment rate: 4.0% (close to all-time low of 3.5% in 2007)

This is a sign of well performing labour market.

Vancouver has a lower unemployment rate than other Canadian metropolitan cities (Toronto – 5.7%, Calgary – 6.9%, Edmonton – 7.5%). It is 9% lower than British Columbia as a whole and 27% below Canada’s national rate.

Employment Wages

Wage growth is important for continued economic prosperity.

The Canadian economy had four consecutive months of increases in the year-over-year growth in full-time median weekly wages, going from no change in February 2019 to 4.0% in July 2019 – the fastest rate of growth in a year and a half.

BC’s overall wage increased by 6.0%, which is the fastest growth since February 2011 (6.3%).

The cost of living in metro areas of BC is high, but median weekly full-time wage rate in BC reaching $1,038 (3.8% higher than in Canada as a whole) is a positive sign.

Stock Market Growth and Uncertainty

Change in stock market is also used to determine economic well-being of a country.

Global stock markets have performed well in the ten years since the Great Recession. The FTSE and TSX returned 52% and 50%, respectively. NASDAQ grew by 301% growth.

2018 was the worst performing year for stocks in a decade due to signs of a global economic slowdown, political dysfunction, and inflation fears, among other factors. It’s uncertain whether the stock market rebound of 2019 is sustainable. We will be watching this, along with other events that affect stock markets such as ongoing US-China trade dispute, tensions in the Strait of Hormuz, and evolving monetary policy over the coming months for how they affect our economy and housing market.

Import and Export

Trade, especially international, is important for the economy. BC engages in a lot of trade and our international exports of goods account for 15% of provincial GDP.

Over the past year BC’s international exports have grown by $3.05B, with growth averaging $1.03B annually over the past 2 decades

Most of this growth has come via increasing trade with the US (export growth of $5.68B between 1998 and 2018) and China ($6.55B). The US and China are going through a bad trade dispute which doesn’t seem to resolve any time soon.

BC export is dependent on China and US. If the current trade dispute between the US and China delays or spreads to other countries, it will harm both global and BC economy.

We hope this dispute will be resolved soon and trade flow will normalize over time.

Predicting the Next Recession

Slowdown and decline in total hours worked is often considered a predictive value for recessions. In Canada, this isn’t always the case. Since early 1980’s 4 recessions were preceded by lower work hours, but 3 other times decline in work hours wasn’t followed by a recession.

The latest data points indicate economic growth for Canada.

Vancouver Economy - Review from the Rennie Report

2. Rates

The yield curve plots the interest rates (or yields) associated with bonds of varying durations to maturity. A normal yield curve rises from left to right, with longer-term rates sitting above shorter term ones. There is more risk (including that posed by inflation, which erodes the value of money) associated with an investment long term and investors must be compensated for this added risk.

An inverted yield curve—meaning it declines from left to right—is defined by longer term rates falling below short-term ones, implying that investors are pessimistic about future economic prospects.

Inverted yield curves have preceded recessions worldwide.

In Canada, the shape of the yield curve has not been a reliable predictor of future economic performance despite the alarms recently sounded by many self-appointed yield curve experts.

In the past three recessions, inverted yield curve only appeared before two of them. The last four times yield curves hit 0% the market took a swift uptick – as seen in 1992, 1997, 2001, and 2007.

Because yield curves themselves don’t cause recessions, we must consider that in Canada inflation is normal, job and wage growth is robust, population (and labour force) growth is strong, and income is rising.

Decreasing Mortgage Rates

Low Interest rates are good news for real estate investors, resulting in increased real estate transactions.

In 2018, Canadian and US central bankers had been increasing their short-term rates, and longer-term bond yields had been rising, which resulted in increased mortgage interest rates.

The go-forward trajectory for rates is, at its highest, flat, and at its lowest, down. In Q3 2019, Canadian inflation settled at 2.02% (Bank of Canada’s target band 1%-3%). The Bank’s policy rate has remained unchanged at 1.75% since October and be at least one 25 basis-point cut to this rate is expected by the end of 2019.

There has been a steep decline in bond yields. Government of Canada 5-year bond yields have declined 40% to 1.46% most recently, from 2.42% at their peak at the end of last year.

Since bond markets heavily influence fixed mortgage rates, it’s now cheaper to borrow for your home. The CMHC 5-year conventional mortgage rate has dropped by 8% over the same period, to 4.14% today. With discounts, most mortgage holders would pay a far lower rate, with some chartered banks currently offering 5-year fixed rates of 2.49%.

This is great news for those looking to renew, refinance, or take out a new mortgage, as it is has become much cheaper.

How do Lower Interest Rates Affect Borrowers?

Let’s assume a typical mortgage with a few standard parameters—a 30% gross-debt service ratio, a 25-amortization period, and we use CMHC’s 5-year conventional rate.

