B.C. housing starts rose for a second straight month in August. The increase partially stalled declining momentum during the first half of the year.
Including rural areas, starts reached a seasonally adjusted annualized rate of 48,300 units on the strength of multi-family construction in urban markets. This was up 8% from July’s 44,800-unit pace, and 28% above a year ago.
Starts surged in the Victoria and Kelowna census metropolitan areas (CMAs), while Vancouver CMA starts were virtually unchanged from July.
Looking past monthly volatility and August’s jump, the trend has eased following a 2017 surge but remains robust. Abbotsford-Mission has experienced a sharp downtrend in new construction and is back to its pre-2015 trend. While recent trends in both Vancouver CMA and Kelowna starts have declined significantly, levels remain elevated. Victoria continues on an upswing.
Year to date, Victoria CMA starts rose 32% through August, and Vancouver starts were virtually unchanged, while Abbotsford-Mission (down 57%) and Kelowna (down 29%) were both substantially lower.
The current housing-starts cycle is supported by the strong pre-sale conditions in recent years, but levels are forecast to slide. This year’s mortgage stress tests, rising interest rates and the announcement of a speculation tax on non-B.C. residents will continue to weigh on demand. Annual housing starts are expected to slip to 41,700 units this year from 43,800 in 2017 and trend near 38,000 units through the end of the decade.
B.C.’s tourism-sector activity remained strong through mid-year. The number of international tourists entering Canada through B.C. rose to 755,340 in June, marking a year-over-year gain of 8.5%. The number of U.S. visitors climbed 7.6%; overseas entries were up 10%.
While the pace of growth slowed, seasonally adjusted inflows continue to climb. This is driven by a competitive Canadian dollar, rising tourism demand from emerging markets and likely some diversion of tourist dollars away from the U.S. Seasonally adjusted, international inflows reached 499,600 persons, up 2.7% from May. Levels have surpassed the prior seasonally adjusted peak observed during the 2010 Olympic Games, and rival those observed during Expo 86.
According to CBRE data, B.C.’s hotel occupancy rate averaged about 65.5% this year, which extends an uptrend observed since 2013. The previous cyclical high was in 2006 at 64.4%. The occupancy rate was 75% in Greater Vancouver and 65% on Vancouver Island. Through the first half of the year, total international visits rose 4.9%, led by a 7% increase in overseas visitors and a 3.6% increase from the U.S. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
