B.C. saw builders started work on 1,817 new homes in July, down 13 per cent from June, Canada Mortgage and Housing reported Tuesday, with starts of single-family homes showing the sharpest decline.
The fall in new-home construction is in keeping with declining housing resales, which have trended lower since the start of the year and brought down prices marginally as a result.
It is all part of an easing that mirrors Canada’s national picture and one that economists have expected as factors such as economic uncertainty, new mortgage restrictions and, for B.C. and Ontario, the harmonized sales tax take hold.
And in a global perspective, Canada’s current slowdown has proven to be “the most dramatic,” according to Scotia Economics senior economist Adrienne Warren.
“Sales, while still at a high level, have trended steadily lower alongside reduced affordability and exhausted pent-up demand,” Warren wrote in her report, Global Real Estate Trends, also released Tuesday.
Warren wrote that global housing markets are in a transition from “overvaluation and overbuilding of the mid-to-late 2000s,” and that in “higher-growth nations such as Canada and Australia, housing activity should prove much more subdued.”
In B.C., the downturn in sales has accelerated over the past few months, Bryan Yu, an economist with Central 1 Credit Union, said.
Yu added that it was record low interest rates that fuelled a frenzy of buying in the last half of 2009, which, couldn’t expect to be maintained even though rates are still near their bottom.
“We did sort of draw down some of that [future] demand, pulling it forward,” Yu said.
The new mortgage restrictions make it tougher for first-time buyers to qualify for certain mortgages, Yu added, and the impact of HST on new homes priced over $525,000 has added to price pressures that have again begun to push buyers out of the market.
Add to that general uncertainty over the direction of the job market (B.C.’s unemployment rate has fluttered between 7.5 per cent and 7.8 per cent over the past three months) and Yu expects markets to stay in line with current levels of activity.
“When we look at the overall economy, we are in a recovery phase, but it is a very slow, gradual phase,” he added.
Robyn Adamache, a Metro Vancouver market analyst for Canada Mortgage and Housing, said the declines being experienced in new-home construction represent builders reading the signs of slower sales in resale markets.
New-home construction for the first seven months of the year at 13,292 housing starts is still more than double what it was a year ago, but Adamache added that the number is moderating.
“There are a few things that need to settle and people need to see exactly what’s happening before buyers and builders feel a little more confident that the recovery is underway,” Adamache said.
In Metro Vancouver, the region’s builders started work on 1,124 new housing units in July, down 10 per cent from June’s new-home starts and the lowest single-month number since February, although for the year-to-date, starts stood at 8,005, which is up from 107 per cent from a year ago.
“I have to take some optimism from that,” Peter Simpson, CEO of the Greater Vancouver Home Builder’s Association said in an interview.
However, Simpson added that his members have reported “a mixed bag” of results from their project sales offices, with some reporting stronger presales of new projects and others reporting slower presales.
“The focus is on marketing and sales of new projects,” Simpson said. “The number of people who respond to those launches and how quickly they sell will tell the real story.”