Home sales propelling provincial GDP

Friday, October 31st, 2003

‘Big head of steam’ built by real estate

Ashley Ford

The already robust housing industry will storm ahead to new records next year underpinning an improving provincial economy, the Credit Union Central of B.C. said yesterday.

Helmut Pastrick, the central’s chief economist, says the powerhouse sector could easily keep charging ahead into 2005 as well.

He says the main propellant is continuing low mortgage rates and the building boom will be spread all over the province.

Plenty of pent-up demand also exists in the market, he says.

Mortgage rates could even go lower next year, Pastrick suggests, as the Bank of Canada cuts rates to offset the higher dollar.

The credit union predicts housing starts could reach 28,800 next year, a jump from this year’s expected 26,200 starts and a huge increase from the 21,625 starts recorded last year.

Jock Finlayson, chief economist of the B.C. Business Council, agrees with Pastrick’s optimism and says housing construction and real estate in general has “built up a big head of steam” in the province.

He said whether it will be the leading growth sector remains to be seen, but it will certainly be a large part of an overall improvement in the B.C. economy next year.

Energy prices are expected to remain strong and long suppressed commodity prices in base metals are all improving, he said.

Wheat shipments through West Coast ports are also up and even the pulp and paper sector is starting to see some improvement. “It is all good news,” he said.

Pastrick says the residential and consumer sectors will lead to an overall moderate improvement in the provincial economy next year.

“Residential investment spending — new construction, renovations and transfer costs — will remain a key source of B.C.’s economic growth in 2004. It’s forecast to contribute about 35 per cent of total real GDP growth,” Pastrick said.

Despite the good news, job growth is expected to remain moderate at just below two per cent, with income growth close to the inflation rate and population growth close to one per cent.

Housing sales next year will rise by five per cent, to 91,800 units, 11 per cent ahead of 2002.

In other real-estate sectors, industrial and retail will show stronger growth but commercial real-estate markets will remain mixed.

In another report yesterday, the BMO Financial Group also forecast that the province’s economy will improve over the coming two years — but progress will be slow.

“Next year’s pick-up in growth will be welcome, but our forecast still sees 2004 as the eighth consecutive year when B.C.’s economy will grow more slowly than the national average,” said Tim O’Neill, BMO’s chief economist.


2002 2003F 2004F

Residential MLS sales 82,737 91,800 96,400

Residential MLS average price $239,620 $256,000 $280,000

Total housing starts 21,625 26,200 28,800

Single family housing starts 10,730 12,300 13,500

Multi-family housing starts 10,895 13,900 15,300

Renovation spending (millions) $2,840 $3,050 $3,270

Rental vacancy: Multi-family 3.3% 3.8% 4.1%

Source: MLS F = Forecast

© Copyright  2003 The Province


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