More good things to come from BC’s strong economy

“It’s not over yet. The 2006 outlook looks good - not great,” said Carol Frketich, CMHC’s BC Regional Economist, at the November 2 conference. “BC is a province with potential. It has the potential to grow at a good pace for the next couple of years.”
Several factors point to continuing growth. Consumer spending is strong, with near-record high levels of consumer confidence. We’re leading the country with annual employment growth up 3.2 per cent. Wages and salaries in BC are up five per cent in the first six months of this year. While real prices will continue to grow, the effect will be mitigated by increasing real incomes which are much more in line with real prices.
BC will have a productivity boost and is expected to outpace the country in annual growth in real GDP in 2005 (3.5 per cent) and 2006 (3.3 per cent). As the world changes with global trade, BC is poised to benefit.
BC has the commodities and the required knowledge and expertise in industries like forestry, mining and architecture to share with the rest of the world. And, of course, we have tourism.
Population growth in BC was up 1.3 per cent this year, compared to national population growth of 0.9 per cent. CMHC predicts we’ll continue to see increases in both interprovincial and international migration in 2006.
A strengthening Canadian dollar has lead to rising interest rates. Headline inflation is expected to stay above 3 per cent and interest rates will increase through 2006, according to Frketich. At rates of 5.8 per cent in September and 6.2 per cent this quarter, mortgage rates will remain relatively low, by historical standards, through 2006. We may see some impact of rising rates in resale markets, but not so much in new home markets.
In terms of housing demand in BC, Frketich says, “It couldn’t look better”. In a province containing only 13 per cent of the national population, resale activity amounts to 21 per cent of the national total. Next year, CMHC expects some slowdown in price appreciation; however, BC will still be host to the highest average prices in Canada. Price gains of about 6 per cent are forecasted for next year.
The supply side may have a hard time keeping up with demand as it faces the constraints of rising average land costs and a shortage of workers. Projects will take longer and the costs of materials and labour will increase, putting a limit on the number of units that can be completed.
After several years of growth, the forecast for BC housing starts points to a slight decrease from 33,600 units this year to 31,600 units in 2006.
“BC’s economic fundamentals support ongoing high levels of activity in the housing sector,” says Frketich.
Other conference speakers included Cameron Muir, Senior Market Analyst, CMHC Vancouver; Murray Dinwoodie, General Manager, Planning and Development, City of Surrey; and Larry Beasley, Co-Director of Planning, City of Vancouver.