A flurry of activity in the Vancouver census metropolitan area (CMA) fuelled a surge in October housing starts. Urban B.C. starts soared to the highest level since 1990 at a seasonally adjusted annualized rate of 53,750 units, up from 37,400 in September.
Starts in the Vancouver CMA nearly doubled from September to a seasonally adjusted total of 34,850 units – driving most of the provincial gain – while starts jumped 30% in Victoria, extending a prior month surge.
Without a doubt, October’s gain is unsustainable. Monthly housing starts are volatile given the infrequency and scale of large multi-family apartment projects that underpinned the increase. Nonetheless, construction remains strong due to economic growth, in-migration, low interest rates, a tight rental market and exceptionally low inventory.
With October’s increase, urban-area activity rose 2% above year-ago levels through 10 months, led by Kelowna (+ 77%), Abbotsford-Mission (+43%) and Victoria (+38%). Vancouver CMA starts are still 10% lower than last year’s record performance despite October’s surge. Multi-family starts are tracking slightly ahead of last year’s record-high performance, reflecting demand for affordable product in large urban areas, investor demand and, potentially, downsizing within older demographics.
Meanwhile, Statistics Canada’s estimates for provincial gross domestic product (GDP) confirmed B.C.’s standing as a growth leader in 2016. B.C. GDP expanded 3.5% in 2016, compared with a national expansion of 1.4%. This marked the third straight year that economic growth exceeded 3% in B.C.
Consumer spending growth slipped from a 3.4% gain in 2015 but remained robust at 3%, while residential investment spending skyrocketed 15% following a near-record year of housing starts, a high number of transactions and significant renovation spending. A strong labour market, population expansion and housing demand were driving factors. Government spending also contributed with current expenditures rising a modest 2.5%, while investment rose 5.6% after a pullback in 2015.
Exports came in weaker than anticipated, slowing to 1.9% from 2.8% in 2015, owing mostly to weaker international sales. In contrast, interprovincial export growth rebounded from 0.7% to 2.2% but was still lacklustre, potentially reflecting the effect of weakness in the energy patch. Real imports rose a scant 1%. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.