CREDIT: Vancouver Sun Graphic New Homes By Province

British Columbia will lead the country in the growth of new home construction this year and next, Canada Mortgage and Housing Corporation predicts.

Housing starts will grow 21.1 per cent to 31,700 in 2004 and a further 2.2 per cent to 32,400 in 2005, the federal agency said in its third-quarter Housing Outlook, released Wednesday. That compares with a projected Canada-wide increase of just 3.3 per cent this year and a decline next year. It also represents the highest new home numbers seen on the West Coast in a decade.

B.C. housing starts peaked at 42,807 in 1993, when new arrivals were flocking to the province from Alberta, Ontario and Hong Kong. Since the late 1990s more new homes have been built in Alberta than B.C., but CMHC is predicting that B.C. will once again overtake its neighbour beginning in 2005.

The province is also expected to set a new record of 100,000 sales of existing homes this year — more than one in every five homes sold in Canada — and to lead all provinces in the growth of renovation spending. B.C. residents will spend $4.6 billion on home improvement this year, a 10.3-per-cent increase over 2003.

CMHC’s regional economist, Carol Frketich, attributed B.C.’s leading position to strong employment growth and rising consumer confidence, in addition to the historically low interest rates that are sustaining construction and real estate sales across the country. She also noted that B.C. is playing catch-up.

“We’re still coming off those very low numbers in 2000 and 2001,” she said. B.C. had been underperforming the rest of Canada since the “Asian flu” — the economic downturn in Asia — struck in 1997. As a result, the housing market here had more room to grow than elsewhere in Canada.

“This will be the third straight year of more than 20-per-cent growth” in new home construction, she said.

Though the 2005 projections are still dependent on a number of factors, Frketich said the 2004 forecast is pretty solid.

“For 2004 we’ve got a lot under our belt already,” she said. “It would take a lot to throw that forecast off.”

Greater Vancouver accounts for more than 60 per cent of the new apartments, townhouses and houses being built, but the positive direction is spread around B.C., Frketich said. Victoria is seeing a substantial increase in condominium construction, as is Kelowna. The fastest percentage increase in all housing categories is coming in Kamloops, she added.

Higher interest rates will likely push resale activity down to a still-robust 95,000 transactions next year, CMHC predicts. But prices will keep climbing, faster than the Canadian average. The average price of a home in B.C. will grow 12 per cent to $292,000 this year and another 5.5 per cent to $308,000 in 2005.

Canada-wide, the average price should rise 9.2 per cent to $226,200 this year and 4.6 per cent to $236,500 in 2005.

B.C. will see higher renovation spending again in 2005, growing another 8.9 per cent to $5 billion, CMHC said. That contrasts with six-per-cent growth nationwide, to $38.5 billion.

Across Canada, CMHC expects 225,700 housing starts this year, the most since 1987.

“As mortgage rates continue to rise next year, demand for new homes will cool and starts will slow to 204,200 units,” CHMC chief economist Bob Dugan said in a news release. Ontario and Alberta starts have already begun to decline.

Though B.C.’s housing market indicators appear to be trailing the market trend in the rest of the country, the province won’t necessarily follow other provinces into a downturn in 2006 and beyond, Frketich said.

“B.C.’s in a different cycle,” she said, noting that the approach of the 2010 Olympics and trends in the energy sector bode well for long-term growth in real estate.

Even today’s frenetic pace of new home construction is not keeping pace with the demand, said Michael Ferreira, president of the research and consulting firm Urban Analytics Inc. Just 76 of the 7,420 new multi-family homes put on the market in Greater Vancouver between January and July remained on the market at the end of the period, he noted.

“Most of the stuff that’s being started is already sold,” he said. He added that municipal halls are swamped with development proposals, so many projects are taking longer than expected to go through the approval process.

Like CMHC, Ferreira does not foresee any softening in the market any time soon. Construction activity will increase and prices will rise — both because labour and material costs are rising and because of underlying land values are, too.

“I don’t really see much of a change over the next 18 to 24 months,” he said. “There’s always a fear of the bubble bursting, but I don’t see any letdown in the near future.”

In the Vancouver area, sales volume dropped by a quarter to 3,017 units, the Real Estate Board of Greater Vancouver reported Wednesday. Single-family houses saw the biggest decline, to 1,211 from 1,819 in July 2003.

Still, year-to-date sales are running nine per cent ahead of 2003 and average home prices continued to increase at a torrid pace, with townhouses at a new all-time high of $324,193 and detached houses and condominiums slightly off their spring peaks at $521,782 and $246,765, respectively.

The average price of 60 houses sold in toney West Vancouver in July reached a stratospheric $978,700. The benchmark price, representing a typical home in the Greater Vancouver marketplace, rose 15.4 for houses, 19.3 per cent for townhouses and 19.6 per cent for apartment properties, year over year, the board said.

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NEW HOMES BY PROVINCE:

B.C. is expected to be the only province in Canada to record increases in housing starts both this year and in 2005.

Estimated change in number of new housing starts in (brackets).

Source: CMHC

2003 2004 2005

Actual Forecast Forecast

31,700 32,400

B.C. 26,174 (+5,526) (+700)

33,900 30,000

Alberta 36,171 (-2,271) (-3,900)

84,500 76,500

Ontario 85,180 (-680) (-8,000)

56,000 47,000

Quebec 50,289 (+5,711) (-9,000)

4,100 3,875

Nova Scotia 5,096 (-996) (-225)

© The Vancouver Sun 2004