Biggest investment drop is forecast to happen this year. (Central 1 Credit Union)

B.C. housing slump has begun to slow economy, credit union economists say

Central 1 not predicting recession, but ‘sharp contraction’ in construction

Government moves to put the brakes on B.C.’s urban housing costs are taking hold and are about to produce the biggest drop in residential construction since 2009, Central 1 Credit Union says in its latest forecast.

The drop in housing investment is projected to be nearly as large as the world-wide recession of 2009, but will not signal a recession in B.C. because of strength in other construction sectors, says B.C. Economic Outlook 2019-2021, a forecast by the organization representing credit unions in B.C. and Ontario.

Increasing population, new capital investment in public works and the LNG Canada liquefied natural gas project in northern B.C. are expected to keep unemployment low as housing construction slows, Central 1 forecasts.

“B.C.’s economy will slow over the next three years as the policy-induced housing market downturn weighs temporarily on growth,” the report says.

“The recent slump in housing demand and prices will trigger a sharp contraction in housing construction and the most pronounced drop in broader residential investment since 2009. Growth will trend in a range of 2.0 to 2.5 per cent over the next years and accelerate to 2.8 per cent in 2021.”

The federal government’s addition of a “stress test” for bank mortgages in 2018 has required borrowers to qualify their ability to pay if interest rates increase, after a long period of low rates led to personal debt rates rising. B.C. has focused on increased taxes for foreign buyers and second homes in urban areas that have low rental vacancy rates and high purchase prices.

READ MORE: Deadline looms to register to avoid speculation tax

READ MORE: Drop in fixed mortgage rates a ‘welcome cooling’

“Retrenchment has been significant in larger urban markets, which will curtail new home activity in 2019,” the report states. “Home sales have fallen to a multi-year low pace.”

Central 1 expects that B.C. exports will be a drag on growth, with the continued trade dispute between the U.S. and China and a general trend to trade protectionism internationally.

Retail sales rose “a mere two per cent last year following a 9.3 per cent increase in 2017 and 6.6 per cent gain in 2016, despite support from rising wages, solid labour market and population growth,” Central 1 says.


@tomfletcherbc
tfletcher@blackpress.ca

Like us on Facebook and follow us on Twitter.

Just Posted

Figures reveal spike in highway traffic jams between Abbotsford and Langley

Nearly one in 20 westbound vehicles between Abbotsford and Langley clocked at under 60 km/h

Taser takedown in Chilliwack complex after incident gets violent

Male suspect became agitated under questioning and repeatedly punched an officer

Harrison looks to test viability of solar power

Harrison has applied for a grant to see whether solar power is an option for its village buildings

Agassiz man pleads guilty in snake venom death of toddler

Plea comes more than five years after the incident in North Vancouver

Funding uncertain, but Agassiz’s Storytime in the Park will go on, organizer says

The literacy program takes place each summer in Agassiz, Harrison and Seabird Island

VIDEO: Agassiz remembers local officer at grave-marking ceremony

Montague White-Fraser had been buried in the Old Cemetery for 92 years without a headstone

Body, burning truck found near northern B.C. town

RCMP unsure if the two separate discoveries are related

Former Fernie Ghostrider re-signs with Vancouver Canucks

Josh Teves has signed a two-year contract with the NHL team

Couple found dead along northern B.C. highway in double homicide

Woman from the U.S. and man from Australia found dead near Liard Hot Springs

UPDATE: West Kelowna fawn euthanized, not claimed by sanctuary

Gilbert the deer has been euthanized after a suitable home was not found in time

BC Wildfire Service warns wet weather no reason to be complacent

Fire risk currently low for much of B.C. compared to same time over last two years.

Bank of Canada lowers qualifying rate used in mortgage stress tests

Home sales softened last year after the federal government introduced new stress test rules for uninsured mortgages

Most Read