Diverging views emerge on Vancouver home construction outlook

A Vancouver real estate services firm is pushing back against the widely held view that not enough homes are being built in Metro Vancouver.

In a report it releases semi-annually, Rennie highlights that construction began on 33,000 homes locally last year – which was a record for the region.

Still, the firm acknowledges not all municipalities in Metro Vancouver are building enough, given record immigration levels.

“The onus is then on cities, towns, villages, communities, to accommodate that growth, with infrastructure, transportation, hospitals and housing,” said Rennie’s head economist, Ryan Berlin. “And the reality is – I don’t think that municipalities – they’ve kind of had a myopic view, and sort of like, we’re going to go it alone, we’re going to do things our way, and now I think that mindset is changing a little bit.”

But not everybody feels rosy about the home construction outlook.

Earlier this month, Canada Mortgage and Housing Corporation forecast a slowdown in building, pointing to high costs and financing constraints.

“The other thing I would say is there is significant risk of reduced construction in 2024 and going forward,” said economist Tom Davidoff with the University of British Columbia’s Sauder School of Business. “Interest rates have not come down. My understanding is very challenged economically to make rental projects work and I would imagine presale activity is pretty slow as well.”

While many economists expect interest rates to drop, uncertainty could leave some homebuilders and potential buyers waiting on the sidelines.

“It’s simple math,” said RE/MAX Canada president Christopher Alexander. “When developers don’t have enough people to buy their projects, they don’t build them. When rates started to rise, people stopped buying, and the more they rose, the less purchasers on top of that. So it’s been a compound effect.”

The Rennie report also takes a look at the drop off in first-time buyers in recent years.

“The proportion of first-time homebuyers in all home sales in British Columbia, in Metro Vancouver, has fallen by about two-thirds today versus where that activity was before the pandemic,” said Berlin.

As for improving the situation for those trying to get into the market, some in the real estate space want the feds to take action in this week’s budget.

 “Incentivize as much development of both affordable housing, purpose-built rentals as we can, and find a way to speed up development time so that we can bring more product to the marketplace,” Alexander said, when asked about his federal budget hopes.

In terms of specific incentives, Alexander is calling for tax breaks or credits, saying certain projects are not profitable in the current climate.