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

$30,000 in funding for Shuswap youth projects available

Funds come through partnership between Shuswap Community Futures and RBC

Okanagan-Shuswap weather: rain, clouds, thunderstorms and flash floods

Environment Canada forecasts dreadful weather for Thursday

Black bear spotted near Hillcrest Elementary

The bear was sighted at around 4 p.m. after school was out

Salmon Arm skater captains national champion Junior A hockey squad

Nathan Plessis was wearing the C for the Brooks Bandits as they beat the Prince George Spruce Kings

VIDEO: Fire damaged Salmon Arm 7-Eleven demolished

7-Eleven representative says company interested opening elsewhere in Salmon Arm

Hundreds of homeowners angered over proposed development on WFN land

Westbank First Nation are seeking to rezone Lot 348-3 from low density to high density area

In photos: Classroom-raised salmon fry released

South Broadview Elementary students participate in fry release at Kingfisher Interpretive Centre

Crews fight fire with fire to keep blaze from northern Alberta town

The wildfire now covers some 920 square kilometres

Man in B.C. charged with murder and arson in 2016 New Brunswick death

He is charged in the death of 71-year-old Lucille Maltais, who was found inside a burned down home

Young Vernon melanoma survivor speaks out about sun danger

World Melanoma Day is recognized every May to highlight the growing prevalence of malignant melanoma.

Kelowna fundraiser returns to support African grandmothers

The 2019 Stride to Turn the Tide walk is June 1

Kelowna thrill-seeker returns to rally racing

Mark Jennings-Bates is back behind the wheel at Rocky Mountain Rally this weekend

Improve your life and theirs, adopt a cat from the BC SPCA

The BC SPCA holds an adult cat adoption promotion

Okanagan pastry chef wins top honours at Vancouver’s Chocolate Challenge

Jalayne Jones creation, ‘Beer & Pretzels’, won

Most Read