By Raphael Alexander, Vancouver Sun
I wrote in early January about the “bubble” economy in British Columbia, which, despite the Olympics-related building, still resulted in a massive collapse in the construction industry in tandem with the recession. Construction jobs contracted by 11.9 per cent in the province in 2009, as we were one of the last districts in Canada to feel the effects of the global economic meltdown.
Although January construction numbers are up to 198,600 jobs, it is below the 202,100 jobs from a year ago, and a far cry from the 220,800 jobs during the boom.
The good news is that new construction is on the rise in the province, with the seasonally adjusted annual rate of housing starts reaching 186,300 units in January, a 5.8-per-cent increase from December.
That’s much better than the 149,081 housing units to begin 2009, but the construction starts have progressed steadily until now, according to the Canada Mortgage and Housing Corp. It’s even better than the figure that economists from financial institutions had been predicting.
In cities, housing starts are up 4.4 per cent, and within those numbers the increase of multiple urban starts [like condos] also increased by 5.7 per cent. All of those numbers show a recovery from the recession, with confidence in the housing market improving, and home sales rising again.
But the victory may be short-lived, with experts predicting the bubble will pop when the harmonized sales tax kicks in on July 1.
Home buyers will likely advance their demand for houses before the HST is implemented, meaning fewer purchases in late 2010 and early 2011.
This is forecast by the Canadian Real Estate Association itself, which says that not only the 12-per-cent HST, but also higher interest rates, which must inevitably rise after historically prolonged lows, will push real estate down in 2011.
B.C.’s housing resale market is forecast to jump 19.8 per cent for 2010, with average home prices going up by 4.2 per cent to $485,500. But the bulk of those sales will be before the HST and the Bank of Canada interest rate revisions.
Interest rate increases are likely to further dampen the housing market in 2011, with an expected decline of 7.1 per cent in the number of units sold. B.C.’s market is forecast to see the largest decline of 12.9 per cent to 88,800 units sold in 2011.
Even though the market is expected to fall in 2011, the prices of homes in B.C. are expected to decline only 1.8 per cent, meaning that investors will still be making a profit with the dip. That means there’s no relief for homebuyers who were hoping the astronomical prices of an average home in Vancouver would go down.
The median sale value of a home in Vancouver in 2009 was $540,900, while median household income was $58,200. According to The Demographia International report which calculates home affordability in an index that divides the price of a home by household income, Vancouver is the most expensive city among 272 metropolitan markets in Canada, the U.S., the U.K., Australia, New Zealand and Ireland.
The “Median Multiple” gives Vancouver an index of 9.3 in affordability, much higher, for instance, than Kamloops, where the median family income is $67,434 while the price of a home is $257,242, giving a Median Multiple of 3.8.