The see-saw pattern for B.C. housing starts continued in September. Urban-area starts plunged to a seasonally adjusted annualized rate (SAAR) of 25,611 units after tracking a robust 40,000-unit pace since March. This was the weakest pace of starts in two years
That said, a single month of data does not make a trend, particularly since starts are volatile due to swings from apartment projects. While current housing demand weakness is likely dragging on starts to a degree, new construction reflects conditions and pre-sales from at least one to two years back. Through the first three quarters, year-to-date starts were virtually unchanged from 2017.
September’s drop was led by a 67% decline in apartment starts, to a SAAR of 10,450 units. Detached starts, which are less prone to fluctuations, fell 3% to 8,631 but have eased since late 2017. Not surprisingly given the magnitude of decline, the Vancouver census metropolitan area (CMA) led the pullback, with starts declining to a SAAR of 14,390 from 24,740 in August. Victoria and Kelowna CMAs also slumped.
October starts are expected to bounce back, but a deteriorating trend among large urban markets will continue. Mortgage rules and higher interest rates continuing to constrain credit availability, and provincial policy limiting recreational and investment demand in some markets, will contribute to erosion. Annual housing starts, inclusive of rural areas, are forecast to hold steady this year to near 40,500 units, down 6% from 2017 given September’s weak reading. Starts are expected to decelerate to an average of 38,000 units per year from 2019 through 2021.
B.C. employers are finding it increasingly difficult to staff their operations, which is likely becoming a constraint to meeting business demand. Job vacancies rose by 19,900 positions from same-quarter 2017, marking a 23% increase. Only Quebec and Prince Edward Island recorded stronger relative growth.
Among provinces, B.C.’s job vacancy rate was tied with that of Prince Edward Island at 4.7%, the highest in the country. B.C.’s rate was up from 4% in same-quarter 2017 and was the highest since data was made available in 2015. Employers are opening up positions faster than they can fill them, reflecting an insufficient number of applicants or skill sets or a combination of both. Job vacancy rates align with rock-bottom unemployment rates in the province.
Job vacancy rates look to remain high. Major project construction, including liquefied natural gas and transportation infrastructure, the growing tech sector and broad commercial investment will continue to lift demand for labour. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
