Housing starts shrink

New-housing starts are at near-record lows as B.C. became the only province in the country to record a decline in urban housing starts last month.

Figures released yesterday by the Canada Mortgage and Housing Corp. showed B.C. housing starts are down five per cent for May, at 809 homes.That means seasonally-adjusted housing starts in B.C. are 11,200 for the year. In 2008, there were 34,321 housing starts.

Meanwhile, housing starts across the country rose to 128,400 units in May, compared to 117,600 in April. Housing starts are up 22 per cent in Ontario, 16.8 per cent in the Prairies.

"That is a very low level of housing starts in B.C.," said CMHC regional economist Carol Frketich yesterday. CMHC predicts new-housing starts in B.C. should improve to 19,725 by the end of the year, which would still be down 42 per cent from 2008 levels.

But next year, she added, housing starts should recover, and rise 10 per cent to 21,700.

"It certainly has slowed," said Peter Simpson, CEO of the Greater Vancouver Home Builders Association. The inventory of unsold homes is falling, he said, and banks are not lending to builders in the way they used to.

"Everybody is holding the reins back," he said. But Simpson figures the decline is bottoming out, and lower mortgage rates should entice wait-and-see buyers into the market.

The mood among builders is "cautious optimism."

Despite the downturn, shovels are already breaking ground on new-housing projects.

Home-builder Dale Barron sold eight homes last Saturday, each for about $500,000, in a 78-home project in Cloverdale.

He also sold 19 homes last month at another project in Coquitlam, where prices range between $650,000 and $800,000. "We have to be near the bottom," said Barron, of Morningstar Homes. "Prices will firm up."

Most cities in B.C. have experienced massive drops in new construction of single-family houses and condos. In the first five months, housing starts were 2,771 in the Lower Mainland, compared to 8,448 for the same month last year.

In the Fraser Valley, foundations were poured for 208 homes, as against 1,259. Kelowna starts are down 91 per cent, from 1,600 to 139 starts.

"We have seen some indication that the resale market is starting to improve, and sales are picking up," said CMHC senior market analyst Robyn Adamache. "Once we see the number of unsold homes fall, then builders will feel that it's time to build new homes again."

B.C.'s housing starts are near the record-low levels of the early-1980s and late-1990s, says BMO Capital Markets economist Robert Kavcic. "They had one of the strongest housing booms in the country," he said.

"Now, economically, the province is getting hit particularly hard. You are not going to get a sustained increase in new buying activity until the job losses stop, Kavcic said."

TD economist Pascal Gauthier said B.C. is dramatically off its peaks of 55,000 starts just a few years ago."It seems to be finding bottom," added Gauthier.

(prepared by John Birmingham/Vancouver Province)