Fiona Anderson
Sun

The value of building permits issued in B.C. dropped dramatically in November from October, yet building intentions in the province for the year were still record-breaking.

Building permits worth $806.6 million were issued in the province during November, a drop of 13 per cent from the $928.7 million in permits issued in October. The decrease was caused almost exclusively by a stunning 35.5-per-cent drop in permits for residential multi-unit starts, to $248.3 million from $384.9 million a month earlier.

But the value of building permits in the first 11 months of 2005 exceeded the value of permits issued for the entire 12 months of 2004 in all sectors, said Etienne Saint-Pierre, an economist with Statistics Canada.

“With still December to compute, the total value of building permits [in B.C.] is already a record high,” Saint-Pierre said in an interview.

The value of permits in the province was up 27.1 per cent during the first 11 months of 2005 over the same period a year earlier, to $9.3 billion from $7.3 billion. Residential permits were up 14.93 per cent — from $5.5 billion to $6.3 billion — with an increase of 24.2 per cent in multiple units outstripping the 7.24 per cent increase in single units. Yet it was the non-residential building permits that gained most, up a whopping 63.7 per cent — from $1.8 billion to $3 billion. Institutional permits led with an increase of 125.9 per cent.

“So the strength is all across the board for the different types of buildings,” Saint-Pierre said.

Much of the provincial drop in November was caused by a slowdown in Vancouver, which accounts for almost half of the building permits issued, Saint-Pierre said. In November, residential permits were down 25 per cent in Vancouver, from $434.4 million to $326.1 million, while non-residential permits increased 21 per cent, from $89.1 million to $108.2 million.

The November drop in values is not indicative of a trend but rather the volatility of the numbers, Saint-Pierre said. It is also a reflection of the strong October the province had, he said.

The huge volume of building permits bodes well for another good year for the construction industry, Saint-Pierre said.

“Those permits should generate active construction activity in the coming year,” he said. “So it’s very positive.”

© The Vancouver Sun 2006

Limited land and shortages of skilled labour main reasons; starts rise in rest of province

Fiona Anderson
Sun

Construction Worker Photograph by : Ian Smith, Vancouver Sun

Housing starts in Vancouver and other major urban areas in the province dropped in 2005, as limited land and a shortage of skilled labour put the brakes on development. But in the province as a whole, starts were up, albeit slightly, according to numbers released Tuesday by the Canada Mortgage and Housing Corporation.

Housing starts in British Columbia, excluding rural areas, increased half a per cent, from 30,874 to 31,043 units.

But starts in Vancouver fell three per cent — from 19,430 to 18,840 units — with drops of almost 13 per cent in Victoria and seven per cent in Abbotsford. The lower housing starts were offset by a 24-per-cent growth spurt in new houses in Kelowna, and 11.5-per-cent growth in other urban centres within the province.

The move away from the Lower Mainland into the Interior reflects the growing difficulty with building in Vancouver and Victoria and other major urban centres, CMHC senior market analyst Cameron Muir said in an interview.

“The reason for the decline is not waning consumer demand,” Muir said. “It’s really a function of [having] in those very active markets increasingly complex building sites, rising construction costs and competition for skilled labour [which] is putting a ceiling on the number of units builders can produce each year.”

Constrained land supply, which necessitates high-density housing, takes more planning and more effort in site preparation, adding to the complexity of development and slowing down starts, Muir said.

Multiple unit starts kept the province on its upward trend with an increase of 5.6 per cent in 2005 from 18,545 units to 19,589. At the same time, the number of single starts fell 7.1 per cent, from 12,239 to 11,454.

The number of housing starts in 2005 was the highest B.C. has seen since 1994, when a struggling Ontario was forcing workers to go West to find jobs, Muir said.

In that year, B.C. had 40,000 net new residents. In 2006, between 7,000 and 10,000 people are expected to move to B.C. from elsewhere in Canada, Muir said.

CMHC predicts that housing starts will slacken slightly in 2006 in both Vancouver and the province with Vancouver seeing about 18,000 to 18,500 starts, and the province — including rural starts which are not included into Tuesday’s statistics — down to 31,600 units. The decline would be largely caused by further constriction in the urban centres, Muir said.

