Investor condominiums provide much needed supply in a tight market
Sun
Solid homebuyer demand will keep new home construction in the Vancouver CMA (census metropolitan area) robust into 2008, with housing starts close to decade and a half highs, according to a recent report from CMHC.
Vancouver’s vibrant economy is generating jobs and drawing people to the region. While homebuilders will continue to face the challenges of labour availability, as well as high land and material costs, strong economic conditions in the region will keep construction up near 2006 levels in the year ahead.
As existing home sales moderate into 2008, and more listings come on line, look for less spillover into the new home market. However, new projects continue to sell out quickly, and many will break ground within the year.
Demand for rental accommodation in the lower mainland will remain strong in the coming 18 months, bolstered by ongoing employment growth, which is drawing migrants to the region. The high cost of homeownership in both Abbotsford and Vancouver compared to other Canadian centres will also mean that many people relocating to the area will rent for some time before buying. As well, high home prices in the region are keeping many would-be first time buyers renting. Further adding to demand for rental housing are those who have already purchased condo units and are awaiting the completion of projects. Condo completion times have been extended due to labour shortages, as projects compete for skilled trades with other residential and non-residential developments.
New purpose-built rental construction will continue to be scarce in the lower mainland, with investor condominiums providing much needed rental supply. In 2006, just three per cent of all starts in the Vancouver CMA were rental units. Vacancy rates in purpose-built rental buildings will remain low over the next 18 months, coming in at one per cent for October 2007 and 1.3 per cent in 2008. Average one and two bedroom rents will increase by four per cent in 2007 and three per cent in the following year.
Solid economic conditions in the lower mainland will keep housing demand robust this year and next. Vancouver’s economy is set to grow by 3.1 per cent in 2007 and 3.4 per cent in 2008, fuelled by strong activity in residential and non-residential construction, as well as wholesale and retail trade. Olympic and non-Olympic transportation and infrastructure projects will keep Vancouver’s construction sector busy this year and next. Retail spending is being spurred on by improving labour market conditions, a trend expected to continue through the forecast horizon.
An additional 31,400 jobs were created across Greater Vancouver in 2006, driving the unemployment rate to a twenty-year low of 4.4 per cent. Job growth took off in the first quarter of 2007 with 61,700 more new positions filled, compared to the first quarter of 2006. Labour conditions remained tight with an unemployment rate of just 3.7 per cent. Fully three-quarters of all the jobs created in the province in the first quarter were in the Greater Vancouver region. These strong labour market conditions will continue through this year and next, with annual employment growth of 33,000 jobs projected, and unemployment near four per cent.
Vancouver’s job growth will continue to draw people to the region from other provinces and from abroad. The CMA will gain more than 30,000 people through migration in each of the coming years.
© The Vancouver Sun 2007