B.C. will post Canada‘s largest increase in new home construction this year, Royal Bank of Canada economists predict.

Low mortgage rates should buoy house sales in B.C. in 2004 as they ignite a response from the enormous pool of potential first-time homebuyers, RBC economists said yesterday.

The lack of resale supply will force prices sharply upwards, fuelling the biggest annual increase in new home building among the provinces, the economists said. “This shouldn’t be misconstrued as a boom but rather a trend towards building at more demographically consistent levels,” RBC economist Carl Gomez said.

B.C., already Canada‘s least affordable province for housing, has been getting even less affordable, the bank said.

The bank’s housing affordability index for B.C. rose to 42.9 per cent in the final quarter of 2003 from 42.1 per cent in the third quarter. The index measures pre-tax household income needed to service the costs of owning a detached bungalow.

This amounts to a payment of $1,645 per month for an average detached bungalow, including principal, interest, tax and utilities — up 2.6 per cent from the third quarter of 2003.

Vancouver‘s affordability index reached 46.2 per cent in the last quarter of 2003 for an average monthly payment of $1,969, cementing its status as Canada‘s costliest city.

© The Vancouver Province 2004