B.C. housing starts rebounded following a two-month lull in November but the trend is anticipated to slow through 2019 as weaker housing demand leads developers and builders to curtail construction.
Urban-area housing starts jumped to 36,776 units (all figures are seasonally adjusted annualized rates unless noted) in November, up 22% from 30,076 units in October. Gains were seen in all product markets, with single-detached units up 14% to 9,067 units and combined row/townhome and apartments up 25% to 27,709 units.
The monthly housing starts increases among metro areas were driven by a surge in Kelowna, which rose to 4,275 units from 700, and Metro Vancouver, which rose to 22,049 units from 17,718.
Despite November’s increase, housing starts slowed for most of 2018. While large-scale apartment starts are planned and pre-sold years in advance – so the slow patch may be a coincidence – other factors may be affecting the numbers. Fewer pre-sales since the introduction of the federal government’s mortgage stress tests, higher interest rates and the announcement of a speculation tax may be delaying project construction. Elevated units under construction and risks of inventory overhang due to a high number of units under construction may also be pushing builders to tap the brakes.
Provincial housing starts, inclusive of rural markets, are forecast to ease about 9% this year to 39,500 units. The policy-driven housing downturn triggers a further 18% decline in starts in 2019, with most of the drop in the apartment sector. Social housing will likely be firm; however, home-ownership demand will ease and rental market construction will slow.
The pace of non-residential building permits slowed in October, but the trend remained well ahead of a year ago. Permit volume declined 22% from September and 17% year-over-year in October to $360 million. A drop in private-sector permits led the increase, with industrial permits down 27% and commercial permits down 25% from September.
The Vancouver census metropolitan area was the main drag among metro markets, with non-residential permit volume down 17% from September, a drop of $52 million.
Despite the most recent decline, year-to-date provincial permit volume was up by 15% from a year ago, and the underlying trend remains stable, reflecting signs of healthy business investment in 2018. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
