Housing starts in B.C. finally cooled in August following four months of record-high performances.
Annualized urban-area starts fell to 36,900 units during the month, from 50,800 units in July, following strong results since April. This was the lowest monthly reading since March. While it remains to be seen if this drop-off marks the beginning of a trend, our expectation is for a significant decline over the next year given the weak resale market and moribund pre-sales of new projects since 2018.
As can be expected with a decline of this magnitude, multi-family unit construction was the main driver of August’s pullback. Starts fell from 43,400 units to 29,112 units (down 33 per cent). Detached starts rose 4 per cent to 7,750 units annualized.
Among metropolitan areas, Vancouver posted a second straight substantial decline with annualized starts at 19,858, down from 31,835 in July and the first sub-20,000 performance since October 2018. Starts also fell by more than half in both Victoria (1,645 annualized) and Abbotsford-Mission (1,125 annualized). Kelowna starts rose sharply to a two-year high in August to 5,844 annualized units.
August’s decline narrowed year-to-date growth, but levels remained 13 per cent ahead of 2018. This was among the strongest gains across provinces and lagged behind only Quebec, Prince Edward Island and New Brunswick. Nationally, starts were unchanged from a year ago. Vancouver-area starts were up 20 per cent and Abbotsford-Mission starts were up 89 per cent. Starts declined in Victoria and Kelowna by more than 20 per cent.
Starts are forecast to slow through the end of 2019, with annual housing starts holding near 2018 levels of 41,000 units (inclusive of rural areas) before declining to 33,000 units in 2020. Sluggishness in market conditions over the past year, rising levels of standing inventory and high levels of units under construction in the new-home market will slow activity.
The choppy pattern of non-residential building permits continued through July, but elevated levels point to solid investment activity. Permits reached a seasonally adjusted $602.7 million, marking a 48 per cent gain after June’s 33 per cent decline. July’s increase moved permits back toward trend, with seasonally adjusted levels up 63 per cent year-over-year.
Year-to-date, permits rose nearly 59 per cent, led by a 60 per cent increase in commercial activity and 84 per cent increase in government building permits. Industrial permits rose 59 per cent. Growth has been shared among most metro areas, with a 64 per cent increase in Vancouver and a 28 per cent increase in Kelowna. Permits were down 24 per cent in Victoria.
Bryan Yu is deputy chief economist at Central 1 Credit Union.