While Canada’s building boom may end soon, Vancouver will stay hot
Ashley Ford
Province
CREDIT: The Associated Press Construction starts in the single-family category are down 23% from last year, the result of cost pressures.
Housing starts continue to dip across the Lower Mainland but the construction industry is still screaming along at near capacity.
Cameron Muir, senior market analyst at Canada Mortgage and Housing Corp., said yesterday that while housing starts dipped by three per cent to 1,797 units last month, “homebuilders are now working flat out, leaving little room for further expansion of the housing sector.”
And there is more grim news for homebuyers. “Prices have nowhere to go but up. Rising construction costs, coupled with continuing low new home inventories, will make sure of that,” Muir says.
He predicts the average price of a new apartment condominium in the Lower Mainland will climb 10 per cent this year to $345,000.
Despite the continuing demand, Muir says he doubts starts this year will crack through the 20,000 barrier achieved in 1993 and 1994. Starts will likely come in around the 19,400 mark achieved last year.
Overall starts across Greater Vancouver are down nearly 10 per cent to 7,257 units from a year ago, with the largest decline of 23 per cent in the single-family category. But multiple starts have also dipped by four per cent compared with 5,455 units from the same period last year.
Scotia Economics says the housing boom may soon end because Canadian homebuilders are facing rising cost pressures, fuelled by building materials prices, increasing development fees and rising land values. But that won’t be the case in Vancouver, it says.
“Among the seven major cities surveyed by Statistics Canada, the hot Vancouver market is facing the biggest increase, a trend that will likely continue with major infrastructure projects in the lead-up to the 2010 Winter Olympics,” Scotiabank says.
“In terms of selling prices, however, the largest increases can be seen in Montreal and Ottawa, in part reflecting a faster appreciation in land values,” said senior economist Adrienne Warren.
“Mounting cost pressures are a threat to slow the booming pace of construction activity in Canada, removing one of the major sources of support to the overall economy in recent years,” she added.
Statistics Canada figures show construction costs increased 6.4 per cent between the first quarters of 2004 and 2005. That’s below the 8.2-per-cent annual increase reported at the end of 2004, but still more than three times the average 1.8-per-cent yearly gain from 1990 to 2003.
© The Vancouver Province 2005
