The number of new homes beginning construction in the Vancouver region is declining and expected to fall significantly in the near future.
It will be a sharp descent from levels seen only a year ago, when housing starts in the region hit a peak.
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According to a forecast published this week by the Canada Mortgage and Housing Corporation (CMHC), housing starts in the Vancouver region had already started falling before the onset of the COVID-19 pandemic.
Even though home construction activities have been permitted to proceed across BC, CMHC’s Braden Batch and Eric Bond wrote that the pandemic will deepen the cyclical decline in construction activity that was already underway.
“[N]ew construction will be challenged by reduced migration both from other parts of Canada and abroad, loss of household income due to increased unemployment, and increased uncertainty regarding the long-run economic impacts of the pandemic affecting confidence in initiating new housing units,” they wrote.
Housing starts measure how many homes began construction during a given period and are generally viewed as a key factor in determining market health.
Building applications, which give a sense of how many housing starts can be expected in the near future, were also down in Vancouver before the pandemic hit. Real estate consultancy Altus Group said this week that new development applications were down in the first five months of the year from their 2019 levels.
“Oversupply in the new condo market is likely a factor here, even without concerns related to the impact of COVID‐19 on the market,” Altus Group said.
While the CMHC forecast called for a home building recovery in Vancouver by the end of the year, don’t expect construction to return to 2019 highs anytime soon.
“Following the immediate shock to the economy, we expect housing starts to begin recovery by the end of 2020 to a pace in-line with household formation and economic growth of the region,” wrote CMHC’s Batch and Bond.