Dovetailing with recent building permit data, B.C. housing starts pulled back in November after an October surge but remained robust. Urban-area starts slowed to a seasonally adjusted annualized rate of 45,300 units from a 53,900-unit pace in October. Not surprisingly, fewer apartment starts (down 24%) led the monthly decline following the previous month’s increase, with higher single-family starts providing a partial offset. Declines of 9% in Vancouver and nearly 70% in Victoria led the pullback, as starts in both Kelowna and Abbotsford-Mission rose.
However, recent above-trend numbers lifted year-to-date activity ahead of 2016 by about 2% owing entirely to sharply higher starts in metro areas outside the Vancouver census metropolitan area. Townhome and apartment units underpin growth, reflecting affordable housing and lifestyle demand.
The recent uplift in starts means 2017 activity will finish in line with 2016 levels – which represented a 20-year high – reflecting strong demand for housing, low inventory and plenty of pre-sales in prior years. Tighter mortgage conditions and affordability erosion will temper home ownership activity in 2018 and associated starts, but affordable housing strategies promoted by various levels of government will support new projects. We forecast housing starts to hold near 40,000 units per year through 2019. Elevated starts and units underway maintain a construction sector at capacity, and contribute to broader economic growth.
Meanwhile, after a soft pattern through 2016, non-residential building intentions have risen, aligning more with B.C.’s economic growth profile. On a trend basis, volume is the highest since about 2006, although likely lower in real terms due to higher costs. Dollar-volume permits rose nearly 20% through October, with growth spread across private and public sectors. Businesses are investing despite trade uncertainty, while government spending may be picking up with strengthening infrastructure investment.
B.C. exporters gave back some of September’s gain in a disappointing month for international merchandise exports. Dollar-volume export growth decelerated from 9.6% year-over-year to 0.9% in October. Exports broadly weakened across various product markets in October, particularly for energy and food products.
On a seasonally adjusted basis, Central 1 estimates monthly sales eased by close to 5% following two consecutive gains.
B.C.’s export cycle has slowed since the spring, which could reflect fluctuations in the Canadian dollar and commodity price effects. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
