Fewer new homes likely to be started this year, report says
Derrick Penner
Sun
British Columbians will spend more money remodelling their existing homes this year and next, and less on brand new homes, Credit Union Central B.C. predicts.
Housing starts are expected to deflate by almost a percentage point this year, compared with last year, and a further 3.2 per cent in 2008.
However, Credit Union Central is forecasting that acquisitions and renovations of existing homes to grow by 10 per cent in each of the next two years, which chief economist Helmut Pastrick said is typical in escalating markets, especially high-priced places such as Vancouver.
“Being in a high priced market, there is a greater tendency to seek the renovation alternative than go out and buy and relocate,” Pastrick said.
Of course the age of housing stock is another factor in the need for repairs to existing homes, and Vancouver also has a larger proportion of older homes than outlying regions such as Kelowna.
The pace of spending on new homes and renovations, however, represents a slowdown from the frenzied pace of a year ago when British Columbians poured $13 billion into residential construction (an 18-per-cent increase from 2005).
And the pace of new investment outweighed depreciation on aging homes so that the value of B.C.’s housing stock increased 12 per cent to hit $174.7 billion at the end of 2006, according to Statistics Canada’s initial estimate. That was the biggest gain in B.C.’s housing capital since 1989. The value of residential housing has increased every year since at least 1941, Credit Union Central said.
Pastrick expects, thanks to renovation, that spending on residential construction to increase 6.8 per cent this year and 5.6 per cent last year even though housing starts are expected to decline.
“This adjustment process . . . will be more drawn out than we’ve seen in previous [market] adjustments,” Pastrick said, “but I view it as a healthy market response [that] does help to wring out some of the excesses that may have existed, and will help to extend the health of the market over the longer term.”
© The Vancouver Sun 2007
