B.C.’s economy has emerged as one of the better performers during the pandemic, and robust construction activity continues to support the recovery phase.
The latest building investment figures, which reflect new building construction and improvements to existing properties, point to a surge in activity this year and positive momentum. While total building construction investment slipped 0.7% to a seasonally adjusted $2.9 billion, levels rose 16% year over year.
Base-year effects of a construction slowdown early in the pandemic contributed to some of this increase but the trend has climbed sharply since late 2020. Real construction investment rose 11.7% year-over-year.
Unsurprisingly, the construction ramp-up reflects residential activity amid a record pace of housing starts to start the year, renovation demand from pandemic needs and stellar resale market. Residential investment spending rose 24% year-over-year in June, with growth of 40% in single-family units while multi-family units rose 14%. Demand for detached homes and home renovations has surged during the pandemic, specifically outside Metro Vancouver. Construction activity doubled in Kelowna, rose 50% in Victoria, and climbed more than 30% outside B.C.’s metro areas as demand shifted into smaller markets.
Meanwhile, softer non-residential construction reflected the drag of the pandemic on the economy, waves of temporary closures, and uncertainty. Investment declined 4.1% year-over-year in June, with industrial activity down 6% and commercial investment down 10%. Institutional investment rose 15% amid higher government spending.
Through the first six months, total value of investment rose 12%, with residential activity up 21% and non-residential investment down 7.1%. Real investment growth came in close to 6% as construction costs contributed a similar amount. Construction costs have risen more sharply in the residential sector amid high prices for materials and firm labour market costs. This pace of growth is likely to slow as housing starts and renovations ease, although improvements in the economy should lift business investment.
New motor vehicle sales rebounded in June, signalling ongoing strength in consumer spending. Total sales in the B.C. and Territories region reached 20,500 vehicles, which was nearly 27% higher than same-month 2020. •
Bryan Yu is chief economist at Central 1 Credit Union.
