B.C. housing starts reclaim some lost ground

B.C. housing starts regained some lost ground in May following a sharp April pullback, but the trend continued to decline amid the COVID-19 economic downturn.

Urban starts in the province reached a seasonally adjusted annualized rate of 36,156 units in May, up 30% from April’s 27,690 units. That said, monthly starts were down 33% year over year. Despite record-high annual starts, fewer pre-sale transactions had already contributed to a downward trend since mid-2019. COVID-19 has amplified this downshift as demand falters, developers adjust and construction companies make operational changes to ensure workplace safety.

May’s pickup in starts was entirely attributable to an increase in multi-family starts, which rose from an annualized 21,041 units in April to 29,827 in May. Detached starts edged lower. Among metro areas, Metro Vancouver starts rebounded sharply to a pace of 24,965 units, but similarly, the trend was still modest and down by nearly half from the same month in 2019. Kelowna also snapped higher.

Through the first five months, total urban area starts fell 27%. Vancouver starts declined 37%, accounting for almost all of the net decline. 

A weak labour market and demand for resale housing will curtail demand in the new home market. Investor demand will likely wane while a recession, fewer in-migrants and students and reduced numbers of international tourists will constrain demand for rental properties. A record number of units under construction will likely lift developer-owned inventory levels.

Meanwhile, new vehicle sales in B.C. plummeted in April as consumers stayed home due to COVID-19 and limited major purchases as the economy cratered. While the provincial government allowed B.C. car dealerships and their maintenance services to stay open, many did so at reduced capacity, and some voluntarily closed due to weak demand.

In some other provinces, including Ontario, sales floors were required to close.

Total sales in the B.C. region (which includes the Canadian territories) fell to 7,991 units in April, which marked a 59% year-over-year decline. Passenger car sales (-71%) fell faster than truck sales (-54%). Nationally, sales fell 74.6% year over year, led by an 85% decrease in Quebec and 79% decline in Ontario.

We calculate that B.C.’s seasonally adjusted sales fell 27% monthly in April after a 46% drop in March. However, a spike in February sales amplified these declines. Sales have declined about 50% from the late-2019 trend and have fallen to the lowest level since the mid-1980s. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.