New Home Construction declines sharply in Vancouver
Mortgage Advisor at Oceanvale Mortgage & Finance
The new mortgage and tax regulation adjustments that have been made to the housing market have had the desired effect in both B.C and Ontario, most notably in Vancouver and Toronto.
As a BC resident, and not being far from Vancouver, I can see what the Federal and Provincial government have been so concerned about. Housing prices have been inflating in Vancouver for years making homeownership increasingly difficult for many of us who were born and raised here. The sharp increases were fast becoming a source of anxiety. The reality of being exposed to a real estate bubble that could, in the event of a major downturn, leave us in economic turmoil was making everyone nervous.
The measures by the Federal government through the new mortgage and tax regulation was intended to be a means to slow down the demand for real estate and it has worked with almost alarming efficiency. However, creating higher barriers to entering these location specific markets have led to a ripple effect throughout the country. Many Canadian real estate markets have seen a slowdown of sales. But the more notable slowdown has actually recently been uncovered as being inside of the new construction start-ups.
Vancouver is the statistical outlier and has also been the leader in declining new home construction. I think it is important to note that these new home-start statistics “generally tend to gyrate wildly.” This is because they are annualized versions of monthly results (fluctuations are exaggerated when subjected to a multiplier). Another consideration is the major decline of new apartment startups, not detached or semi-detached homes, that make up the majority of the statistics. I speculate that it’s a reaction from the construction industry to finish up current projects and wait to see how the market continues to react to the plummeting sales and new regulations.
All-in-all, this is just the continuation of the impact that these new mortgage and tax regulations have had. Some say that the market had already peaked and was in fact cooling down on its own. As alarming as the headline may be, this decline is trending into the range of what “normal” levels were back in the period of 2010 to 2015. When you take the time to consider it, it is really just unrealistic and unaffordable growth coming back to a more stable and safe economic state.