The monthly cost of borrowing $100K has fallen by $10 from Q2 to Q3 2019, and by $15 from Q3 2018. If we consider the impact of this on a household that is purchasing a $882K home (the most recent average resale price for the Lower Mainland) with 20% down, this translates to a monthly savings of $106.

If you purchased a home in 2017 and 2018, it’s a great time to refinance and lower your payments. Visit our website for help with refinancing.

Metro Vancouver’s economy has a near record-high growth in employment, near record-low unemployment, increasing wages, and a housing market where prices have moderated over the past 18 months.

The inflation rate for Vancouver market is 2.7% – 35% higher than Canada’s 2.0% and higher than peer markets of Edmonton (1.8%), Calgary (1.1%), and Toronto (2.0%).

3. Credit & Debt

Rising interest rates in 2017/18 and increased credit consumption has pushed Canada’s debt service ratio (DSR) back to its pre-recession peak. The good news is, relief is on the way.

The household debt is at an all-time high in Canada. Current and future economic growth would have been dangerous if the interest rates were high like in 1982 (interest rates over 20%).

The total DSR is the proportion of gross income diverted to debt repayments. DSR in Canada has risen because interest rates started increasing after 8 years of decline. It’s reaching 14.88% – close to 30-year high of 2007.

What does this mean?

Rising DSR is caused more by mortgage DSR than non-mortgage DSR.

The mortgage DSR at 6.74% is only 2% below its three-decade peak of 6.89% from 1992. The non-mortgage DSR (consumption debt) is at 7% below its 2008 peak). People are most likely to service their mortgage debt above other types of debt, like car loans, credit cards, or unsecured lines of credit.

Interest rates are less likely to rise in the next 12 months and they may decrease more. This means Canadian households will have more money left over each month after servicing past debt.

Although BC residents on average owe more money than they did a year ago, there are positive signs in the details.

Across mortgages, auto loans, credit cards, lines of credit (LOCs), and home equity lines of credit (HELOCs), the average monthly debt obligations of British Columbians has risen by 5.5% over the past year, to a total of $3,367 per month.

The growth rate of these financial obligations has exceeded the rate of inflation over the past year. Growth rate and the current dollar value of these obligations are causes for concern, but not panic.

One good news is financial obligations are changing across debt categories: of the $176 increase in average monthly obligations in BC over the past year, $160 (91%) was associated with debt secured by residential assets. Consumers are moving away from old-fashioned LOCs and into HELOCs.

From an overall financial risk perspective, these are positive characteristics of BC’s changing debt structure. Moreover, with declining interest rates, BC’s average financial obligations will grow at a slower rate.

Mortgage arrears rates remain exceptionally low in BC.

In each of BC’s four metro areas (Vancouver, Victoria, Abbotsford-Mission, and Kelowna), the mortgage arrears rate is most recently less than half of what it was 4 years ago.

Currently, Abbotsford-Mission has the lowest mortgage delinquency rate in the province at 0.10%, followed by Vancouver (0.12%), Victoria (0.13%), and Kelowna (0.22%).

While the arrears rate has increased in three of BC’s four metros in the past year, it may once again be set to fall due to the increased availability of cheaper credit. Maintaining a low delinquency rate is vital for the province’s economy.

Are Millennials better off than Gen-xers & Boomers?

Media has lied to us that Millennials are in trouble because of High home prices, increasing rent, low paying jobs, expensive tuition, and increasing debt.

A recent study by Statistics Canada compared the financial situation of millennials to their Gen-X and Baby Boomer counterparts when the latter two cohorts were the same age as the millennials are today and adjusted for inflation.

The study found Millennials owe more but own homes that are more expensive and have higher incomes.

Median mortgage is higher at $218K, than Gen Xers ($117K) or Boomers ($68K), but the values of Millennials’ homes are higher (by between 80% and 139%), and they earn more (by 27% and 28%).

4. Demographics

Demographics - Summary of the Rennie Report

Immigration is important to our economic competitiveness in the future. Increasing our immigration targets to 350,000 people annually by 2021 is a proactive measure to ensure Canada’s economic competitiveness for the coming years.

The UN projects a 16% increase in our 25-64 population over the next 50 years. The prime working-age population in the US will grow by 12% over the same period.

Due to extremely low fertility rates and relatively low migration rates, Europe’s working age population began declining in 2016, and by 2069, it will decline 24% more.

Japan, with almost virtually no immigration, began experiencing a working-age decline in 2004; it is set to see a further 40% decline in the next half-century.

The most concerning of all for the world economy is that China is due to experience a 31% decline in its working-age population over the next 50 years, beginning in 2024 (because of the one-child policy).

