BC Economic Snapshot Aug. 31, 2013

Housing Still a Drag on Economic Growth

VANCOUVER, BC, Aug 31, 2013/ Troy Media/ – With all the hype surrounding rising home sale trends and recovering demand in recent months, it is easy to forget that housing remains a drag on B.C.’s economy.

While MLS sales are on an upswing, new home construction investment, which accounts for nearly half of all residential investment expenditures in the province, declined for an eighth consecutive month in June. Constant-dollar or real investment in new principal dwellings fell to a seasonally-adjusted $583.3 million, marking a 0.2 per cent dip from May and 5 per cent decline from June 2012.

Through mid-year, real investment was in line with the national performance and down 0.4 per cent from the same period in 2012, with the more modest drop of 0.2 per cent in current-dollar volume reflecting slightly lower costs. The decline was isolated to townhome construction, as apartment and duplex construction gained and single-detached activity held steady.

The declining trend in home construction investment reflects the second-half lull in new project commencements in 2012 and fewer units under construction as completions outpaced starts.
While housing starts and permits have bounced higher in recent months, annual starts will fall about 7 per cent this year leading to a 5 per cent decline in principal dwellings investment and representing a significant drag on the provincial growth picture.

Housing starts are forecast to rise about 4 per cent next year to 26,600 units, but remain at subdued levels as elevated new and existing home inventories, higher mortgage rates and generally weak consumer demand weigh on projects.

Nevertheless, new housing investment is forecast to grow by a similar pace, providing a modest boost to general residential investment expenditures and provincial growth.

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