Bruce Constantineau
Sun
The value of B.C. building permits fell 19 per cent in July to about $861 million — with residential permits dropping 7.1 per cent and non-residential permits plunging by more than 37 per cent from June levels.
Analysts say the declining permit values reflect a slowing economy and builders’ increasing caution about future development plans.
Statistics Canada reports the total value of B.C. building permits during the first seven months of this year declined 9.7 per cent to $6.837 billion. Residential permits fell 8.8 per cent to $4.654 billion while non-residential permits dropped 11.4 per cent to $2.183 billion.
Central 1 Credit Union chief economist Helmut Pastrick expects house building activity throughout B.C. will slow down considerably, following recent sharp declines in home sales.
Greater Vancouver Multiple Listing Service sales fell nearly 54 per cent in August to 1,568 units.
“I expect we’ll see considerably weaker residential permit values in the future — with a decline of about 20 per cent by the end of this year and another decline in 2009,” Pastrick said in an interview on Monday.
He predicts B.C. housing starts will fall from 39,200 last year to 37,100 this year and 31,700 in 2009.
Pastrick believes there is more potential for growth in B.C. non-residential construction because market conditions on the commercial side remain strong — with low office vacancy rates, low industrial vacancy rates and rising hotel occupancy levels.
“It’s just that we’re seeing some constraints in development plans now because of the credit squeeze, with financing being a little tighter than normal,” he said. “It can also be a lot harder to find commercial development sites, which delays the permit process.”
Pastrick noted the value of non-residential permits does not include engineering construction projects like new roads, bridges and transit lines, which have all generated tremendous activity in B.C.
Residential construction activity might slow down, but there’s no collapse in sight, according to Greater Vancouver Home Builders’ Association chief executive officer Peter Simpson.
“There may be a few clouds out there and the ceiling has dropped a little, but the sky is not falling,” he said.
Simpson said developers of major projects are taking a close look at market conditions now and doing their best to avoid unnecessary risks.
He noted the market has grown steadily since 2000, but it may be time for builders to exercise caution.
Some builders have started offering buyers incentives like attractive mortgage packages or free appliances, but Simpson denied there’s any “desperation” in those tactics.
Vancouver Regional Construction Association president Keith Sashaw said while building permit values dropped in July, the industry remains “very busy.”
© The Vancouver Sun 2008
