Construction roaring with triple-digit growth in starts, CMHC report shows
Derrick Penner
Sun
Triple-digit growth in housing construction for Richmond, the Tri-Cities and Surrey pushed Greater Vancouver’s February new-home starts to a five-year high of 1,008 units, the Canada Mortgage and Housing Corporation said Monday.
“Pent-up demand” is the technical term realtors give to one of the factors driving the market, which simply means renters who have avoided buying homes are now snagging them — often faster than they can be built — to take advantage of low interest rates.
While mortgage rates have crept higher marginally from one year ago, Cameron Muir, senior market analyst at Canada Mortgage and Housing said that likely has not been enough to slow sales.
“They [interest rates] are still historically low, and low by any measure,” Muir said. “The message is that mortgage rates have really helped the market, giving it a short-term punch in the arm to get people buying, and building pent-up demand.”
Maple Ridge realtor Ron Antalek, with Re/Max Ridge Meadows, said people are looking to the suburbs because they’re able to buy a townhouse or detached home for the price of a condominium in Vancouver.
“Many listings are selling on the day they’re listed,” Antalek said. “I’m doing a development of single-family homes and rarely can we even get the carpeting in the houses before they’re sold.”
Antalek said the key markets are first-time buyers and people who have equity in their homes and use it to trade to more spacious homes. The ability to own detached homes close to green spaces is what draws them to the suburbs.
While the over-all real-estate market is somewhat slower than it was at the start of 2002, “interest rates are on the rise now, hat either stops them from buying, or pushes them further east,” Antalek said.
One of the hottest growth areas was just to the west of Antalek.
There were 239 housing starts in the Tri-City zone of Coquitlam, Port Coquitlam and Port Moody in January and February, a 163-per -cent increase from 2002.
In Surrey, there were 433 starts, a 112-per-cent increase from a year ago.
Richmondhad the greatest growth in percentage terms. The 255 homes started in the first two months of the year is a 184-per-cent increase from 2002.
Vancouver, however, had housing starts fall by 49 per cent, Burnaby and New Westminsterdropped by 50 per cent and North Vancouver’s starts were down 76 per cent.
“We have some concerns that the inventory seems to be shrinking,” said Glenn Temes, a realtor with MacDonald Realty-Westmar in Richmond.
“One thing to be aware of [is that] this kind of activity puts a lot of pressure on markets. But continued demand, at this point, has not diminished.”
He said buyers appear to be optimistic about the future unlike they have been in the recent past.
Temes said immigration from Asiafuelled plenty of Richmond’s growth until the mid-1990s.
Today, he said, buyers are also attracted to the municipality because of its central location.
“With the way traffic is going, we’re seeing a lot of people who are not prepared to pay the price and time to commute [from the Fraser Valley],” Temes said.
Kevin Cowie, with Re/Max 2000 in Surrey and Delta, said CMHC increased the maximum mortgage allowed to first-time buyers with a five-per-cent down payment to $300,000.
“First-time buyers always generate the market from the bottom,” Cowie said. “They always seem to be doing a bit here and there to keep the incentive for first-time buyers.”
He said low interest rates, in combination with poor stock-market performance, has drawn investors back to real estate.
CMHC found that a large number of the 1,008 Greater Vancouver housing starts, 575, were multiple units — townhouses and apartments — which was a 102-per-cent increase over the same period last year.
The 433 detached homes under construction in January and February was an 85-per-cent increase.
Provincewide, there were 2,811 new housing units started in B.C.’s urban areas during February. Extrapolated, that creates an estimate of 23,000 starts for all of 2003, an increase of about eight per cent.
Many of the starts were multi-family projects which, from month to month, is a more volatile segment of the construction market.
However, Muir said strong economic and job growth will be required to sustain the real estate market over the long term.
Helmut Pastrick, chief economist of the Credit Union Central B.C. said his five-year forecast anticipates recovery of the U.S. economy, stronger demand and prices for B.C. commodities, increasing exports and a growth of inter-provincial population migration to B.C.
Improved exports should also spur an increase in capital investment in B.C., and Pastrick estimates B.C.’s economy will grow 2.5 per cent in 2003, increase to 4.3 per cent by 2006, then slow in 2007 to 2.3 per cent.
“[However], if we have a fallback into recession, or sluggish growth, we’ll alter that forecast,” Pastrick said. “[Then], we could see housing volumes begin to top out.”
Nation-wide, CMHC said starts surged by 34 per cent in February, mostly due to the start of several large condominium projects in downtown Toronto.
The report was released on the heels of Friday’s robust employment numbers of 55,000 new jobs created last month, which shows Canadians are maintaining their end of the economy, said Craig Alexander, a senior economist with TD Bank Group.
Derek Holt, assistant chief economist at the Royal Bank, predicts construction will begin this year on 201,000 homes, a pace that will slow to 178,000 starts in 2004.
He said more than a year of record-low interest rates is finally beginning to trim the demand for new homes and many who waited through the last decade to buy a home have now satisfied their desires.
The recent developments seem to support the Bank of Canada’s decision last week to raise its rate a quarter-point to three per cent as a way of heading off inflation. The bank cited high housing prices as one of its reasons.
The dollar is another sign of strength in the economy. It closed Monday at 68.26 cents US, up about seven per cent from a low of 63.40 cents in late December.
© Copyright 2003 VancouverSun