Analysts say drop a levelling-off after frantic pace
Derrick Penner
Sun
Although starts in the first two months of this year remain below 2006 levels, Canada Mortgage and Housing analysts say the trend is merely a levelling-off of construction’s fast pace. Photograph by : Vancouver Sun Photo Illustration
February housing starts in Greater Vancouver dropped sharply from the same month a year ago, Canada Mortgage and Housing reported Thursday.
Although starts in the first two months of this year remain below 2006 levels, Canada Mortgage and Housing analysts say the trend is merely a levelling-off of construction’s fast pace.
Builders started construction on 1,248 new units in Greater Vancouver in February, Canada Mortgage and Housing said. That represents a 37-per-cent decline from February 2006, with activity down in both single-family and multiple-unit dwellings.
Canada Mortgage and Housing analyst Robyn Adamache added that February 2006, which saw 1,988 dwellings started, was the busiest February in 18 years.
And this February’s starts are the second highest since about 2001.
“We’re still expecting [2007] starts to be at about the same level [as 2006],” Adamache said. “I still expect we may see a bit of an uptick [in annual starts], but it would definitely be less than five per cent.”
The reasons Adamache doesn’t believe starts will decline are new-housing inventory levels and the pre-sales of units for condominium developments.
Adamache said that in February, 1,120 new homes sat unpurchased. Only 131 of those were apartments. The 15-year average for new inventory is 3,000 units, she added.
And with projects such as the first phase of Surrey’s Quattro project still selling out in short periods, “demand for new units appears to be quite strong.”
Adamache added that a record-high 21,000 new units are under construction across Greater Vancouver.
Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, added that there are a number of housing projects in the development phase, or in the process of digging foundations, which is activity that is not reflected in Canada Mortgage and Housing’s numbers.
“Nobody [in housing construction] is idle,” Simpson said. “The labour force is still stretched to the limit through all sectors now.”
Simpson added that some developers have reported a slowing of sales on their new projects, but lower-priced developments — such as Quattro, where prices started at $119,000 — are doing well.
“With affordability being a huge issue,” Simpson said. “if a project is well priced and well placed, it will be successful.”
And Simpson added that starts are up in Lower Mainland communities outside of Greater Vancouver, where land prices are lower.
“We’re not going to see any significant spike [in home construction], nor a substantial drop,” he said.
Adamache said she is not forecasting higher levels of housing starts in part because the Vancouver real estate market has been seeing fewer sales in the resale sector.
“On average, inventory levels on the resale side are up about two per cent year-over-year,” Adamache said. “So it’s not quite as hard to find resale [homes] and we’re not seeing as much spillover of demand into the new-housing sector.”
Provincewide, builders started construction on 2,074 units in February, a 25-per-cent drop from the same month in 2006.
Greater Vancouver, Kelowna and Prince George saw the biggest declines in construction during the first two months of the year. February starts plummeted almost 73 per cent to 74 units, compared with 270 units in the same month a year ago in Kelowna.
For January and February, Kelowna’s 280 starts remains 43-per-cent below its pace for those two months in 2006.
Prince George, with 23 starts during January and February, is 11.5-per-cent below its pace in 2006.
© The Vancouver Sun 2007