Month over month, housing starts in B.C. were up almost six per cent in December compared to November, fueled by a 9.4 per cent increase in multiple units and a slight drop in single detached homes.

Across Canada, residential starts were down 4.1 per cent to 223,900 units, the CMHC stated in a news release. That downward trend is expected to continue as mortgage rates rise.

The slight decrease in housing starts in Vancouver in 2005 is “not a big deal,” Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said in an interview.

Simpson attributes much of the slowdown to the builders themselves who are slowing their pace to ensure tradespeople are available when needed.

Simpson expects housing starts in Vancouver to continue to fall in 2006.

And as the cost of land and the cost of developing that land continue to go up, so will housing prices, Simpson said.

© The Vancouver Sun 2006

Owners of homes valued up to $780,000 to get relief as a result

Carla Wilson, with files from Chad Skelton
Sun

SOURCE: MINISTRY OF PROVINCIAL REVENUE

Homeowners who have watched their property assessments soar can look forward to a new threshold on homeowner grants.

The province is introducing amendments in February to raise the full homeowner grant threshold to $780,000 in assessed property value, up from the current $685,000.

The Ministry of Finance estimates about 27,000 people across B.C. could benefit from the threshold increase. Of those, the vast majority — 23,500 — are in the Lower Mainland or Fraser Valley.

Under the new threshold, more than 95 per cent of B.C. homeowners will be eligible for the full homeowner grant.

The basic grant gives a homeowner a reduction of up to $470 in property taxes. An additional grant of $275 is available for those 65 and over, or who are disabled, or eligible for certain war-veteran allowances.

The change responds to yet another rise in property assessments in B.C.

Province-wide, assessments have gone up 16 per cent.

This is the third year in a row that the government has raised the threshold, starting with moving it from $525,000 to $585,000 in 2004.

B.C.’s Finance Minister Carole Taylor said: “With the homeowners grant, we really try particularly to get to those families that are perhaps under a bit of stress meeting the housing prices and needs of their families.

“It really is difficult for a lot of seniors and families who want to stay in their homes, but find that with these increased prices and increase taxes it’s really a chore to do that. So the homeowners grant is intended to help people stay in their homes.”

Retiree Cam Young, 69, of Saanich, said Tuesday, “Well, God bless,” when he heard the news.

His home has been assessed at more than $790,000 — up $130,000 from the previous year– and a little over the planned new threshold. Young checked the value of 10 neighbours‘ homes to find that half had been pushed past the current $685,000 threshold.

Young noted the provincial government was quick to respond to a similar situation last year — just before the election — by raising the grant threshold.

© The Vancouver Sun 2006

Tight labour market makes ramping up difficult

Province

Greater Vancouver housing starts faltered slightly during 2005 but still recorded a stellar construction year, Canada Mortgage and Housing Corp. said yesterday.

There were 18,840 starts last year, down three per cent from 19,430 in 2004. However, across the province starts in urban centres climbed 0.5 per cent to 31,043 from last year’s 30,874 starts, CMHC says.

Greater Vancouver Home Builders’ Association CEO Peter Simpson says despite the minimal drop it was a phenomenal performance and says there likely will be little change this year. “You have to go back to 1994 to find better numbers. That’s a big number,” he said.

The industry is having a profound impact on employment numbers and created the equivalent of 52,752 person years — one person year is the equivalent of one full-time job for a year — of employment last year, he said.

Simpson says 2006 will remain strong and said that every housing start creates the equivalent of 2.8 full-time jobs per year.

“I suspect the drop was as much builders pulling back slightly to ensure they had continuity of trades in an extremely tight labour situation. They don’t want to be caught with scheduling problems,” he said.

Cameron Muir, senior market analyst for CMHC, said “broad-based economic growth has impacted nearly every corner of the province. High commodity prices are providing much needed economic spin-offs to Interior communities, while unprecedented demand for recreation property by baby boomers is fuelling new home construction in rural areas.”

Muir said because of the tight labour situation it will be difficult for Vancouver and Victoria builders particularly to “ramp up” production this year.

“Increasingly complex building sites, rising construction costs and competition for skilled labour from the 2010 Olympics and transportation-related projects are hampering their efforts to supply more new homes to the marketplace,” he said.

