Housing starts halved

January saw Metro Vancouver builders start work on fewer than half the number of new homes they started in January 2008, a sign of things to come in 2009, according to Canada Mortgage and Housing Corp.

Builders started work on just 609 new homes in January, down 54 per cent from 1,332 homes in January 2008, and down 45 per cent from the 1,108 new homes started in December.

"We were kind of expecting [a significant drop]," Robyn Adamache, a Canada Mortgage and Housing analyst said in an interview. "I don't know if we expected it to be this big."

Adamache said inventories of unsold new homes built up over 2008 were double the number unsold at the end of 2007.

She said builders were responding to the signal sent by slow sales, along with a drop in resales in the latter half of 2008, by slowing down construction.

Peter Simpson, CEO of the Greater Vancouver Home Builders' Association, said bad weather in December and January also slowed construction sites down, but added that the slowdown in sales is the main reason for the decline in starts.

"Starts are low because a lot of builders are taking a wait-and-see approach," Simpson said. "They're going to be very cautious about putting a shovel in the ground if they're not confident with a particular project selling out."

Simpson said banks and construction lenders are making some decisions as well, by not approving financing for projects.

He said the drop in housing starts looked particularly steep because 2008 was an unexpectedly busy year for housing starts.

Starts for most of 2008 were on track to be the best since 1993 until falling off towards the end of the year, he said.

The bottom line, though, is that the low level of real estate sales that Metro Vancouver experienced through the fall of 2008 was bound to be reflected in lower housing starts, Simpson said.

Adamache said that with a record number of condominium units under construction -- in the order of 18,000 units -- she expected the inventory of unsold new homes could increase further over the next couple of years. Among municipalities, Bowen Island, Langley City, North Vancouver City, Pitt Meadows, Port Coquitlam, Port Moody and White Rock recorded no housing starts, according to Canada Mortgage and Housing.

Vancouver, which saw 294 starts in January 2008, recorded 151 starts this January.

Surrey, which had 409 starts in January 2008, saw only 94 in the first month of 2009.

The decline in housing starts extended to the entire province. The 925 January starts in all B.C. urban centres represented a 60-per-cent drop from the same month in 2008.

(prepared by Derrick Penner/Vancouver Sun)