There are only two ways to grow an economy: by adding workers or making them more productive.

Canada is adding more workers, but we all must continue to make our workforce more productive.

BC’s Increasing Population

BC continues to attract international migrants, which is fueling our population and workforce growth.

BC has added 14,180 people in Q1 2019 according to the latest data from Statistics Canada. This is 5% higher than in the same quarter last year, with growth mostly driven by international migrants.

Natural increase (the difference between the number of births and deaths) added only 277 people to the province in Q1, up from 224 in Q1 2018.

In future, this number will decline due to our below-replacement level birth rate and aging Baby Boomers.

Net interprovincial migration remained positive in the most recent period, adding just over a thousand people to the province – 24% down from last year’s Q1.

BC attracted 1,364 people from Ontario, Manitoba, and Saskatchewan in the first three months of this year (on a net basis).

In aggregate, we lost 298 people to Quebec and the Atlantic provinces, possibly due to desired cost-of-living changes, as well as 207 to Alberta (the third consecutive quarter of net outflows from BC).

Our economic performance will increasingly depend on young, skilled migrants.

In 2018, Canada’s nonpermanent residents (international students or work visas) increased by 160,841, compared to 2017 (138,966), and 2016 (88,815). Before 2016, the average net inflow was under 15,000.

In BC, nonpermanent residents grew by 24,243 in 2018 and by 22,041 in 2017, compared to a before-2016 average of 3,700 annually.

Growth in temporary residents creates more demand for rental housing. This in turn creates more demand for the right types of homes as BC grows. Our economic prosperity depends on it.

5. Housing

After lagging its peers in per capita completions for much of the past two decades, Metro Vancouver has surged ahead.

Without enough housing, or the right type of housing, it’s difficult to attract the workers (and their families) needed to fuel the evolution and growth of regional economies.

The biggest challenge in Metro Vancouver is the overall lack of housing and high cost of homes. This prevents companies to add talent from out of province.

The number of monthly housing completions per capita has been increasing rapidly since 2016, pushing the rate to 887 completions per 1,000 people most recently. This is 18% above Calgary, 20% above Edmonton, and 73% higher than in Toronto.

The current rate of completions per capita is at its highest level in the past 20 years.

Since sales of many new developments are delayed (and a few even being cancelled) over the past year, expect Vancouver’s per capita completions rate to decline. This will pose a challenge for continued economic growth.

Provincial and local governments should focus on ensuring a continued flow of new housing supply.

Though the stock of unabsorbed condos (completed but not sold) in Metro Vancouver has recently surged, a look at history provides some useful perspective.

Beginning in July 2018, the number of unabsorbed condos in Metro Vancouver jumped from 232 to 552. This number has moved up to 815 homes in November 2018, and recently dropped to 645 in July.

This excess supply of new condos is greater than the average of 265 completed and unabsorbed homes that characterized this market between July 2016 and June 2018.

This market has endured extended periods of greater excess inventory than we are currently experiencing.

Between August 1990 and August 2001, the inventory of unabsorbed condos never dipped below 1,000, averaging 2,164 over that period (more than three times current levels). The same circumstances characterized the January 2010 to August 2015 period, with unabsorbed condo inventory persistently exceeding 1,000 homes and averaging 1,807 (just under three times the current level).

This means things are looking better now compared to the past.

Vancouver Homes - Summary of the Rennie Report

New home supply is increasing

Metro Vancouver needs more housing. According to the latest data, on a year-over-year basis (through Q2 2019), total apartment starts in the region rose 7% to 19,409 annually.

Increased construction activity is boosting the per capita supply of new homes to healthier levels.

This rate of increase exceeds that of Toronto (+3%) and Calgary (28% decrease in new apartments). Edmonton saw a 50% increase in new apartment starts over the past year (part of which is due to a relatively small sample size).

The apartment segment of Alberta metro markets plays a lesser role in accommodating growth in their resident populations than it does here, where land constraints are greater. The new apartment growth rate in Metro Vancouver is a key indicator to watch, as it strongly influences the ability of our local population, and our regional economy, to grow.

Do Foreign Buyers Matter?

Foreign buyers give the data – page 44 – this is a marketable topic.

Some market-followers believe that nonresident (or foreign) buyers drive Metro Vancouver’s housing market, but the data indicates foreign buyers account for a tiny percentage of total residential sales in this market.

In July 2019, this share was 1.2%, down from 1.6% in May and June, and down from the past-year high of 4.1% (which means that even then, resident buyers accounted for 95.9% of sales).

The story is largely the same in the Fraser Valley and Victoria: in the Valley, the sample size of sales involving foreign buyers is low enough to preclude the Ministry from providing estimates, while in Greater Victoria the foreign buyer share is 1.0%.

