BC’s housing boom likely to continue into 2005

Friday, October 29th, 2004

Derrick Penner

B.C.’s residential housing boom has not stalled in the latter half of 2004 and promises to march on into 2005, although not at as torrid a pace, Canada Mortgage and Housing said Thursday in its National Housing Outlook.

The federal agency again confirmed B.C. housing starts will hit 31,700 in 2004, and estimated that starts will increase to 32,400 units next year.

“We’ve had a quarter-point increase in the [Bank of Canada key interest] rate just recently, and that is going to have an impact on people with variable rate mortgages and those with lines of credit, but it’s not enough to quell demand in the market right now,” said Cameron Muir, a market analyst with Canada Mortgage and housing.

He added that while interest rates are expected to climb by as much as two percentage points over the next couple of years, housing markets should remain strong because market fundamentals are expected to stay solid as well.

“In terms of the B.C. economy, it’s in a growth phase rather than at a peak,” Muir said.

Employment growth has been strong, consumer spending has been high. “And the other side of the the economy, the export side — that has been struggling — is starting to turn around,” Muir said.

Nationally, CMHC predicts new housing starts in 2004 to hit a 17-year high of 226,800 units, although it expects rising prices and mortgage rates to dampen demand.

“Activity in the new-home market in the third quarter hit heights not seen since the latter half of the 1980’s, so the stage is now set for residential construction activity to slow in the months ahead,” said CMHC chief economist Bob Dugan.

He said housing starts will drift down toward “more sustainable levels” in 2005, but will remain at a high 210,200 units.

CMHC estimates that B.C. will be the only province to show an increase in housing starts next year.

B.C. and Alberta, however, are also expected to lead the nation in the decline in housing resales, CMHC said.

Nationally, resale activity will dip 3.6 per cent to 445,900 units in 2005, Dugan added, as activity “backs off its record-setting clip,” and return to a more balanced position.

Dugan said price gains that homeowners have experienced will decelerate in 2005, but Muir said in B.C., the gains will still outpace inflation.

“Rather than double-digit increases year-over-year, you’ll see single digit increases,” he added.

B.C.’s decline in resales, Muir said, will have more to do with the construction of new housing inventory catching up to demand and a declining number of first-time and investment buyers than economic factors.

Nationally, resales, on pace to reach 462,600 units, will hit an all-time high for the third year in a row. Sales are rising in all regions except Nova Scotia where they have fallen for two years in a row.

Ontario is expected to see 85,200 starts in 2004, but decline to 79,000 in 2005 to be more on par with population growth.

Quebec starts are expected to hit 56,000 units in 2004, but slide to 48,000 units in 2005 on slower employment growth and higher interest rates.


Housing starts in B.C. are expected to continue to grow through all of next year:

2003 (actual): 26,174

2004 (forecast): 31,700

2005 (forecast): 32,400

© The Vancouver Sun 2004


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