Rising construction costs, real estate values behind 10.8-per-cent surge in spending
Derrick Penner
Sun
British Columbians, in 2005, poured a record $11.1 billion into building new homes and spiffing up the homes they already own, Statistics Canada reported Wednesday, driven in a large part by increasing construction costs and rising real estate values.
Spending shot up 10.8 per cent in 2005, although the number of new homes built in 2005 was only up half-of-one per cent and well below record numbers of the early 1990s.
Broken down into the three components of investment, British Columbians spent just over $6 billion to build new homes, an increase of 11.1 per cent; $3.95 billion on renovating existing homes, a jump of 8.8 per cent, and acquisition costs — taxes, development charges and mortgage insurance — hit $1.09 billion, a 16.7-per-cent increase.
The results were no surprise to Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, who has watched construction costs rise. “Land costs have spiked up significantly, costs for labour and materials have both gone up significantly, so the outcome is higher prices for everything,” Simpson said.
“And we don’t see any relief in sight as far as material and labour costs [go].”
Simpson noted that market analysts are forecasting that fewer houses will be built in B.C. in 2006, “because there’s a ceiling out there for some people out there.”
“For every $1,000 rise in housing costs, that eliminates a certain part of the potential market,” he added.
B.C.’s overall spending in housing construction was elevated by a $3-billion surge in the fourth quarter, which was 18-per-cent more than in the same quarter of 2004.
Nationwide, Canadians spent $19 billion on housing and renovations in the fourth quarter of 2005, pushing overall spending to $74 billion, a 5.7-per-cent increase from 2004, Statistics Canada reported.
The federal agency attributed the increase to low mortgage rates, rising full-time employment, a thriving economy in Western Canada and high immigration.
Apartment and condominium construction contributed the biggest gain to new housing construction, Statistics Canada reported.
The agency added that an increase in the average cost of new single-family homes offset a decline in the number of new homes being built.
New-home construction in 2005 was the biggest component at $34.7 billion. An increase in apartment and condominium construction contributed.
Statistics Canada said all provinces except Quebec saw higher levels of investment in residential construction.
While construction of single-family homes drove Alberta’s gains in investment, Statistics Canada analyst Etienne Saint-Pierre said condominium construction was the biggest component of B.C’s new-home construction results.