Home construction is slowing down in British Columbia, with housing starts in Vancouver falling to their lowest level in more than five years, according to the latest data from Canada Mortgage and Housing Corp.
The federal housing agency reported Tuesday that the seasonally adjusted annual rate of housing starts in Vancouver fell to 12,023. The last time it was at that level was in March 2011, CMHC said.
In B.C., the annual pace of urban starts fell nearly 45 per cent to 25,517 in October, compared with 46,294 in September.
BMO economist Robert Kavcic said the drop could be the first sign that home builders are responding to softening demand in the province.
Real estate sales in the region have been falling sharply in recent months. In Vancouver, home sales plunged 38.8 per cent in October compared with a year ago, according to the Real Estate Board of Greater Vancouver.
Builders may also be putting off new projects as they wait to see what impact new government policies will have on demand, said Robyn Adamache, CMHC’s principal market analyst for Vancouver.
In August, the B.C. government implemented a 15 per cent tax on foreigners buying homes in Metro Vancouver, while the federal government moved last month to tighten rules for mortgage lenders and foreign buyers in an effort to stabilize hot housing markets such as Toronto and Vancouver.
“Builders are gauging the market and waiting to see how the market responds to these after it adjusts a little bit,” said Adamache.
“The other part of the equation is that in Vancouver there’s a record number of homes already under construction, so they’re busy just building what they’ve already started.”
While the drop in housing starts in British Columbia was particularly sharp, the pace slowed in most other regions of the country, as well, with Quebec, the Prairies and Atlantic Canada all seeing declines.
Ontario was an exception, with the annual pace of urban housing starts climbing 20 per cent to 81,360 last month, up from 67,798 previously.
TD economist Dina Ignjatovic said she expects starts to decline considerably in Ontario and B.C. next year, following strong growth through most of 2016.
“The new mortgage and tax regulations recently introduced by the federal government are expected to take some steam out of home sales, particularly in B.C. and Ontario which have accounted for the bulk of the gains so far this year,” Ignjatovic said in a note.
“This should filter through to homebuilding activity as well.”
On a national level, the seasonally adjusted annual rate fell to 192,928 units in October, down 12 per cent from 219,363 units in September.