Metro Vancouver put up steady home construction numbers in March even as many other BC regions saw declines. But, despite last month’s encouraging activity levels, significant drops are forecast for at least the near term for all markets in the province.
Central 1 Credit Union Economist Bryan Yu explained in a regional outlook published last week that even as a record number of homes are currently under construction in the province, the rest of the year appears shaky as the disruptive effects of the COVID-19 pandemic are starting to be felt across the market.
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New home construction levels, generally measured by “housing starts,” or how many homes began construction during a given period, are viewed as a key factor in determining market health.
“Housing starts are expected to slow due to the broad COVID-19 disruption to society,” wrote Yu. “While construction sites remain open, it is likely that physical distancing measures, closures of non-essential services, and delays in permitting will further slow buildouts and delay projects.”
Citing a major drop in residential building permits across BC municipalities observed in March, Yu said a 30 percent decline in housing starts “would not surprise” this year.
This potential drop in activity represents a tremendous about-face for the provincial market, which as Yu noted in his outlook, had a record of 62,000 housing units under construction during the first quarter.
Indeed, it was likely to be a stellar year for home construction across many major Canadian markets before the COVID-19 pandemic took hold.
“[T]he [home building] sector was priming itself for an extremely strong run through 2020 given the fundamental backdrop before the COVID-19 outbreak,” wrote BMO Senior Economist Robert Kavcic in a research note last week.
Kavcic believes March data on Canadian housing starts is only capturing the early effects of the pandemic on activity levels, with starts likely to remain “extremely depressed” through April and May.