BC Economic Snapshot July 13, 2013

VANCOUVER, BC, Jul 13, 2013/ Troy Media/ – New home starts in B.C. surged to a 12-month high in June as more apartment and townhome units in Metro Vancouver sprang up following a May lull.

Estimated urban B.C. starts rose to a seasonally-adjusted annualized rate of 29,300 units, marking a nearly 40 per cent gain from the previous month’s pace. Multi-family starts jumped to the highest level since mid-2012 and accounted for the entire gain, while single-detached starts edged lower.

June starts provided a sharp boost to second-quarter activity and will likely lift economic growth in the third quarter as related construction activity ramps up.

However, starts are expected to revert lower in the second half. Housing starts are notoriously volatile, reflecting the high number of units associated with individual multi-family project starts and prior to June starts fluctuated near a pace of about 22,000 units.

Despite the most recent upshift, starts were still down 12 per cent from the first half of 2012. We expect an easing of starts to persist through the end of the year. General housing demand remains sluggish albeit stable, and new and existing home inventories are elevated.
Builders are expected to lessen the risk of a supply overhang by delaying start dates and lengthening construction build-out times.

Provincial housing starts, which include both urban and rural markets, are forecast to dip about 7 per cent this year to about 25,500 units. This is a slight upward revision to previous forecasts in light of some positive momentum in resale markets and second-quarter starts, but still the lowest since 2009.

Construction
Building intentions in B.C. retreated modestly in May, following a surge in April activity, but held significantly above the first-quarter trend. B.C. municipalities issued permits valued at a seasonally-adjusted $827 million during May, marking a 15 per cent drop from April with comparable declines across both the residential and non-residential sectors.

Despite higher activity in recent months, intentions continued to trend below the same period in 2012. Total permit volume was down on a year-over-year basis in May, and through the first five months of the year were 11 per cent lower than same period in 2012.

A decline of nearly 40 per cent in non-residential construction accounts for the entirety of this year’s drop off as fewer major projects have started in the North Coast and Lower Mainland regions. Annual non-residential permit volume is forecast to settle at 20 per cent below 2012 levels.

Meanwhile, residential building permits are up slightly this year, outpacing the first five months of 2012 by about 6 per cent on higher multi-family starts in the Lower Mainland and uptick in the Thompson Okanagan. April’s spike in activity generated much of this gain.

The recent increase in residential intentions is temporary and reflects a coincidence of timing in apartment structure start dates rather than a new growth trend. While May remained a relatively strong for residential volume, we expect activity to revert to a slower pace through the end of the year in response to generally weak market conditions, contributing to a slowdown in housing starts.

| Central 1 Credit Union