Slump in multiple-family housing pushes home building down in January
Bruce Constantineau
Sun
A sharp drop in multiple-family housing starts last month caused Greater Vancouver home building activity to fall 19 per cent below the level reached in January 2005, Canada Mortgage and Housing Corp. reported Wednesday.
CMHC said a 22-per-cent increase in single-family home construction in January, to 366 units, was more than offset by a 31-per-cent drop in multi-family starts, to 723 units.
But analysts said multi-family starts typically vary widely from month to month and expect total housing starts this year will only fall by two per cent. Demand for new housing is expected to remain strong but factors like labour shortages and rising building costs will constrain construction activity.
“The demand is still up there but the capacity for builders to build more than they’re already doing is pretty much limited,” CMHC senior market analyst Cameron Muir said in an interview.
Muir said housing affordability throughout B.C. has become an issue more than ever as prices are expected to rise by about nine per cent in 2006 while the average three-year mortgage rate is expected to climb by about one third of a percentage point.
“As prices and rates edge up this year, it’s going to affect affordability for many consumers,” he said.
CMHC said total housing starts across B.C. rose by 20 per cent in January to 2,238 units, with strong increases in Victoria, Abbotsford and Kelowna offsetting the Greater Vancouver decline.
The drop in Greater Vancouver starts occurred despite strong increases in Surrey and Langley, where combined activity rose from 258 starts in January 2005 to 500 starts last month. The number of housing starts in Burnaby dropped from 228 a year go to just 11 last month while city of Vancouver activity declined from 321 units to 109.
Muir said that as building costs continue to escalate, developers must choose between pre-selling all their units as soon as possible or holding off on sales as long as possible to ensure they charge prices that create a decent profit margin.
“If they sell all their units before building them, costs could go up and cut into their profits,” he said. “But if they hold units back to mitigate that risk, they have to be confident the market will stay strong and their units will all sell at good prices.”
Greater Vancouver Home Builders’ Association chief executive officer Peter Simpson said Greater Vancouver housing starts in January 2005 were also down about 17 per cent from a year earlier but total starts for the year only declined by about three per cent.
“The numbers tell me we’re at a plateau — it’s not a big dip,” Simpson said. “It’s not unexpected and it makes it more manageable for builders who were scrambling during the large rampup we had in 2004, which was the best year in a decade.”
CMHC predicts total Greater Vancouver housing starts will decline by about two per cent this year to 18,500 units and by another two per cent in 2007 to 18,200 units. Total B.C. housing starts are forecast to dip by six per cent this year to 32,600 and by another four per cent in 2007 to 31,300.
© The Vancouver Sun 2006
