Housing starts bounced higher in February following a weather-induced January drop.
Urban B.C. housing starts came in at an annualized rate of 38,286 units, up 55% from the 24,561 units the previous month. In comparison, national housing starts edged lower by 2%. As is often the case, the large monthly swing owed to an increase in multi-family starts, although the number of single-detached starts also rebounded. Nevertheless, single-family starts declined through 2019, while multi-family starts have eased after robust gains in the first half of the year.
Despite February’s gains, starts over the first two months fell 18% from same-period 2019. Metro Vancouver-area starts fell 35%, while Victoria construction declined 8%. In contrast, starts in Kelowna (up 29%) and Abbotsford-Mission (up 165%) were well ahead of a year ago. Detached starts fell 12% to 784 units and multi-family starts declined 20% to 4,113 units through the first two months.
The outlook for new-home construction remains mixed. A tightening resale market, lower interest rate environment and population growth will support demand for new ownership housing. High rent, low vacancy rates and government support contribute to new rental supply. That said, condominium starts are expected to slow this year following weaker pre-sale activity in 2018 and 2019, which is expected to dampen the pace of starts. Current economic fears stemming from the spread of COVID-19 are also a threat. Housing starts, inclusive of rural B.C., are forecast to decline more than 15% to 37,000 units this year.
While housing starts decline, B.C. construction will remain elevated. Record housing starts in 2019, extended construction times and labour market constraints have maintained a near-record level of units under construction. Units under construction in B.C.’s four largest metro areas reached 54,974 in February. While completions whittled it down from year-end highs, the number was 6% above year-ago levels. Work will continue through 2020, although lower starts and project completions will contribute to a downward trend.
In a sign of ongoing retail softness in 2020, new-vehicle sales remained in an early-year slump. Sales in the B.C. and territories region came in at 12,681 vehicles in January, down 14% year-over-year. While sales managed to rebound slightly from December by 2% on a seasonally adjusted basis, a negative trend extending back to mid-2017 continued. Sales are trending at the lowest level since mid-2014 despite a period of stronger employment and population growth. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.