“Build, baby, build” is the B.C. housing market mantra as urban-area starts accelerated to a hefty 49,600 annualized units in December, up from a 44,890-unit pace in November. The Vancouver census metropolitan area (CMA) led December’s uptick with solid gains, while Kelowna and Victoria also posted increases.
December’s performance capped off a stronger-than-expected fourth quarter and, by extension, annual performance, for the housing industry. Including rural areas, total annual starts rose 4% from 2016 to a record high of 43,666 units, lifted by a 6% gain in apartment and townhomes. While annual starts fell in the Vancouver CMA, stronger activity elsewhere more than offset this. The Vancouver CMA posted a decline of 6% following a record 2016, while starts rose sharply in Kelowna (up 63%), Victoria (up 32%) and Abbotsford-Mission (up 50%). Domestic economic strength, employment, population growth and other demographic factors are driving demand for housing while a lack of home inventory has fuelled construction activity.
Affordability constraints and municipal government policy shifts have led to more rental unit construction during the past two years. About 9,500 rental starts began construction in 2017, slightly lower than in 2016 but making up nearly a quarter of urban-area activity. The share of starts attributed to rental has risen since 2009. Higher home prices across urban areas have priced households out of ownership, while rent increases, low vacancy rates of 1% in large markets and municipal incentives have spurred more construction.
Elevated housing starts persist this year at about 40,000 units, but are expected to decelerate on more restrictive mortgage credit and a rise in interest rates.
Meanwhile, strength in new vehicle sales in B.C. continued into October, despite signs of a peak in the sales flow. Estimated sales in the region rose 10.7% on a year-over-year basis. Adjusted for seasonal factors, unit sales continued to trend near a record-high pace of 20,000 units per month. Sales have generally climbed following the 2008-09 recession, with the low-interest-rate environment, expansion in the provincial economy and employment underpinning demand.
Through 10 months, vehicle sales rose 8% over same-period 2016, with consumers generally paying about 4.6% more for their new purchases. A key driver was further rotation of consumers to the higher-priced sport and compact utility vehicle segment. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.