Recession still weighing on housing starts in Metro Vancouver

Wednesday, December 9th, 2009

Resale markets, however, are improving and new presales are also doing well

Derrick Penner

Construction began on 2,619 single-family homes across Metro Vancouver in November. Photograph by: Steve Bosch, Vancouver Sun

Metro Vancouver is in contention to post the lowest number of housing starts since 1962, with home construction down 60 per cent in 2009 compared with 2008, but there is a silver lining in those figures.

Builders had started work on just 7,329 new housing units up to the end of November, Canada Mortgage and Housing Corp. reported Tuesday, compared with 18,481 starts over the same period in 2008.

However, the low level is more a comment on the dismal market conditions a year ago as sales collapsed and prices fell, Neil Chrystal, president of the Urban Development Institute’s Pacific division, said in an interview.

“Because there’s a bit of a lag-time in housing starts [after sales fall off], it’s a reflection of just how bad things were in the fall of ’08,” he added.

However, given that housing sales in the resale markets have bounced back to levels that have encouraged developers to launch new presales, and given that those presales are also selling well, Chrystal is confident that 2010 will be a more positive reflection of those 2009 sales results.

“I think we’ll see starts bounce back quite strongly in 2010,” Chrystal said, “but a lot depends on [mortgage] interest rates.”

Also, the Canada Mortgage and Housing figures show that the pace of housing construction has increased over the past few months, particularly in the detached-home category, which saw strong gains in November.

Across Metro Vancouver, builders started work on 401 new detached houses, a 63-percent increase from the 246 started in November of 2008.

That increase was largely in Surrey–where builders started 198 new houses in November, up from 102 in the same month a year ago–and municipalities such as Coquitlam, Langley City and Langley District.

Overall, the 2,619 single-family home starts across Metro Vancouver to the end of November remained down 25 per cent from the same period a year ago.

However, Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said the recent bump up in starts has left builders “quite buoyant about what’s currently happening.”

The housing sector has lost thousands of jobs in the past year, and Simpson added that “it has not been a very good year,” but expectations are that things will improve in 2010.

“We’re looking ahead with some optimism given what we’re seeing on sales sites, single-family-home sales are going up, highrise towers are selling out in a weekend again,” Simpson said. “And all those sales will translate into starts.”

Robyn Adamache, a market analyst with Canada Mortgage and Housing, said builders have been hesitant to start multifamily projects, with multiple starts across Metro Vancouver coming in at 4,710 to the end of November, down almost 70 per cent from the same period a year ago.

“I think it’s just a matter of developers being still a little wary,” Adamache said.

Chrystal said the slowdown in multi-family starts reflects both the lag time between an improvement in sales and new starts and the fact that bank financing for larger development projects largely dried up following the financial crisis of last fall.

“There are signs just starting to emerge that banks are more interested in doing some lending,” Chrystal said. “But the first nine months of the year, it’s been a real challenge [to obtain financing].”

Still, if the region sees less than 875 additional starts in December, that will be the lowest number since 1962.

Across the province, builders started work on 1,483 new homes, a slight increase from the same month a year ago, and again because of a significant jump in single-family home starts.

For the year to the end of November, however, B.C.’s 12,337 housing starts were still down almost 60 per cent from the same period a year ago.

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