Some 30,884 homes were started in 2004 — that’s 25 per cent more than the previous year
Michael McCullough
Sun
CREDIT: Ian Lindsay, Vancouver Sun Residential construction continues strongly across B.C., including this project that is being built in Surrey.
B.C.’s urban housing starts hit their highest level in 10 years last year and the Canada Mortgage and Housing Corp. is predicting further growth in 2005.
Builders broke ground on 30,884 dwelling units across the province in 2004, up 25 per cent from 2003 and the highest number since 1994, when 34,619 homes went up. CMHC, a federal Crown corporation, expects B.C. will be the only province to record another increase in 2005 — to 32,000 starts.
The same factors that boosted new home construction in 2004 — strong job creation, migration from other provinces, a historically low inventory of vacant properties and continued low interest rates — are still in place as we head into 2005, CMHC senior market analyst Cameron Muir said.
In the middle of last year there were fewer than 100 unoccupied new units available in all of Greater Vancouver, Muir noted. In 1999, by contrast, there were 2,600 such homes on the market.
There are 12,000 housing units under construction around the region, but most have been pre-sold, Muir said, meaning they will never sit vacant.
However, while the market in 2003 and 2004 was driven by first-time buyers and investors, those buyers will represent a largely spent force in 2005, he said.
Highly price-sensitive, many first-timers will be gradually priced out of the market by rising building costs and, in all likelihood, interest-rate hikes later this year. As real estate prices reach new highs, investors will opt for other venues such as the stock market.
“More buyers are going to be move-up, move-down, move-over,” Muir said.
For example, he foresees a strong market for high-end downtown condominiums and suburban townhouses near amenities such as golf courses and waterfront promenades from empty-nesters selling their suddenly very valuable single-family houses.
The demand for those houses, in turn, will come from new arrivals to the province and young families seeking a patch of land.
Factors that weigh against CMHC’s rosy forecast include possible interest-rate hikes and higher construction costs.
“Construction material costs have gone up dramatically in the last year to 18 months,” Muir acknowledged. And though labour cost increases have been modest to date, residential builders will soon have to compete with Olympic-related construction projects for skilled tradespeople.
As for interest rates, Muir believes it would take a substantial 200-basis-points (two per cent) increase in mortgage rates to derail the current market momentum.
Greater Vancouver boasted 19,435 home starts last year, a 24.4-per-cent increase from 2003, with some of the fastest growth in Langley, where the number of starts rose 67 per cent year-over-year, and Burnaby, up 61 per cent.
As one of the few places left around Vancouver to build a single-family house, Langley township saw brisk development in the Willoughby area just north of Langley city.
Closer to the city core, Burnaby witnessed the “upzoning” of several walk-up style apartment areas into higher-density condominium towers.
One of the constraints to new development that has been building over the long term is a lack of new building sites, Muir said.
Some developers are resorting to so-called “brownfield” sites — erstwhile industrial land such as the former Canadian White Pine sawmill site in southeast Vancouver and another abandoned millsite being developed by Parklane Homes near Fort Langley.
Greater Vancouver Home Builders Association CEO Peter Simpson was not surprised by the housing start numbers.
“We knew we were headed towards the best year in a decade,” he said Tuesday. In fact, based on the 11 months to Nov. 30 it was already the best year in 10 and the 2,372 starts provincewide in December were just “gravy,” he said.
Given that each housing unit creates 2.8 person-years of employment in construction and manufacturing, the increased activity in 2004 created an additional 10,665 jobs in Greater Vancouver alone, Simpson said.
CMHC’s forecast of a further 2.2-per-cent increase in starts this year is fine by him.
“It’ll basically be a flat line and that’s not altogether a bad thing because it’ll be manageable,” he said. Though the scarcity of skilled trades is stretching completion times longer for some projects, it is not affecting closing dates for buyers, he said.
Virtually all major centres in B.C. saw growth in housing starts in 2004. Victoria enjoyed the best year in the past 11 with 2,363 starts, representing an 18-per-cent increase over 2003. But the strongest markets on Vancouver Island last year were Nanaimo and Parksville/Qualicum, where starts rose 56 and 73 per cent, respectively.
Peggy Prill, CMHC’s market analyst for the Island, expects strong growth from these up-Island communities, with the addition of Courtenay-Comox and Duncan, in the coming year as demand for retirement homes and recreational property intensifies.
An aging population will prompt a gradual shift towards multi-family developments from houses and acreages, Prill said.
After a very strong 2003, housing starts increased just four per cent in Kelowna in 2004, but area analyst Paul Fabri expects a stronger 2005.
New home markets are strong throughout the Okanagan and are picking up in Kamloops and Salmon Arm, he said.
The other hot spots in the southern Interior for residential construction were ski and other resort communities such as Big White, Sun Peaks, Panorama, Fernie, Kimberly, Invermere and Radium Hot Springs.
Prince George saw the best new home market in a decade, with 195 new units in 2004, up from 103 in 2003.
© The Vancouver Sun 2005