Non-resident buyers are insignificant in the landscape of residential transactions in Metro Vancouver.

Foreign buyer tax and China’s capital controls keeps foreign buyer participation low. Recent unrest in Hong Kong could result in a short-term spike, as Canadian expats and Hong Kong natives seek refuge from the current political uncertainty in that part of the world.

6. Policy

Much like in Q2 of this year, not much has changed from a policy perspective in BC for housing. This is mainly because there’s no provincial elections in the near future, and municipal councils are locked in for the next couple of years.

With benchmark prices adjusted by up to 10% and increased inventory over the past year, Metro Vancouver’s housing market is now more balanced compared to the recent past.

There is evidence that demand is beginning to re-emerge from the sidelines that supply may reach its apex and that prices have levelled out.

Are Further Rate Cuts Expected in Future?

Investors’ assumptions about potential rates of inflation and economic growth (not always correct) determine longer-term yields in the bond market. Their assumptions are heavily influenced by central banks who set short-term rates as a matter of policy.

While Bank of Canada has held its rate level at 1.75% since last October, we expect one rate cut of 25 basis points by the end of the year, and possibly even two rate cuts.

In the US Jerome Powell, who heads the Federal Reserve (which sets short-term rates in that country), has cited trade policy uncertainty as a major challenge for both the US and the global economy, denting as it has consumer and business confidence and capital investment. Therefore, Fed recently cut its rate by 25 basis and most Fed-watchers expect at least one more cut before year’s end.

These cuts, if they take place, will boost not only global and local economies but also this region’s housing market, making ownership a little more affordable.


Based on this data, we are confident that Canada, as a country, and the Greater Vancouver area, as a city, are doing well financially. Our economy is improving, unemployment is decreasing, population and immigration is on the rise, employment and wages are increasing, and stock market is growing.

Low interest rates are boosting real estate transactions and increasing home prices. Lack of overall housing in Greater Vancouver area is creating a high demand for new homes. These indicators are positive signs, which make us conclude this is a great time to invest in real estate market in the Greater Vancouver area.

One issue that needs to be watched closely is the US-China trade dispute . If it gets worse, it will negatively affect Canada’s economy and housing market.

The Data Behind Rennie

The Rennie intelligence team is composed of our in-house demographer, senior economist, and market analysts. Together, they empower our developer clients, rennie advisors, institutional advisory clients, and the entire rennie team with comprehensive data and a trusted market perspective. With data as the backbone to our thoughtful real estate practice, we help our clients form and execute sound, well-considered plans to achieve their goals.

The Rennie Landscape Pocket Guide

The following is a summary of key insights associated with the Q3 2019 edition of the rennie landscape, which tracks and analyzes a range of factors influencing Metro Vancouver’s housing market.

After 18 months of sliding sales, increasing inventory, and placid prices, the trajectory of Metro Vancouver’s housing market is poised to change. A recent re-emergence of previously sidelined
demand has coincided with some of the fastest employment growth and wage growth in Canada, with the unemployment rate being driven to a near-historical low.

These factors, combined with continued population growth in Metro Vancouver and an interest rate environment that has gone from market headwind to definitive tailwind over the past 10 months, bode well for the region’s pre-sale and resale markets.


Metro Vancouver’s labour market is the strongest in Canada with a near-historically-low unemployment rate due in part to rapid employment gains and wages growing at twice the rate of local inflation. With workers benefitting from the ongoing demand for talent, aggregate household purchasing power is rising throughout the region.


The inverted yield curve doesn’t mean a recession is looming though it does reflect the complex network of risks that currently face the global economy. With the path of future global economic
growth uncertain, interest rates continue to fall, providing an opportunity for would-be home buyers in this market to qualify and lock in at rates not seen in two years.

Credit & Debt

Canadian household debt service ratios have been rising largely due to increasing borrowing costs and mortgage debt. The ongoing decline in interest rates should provide some relief in the near-term, however.


Population growth in Canada, BC, and Metro Vancouver is strong due to continued inflows of international migrants. This is not the case worldwide, with Europe and Japan’s working-age populations already declining, and China’s set to begin shrinking within 5 years. This underscores both the benefit of Canada’s innovative immigration strategy and the need to invest in people and technology to keep the economy growing.


New home supply is on the rise reflecting a buoyant pre-sale environment that extended into 2017. Demand continues to be driven by the resident population in Metro Vancouver, with foreign buyers accounting for only 1.2% of residential transactions in this region.


Central banks are becoming dovish in response to global economic and political uncertainty that is slowing growth. By the end of 2019 expect the Bank of Canada and the Federal reserve each cut rates by 25 basis points from their current levels in an effort to stimulate the North American economy.

Your Mortgage Guide


The Rennie Landscape Report Summary: What Do Real Estate Investors Need to Know