Homes ‘not expected to rebound sharply’
Fiona Anderson
Sun
Housing starts in British Columbia are near record lows, dropping again in May while starts in much of the country bounced back after a gloomy April.
Builders started 809 homes in urban centres in the province last month, compared to more than 3,000 a year earlier. Annualized and seasonally adjusted — removing seasonal variation and multiplying by 12 to reflect annual levels — that works out to 9,400 starts, down five per cent from the 9,900 urban starts in April, according to numbers released Monday by the Canada Mortgage and Housing Corporation (CMHC). Including rural centres, starts dropped from 11,700 in April to 11,200 in May. In May 2008, annualized starts in B.C. were 38,500.
Across Canada starts rebounded 9.2 per cent to 128,400 from 117,600, annualized and seasonally adjusted. Last May starts were 222,800.
Starts in the province are now “near record low levels seen in the early-1980s and late-1990s, giving the province the distinction of having arguably the nastiest residential construction recession this cycle,” BMO Capital Markets economist Robert Kavcic wrote in a note.
The early 1980s and late 1990s “were pretty bad recessions in Canada,” Kavcic said in an interview. “So it speaks to just how bad this downturn has been in B.C. It’s been pretty bad across the country but in particular in B.C. it’s been very deep and very fast.”
While starts in Alberta have come down by the same amount as in B.C., B.C.’s drops have come in half the time, Kavcic said. “So it’s a little more dramatic in that sense.”
Kavcic does not expect starts to bounce back quickly.
There has been overbuilding across Canada for about six years, especially in B.C. “where the real estate market was a lot hotter than the rest of the country for a good part of that six years,” he said.
“So we’ll probably see housing starts chug along at a lower level as opposed to rebounding sharply back up,” Kavcic said. “We’ll see a bit of rebound from these recession levels but you’re not going to get back to 2005 or 2006 levels any time soon.”
Carol Frketich, B.C. regional economist with CMHC believes that while B.C. is at low levels of activity “there are signs of change.”
Listings in the resale market have gone down and sales have been going up, moving the market back toward balance, Frketich said.
CMHC forecasts that new home construction will pick up later in the year, with new home starts of 19,725 this year, a 43-per-cent decline compared to 2008, followed by a 10 per cent increase in 2010.
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