B.C. construction intentions declined 26.5 per cent in January to a seasonally adjusted $1.37 billion, marking a return to a more modest pace following a strong second half of 2021.
Activity declined similarly for residential construction and non-residential permits. Total permit volume was 4.2 per cent lower than in January 2021.
Residential permits fell 25 per cent from December to $957.4 million.
Uncertainties related to interest hikes could further affect home buying in the coming months. Lower non-residential permits, which fell 28.8 per cent to $409.3 million, were driven by declining commercial (32.6 per cent) and government (41.1 per cent) construction intentions, which offset the recovery in industrial activities (24.9 per cent). That said, economic recovery and broad reopening is likely to stimulate more business/industrial opportunities such as the major redevelopment proposed for Vancouver’s flagship Hudson’s Bay Co. building. Demand for offices is expected to recover as many employers announce their plans for return to in-person work.
Home prices continued their unrelenting surge through February, further crushing the possibility of improved housing affordability in the Lower Mainland. Multiple Listing Service (MLS) data for the region spanning Abbotsford-Mission through Metro Vancouver showed an unprecedented single-month gain of 5.3 per cent in the benchmark value to $1.339 million. This was the sharpest gain going back to at least 2005.
The average MLS price reached $1.324 million, but growth has fluctuated more due to shifting sales composition. Year-over-year growth came in at 24.6 per cent.
Soaring prices continue to be driven by above-normal demand and amplified by a dearth of inventory. While sales fell 20 per cent from same-month 2021 to 5,235 units, this was still the third-highest February on record, and exceeded the 2011-20 February average by 36 per cent. Drivers such as low interest rates, high savings and pandemic factors continue to support activity, but it is likely that rising prices have further amplified gains due to demand fuelled by buyer fears of being priced out. The spectre of higher interest rates also has more buyers locking in pre-approved rates through purchases. •
Bryan Yu is chief economist at Central 1 Credit Union.