The rest of the country also did well last year with total starts of 224,100 units, a decrease of over 3.5 per cent from 2004, but still the second-highest level since 1988 and the fourth consecutive year housing starts were over the 200,000-unit benchmark.

Scotiabank says that starts should continue to trend downward in 2006, but Canada’s generational-low unemployment rate and respectable wage gains should continue to support a historically high level of residential construction.

The prospects of higher interest rates and rising inventories of unsold new homes should have a moderating effect on starts in 2006, especially as economic growth starts to slow by the second half of the year.

© The Vancouver Province 2006

Mini corrections are common in rising markets, economist says

Sun

Lower Mainland real estate markets have slid into a “mini correction,” Credit Union Central reports, as the higher mortgage rates that took effect in July have taken some of the wind out of housing sales.

Credit Union Central, in its Jan. 6 Weekly Economic Briefing, reported that December sales in Greater Vancouver slipped to a seasonally adjusted 3,261 transactions, down from 3,145 in November and lower than the August high of 3,941 transactions.

In the Fraser Valley sales were similarly off, with that region recording sales of 1,476 units in December, compared with 1,740 in November, and down from an August high of 2,185 units.

“This is just a short-term dip here,” said Helmut Pastrick, chief economist for Credit Union Central B.C. “It started when rates began to bump up in July, [and] we’re now approaching six months of it already. Typically these, let’s call them mini corrections, only last no more than eight or nine months.”

Pastrick said such minor corrections in short-term sales trends are common during upward swings in real estate cycles. He added that the current upward cycle, which started in about the middle of 2000, has seen three or four “mini corrections.”

Year-over-year comparisons for 2005, however, miss the current down-trend, Pastrick said. They happen in response to moderate increases in mortgage rates, and occasionally because of other demand fundamentals that turn negative.

Such corrections, Pastrick added, do have some impact on prices “at the margins.”

“It’s still a seller’s market, but it’s not as tight as it was six months ago and prices are increasing, but the rate of increase is slowing,” he said.

However, Pastrick doesn’t see the correction as a sign that the so-called real estate bubble is popping.

“I don’t think we were in a bubble in the first place,” he said, because B.C.’s economy is too strong.

Whether sales will stabilize depends on interest rates. Pastrick said the Bank of Canada will likely raise its key overnight lending rate by a quarter of a percentage point Jan. 24, and may raise it again in March.

However, he believes the central bank will stop raising rates in the second quarter of this year, which will stabilize mortgage interest rates and real estate sales will stop declining as a result.

Pastrick noted that short-term interest rate increases have slowed sales in the past, but rates have then declined and “reignited sales.”

“I’m looking for the [real estate] trend to stabilize sometime in the next four months or so once the Bank of Canada stops raising rates,” he added.

© The Vancouver Sun 2006

Sun

The developer converting a Edwardian warehouse downtown into residences intends to re-introduce into the sidewalk outside the building the “areaway” of glass bricks that shed light on the below-grade floors of the warehouse all those years ago.

“It’s not a re-creation, but it’s as close as we can get to the original and still conform to building code,” Rick Ilich of Metroliving says of the areaway-restoration he plans for the Crane Building, on Beatty between Dunsmuir and Pender.

That’s the building, above, in a detail from a City of Vancouver archives photo. The areaway is in front. Plumbing supplies are display in the lower windows,

Metroliving is building 57 residences behind the warehouse’s Edwardian brick facade.

“One of my earliest memories is being hand in hand with my mother in the 500-block Beatty and walking over the illuminated lavender-coloured glass blocks in the sidewalk,” Ilich told publicist Pamela Groberman.

“To me, it was like magic.”

TECHNOLOGY ADVICE: $165 GOES A LONG WAY

“We used to spend a lot of time doing big bookcases for big TVs, and then flat screens came along and you just hang them on the wall. Architecture has a longer half-life than technology does . . .

“I think it’s better to stay really basic because the technology shifts so quickly — it’s moving away from a kind of fixed place, fixed hardware and more to software solutions and wireless solutions. Now all you need is a $165 wireless hub and you can do anything anywhere you want.”

— architect John Brown, in the Calgary Herald

© The Vancouver Sun 2006