But some short-term help from infrastructure development is possible
Paul Luke
Province
Patricia Croft says first-time home buyers may want to hold off. WAYNE LEIDENFROST — THE PROVINCE
Don’t bank on your patch of dirt grabbing gold at the 2010 Winter Olympics, says Patricia Croft.
Lower Mainland house prices may get a short-term boost from Olympic infrastructure projects but the Games will do little to lift long-term values, the chief economist with Vancouver-based Phillips, Hager & North Investment Management said.
Phillips, Hager & North has studied the impact of earlier Olympics around the globe on house prices and found host cities get only a fleeting boost, Croft told the Vancouver Board of Trade’s economic outlook meeting yesterday.
“If you think about it, why would the influx of 300,000 people in two weeks really provide an underpinning for the real-estate market?
“But to be fair, if you do see the infrastructure developments . . . that could help the real-estate market, at least in the short term,” Croft said.
It’s not as if the Lower Mainland’s housing market needs an Olympic boost. The Vancouver housing market is “the most over-valued market in Canada,” Croft said.
Asked if it’s a good time to buy a house in the Lower Mainland, Croft suggested people might want to delay making their first plunge into real estate. “With interest rates on the rise and house prices now in real terms at a new record high in Vancouver, perhaps the answer [is] maybe time to rent for a little longer,” she said.
Still, Canada has so far resisted developing the housing bubbles that have infected the United Kingdom, Australia and the U.S., she said.
As interest rates rise, the U.S. housing bubble — which has seen free-spending consumers treat their homes as multi-bedroom ATMS — is more likely to fizzle out than pop, Croft said. But even a mere levelling off of U.S. house prices will create a headwind to consumer spending, she cautioned.
Helmut Pastrick, chief economist with Credit Union Central of B.C., said average B.C. house prices should rise about nine per cent in 2006, down from an estimated 15 per cent last year. Led by the mining and construction industries, B.C.’s economy will grow by a robust 3.7 per cent in 2006, compared with 3.9 per cent in 2005, Pastrick said.
“Overall, it’s going to be another good year and B.C.’s economy will continue to be one of the growth leaders in Canada,” Pastrick said.
Retail sales should grow by about seven per cent this year, mining output should rise by more than 10 per cent, and construction should maintain GDP growth of about seven per cent, he said.
Tourism, however, will show weakness as the stronger loon and higher gas prices discourage U.S. visitors.
Growth in the crucial forest industry will slow in 2006 as the pulp-and-paper sector weakens, he said.
Vancouver Regional Construction Association president Keith Sashaw said continued cost and labour-supply pressures may force companies to delay projects.
Construction costs are rising by about 12 to 15 per cent in the Vancouver market, Sashaw said.
Separately, a survey of B.C.’s chartered accountants shows 48.8 per cent of CAs believe the provincial economy will improve further over the next five years.
© The Vancouver Province 2006
