Growth in the Canadian economy rebounded in the second quarter of 2018, with output expanding 2.9 per cent following just 1.4 per cent growth in the first quarter. Rising exports, an increase in household spending and renovation spending driven rebound in housing investment were all major contributors to growth in the second quarter.

Very strong economic growth over the past year has pushed the Canadian economy beyond its full-employment level, creating upward pressure on inflation. Consumer prices rose at a 3 per cent rate in July, the first time inflation has reached that level since 2011. Rising inflation and an economy operating beyond its capacity means that he Bank of Canada will continue on its rate tightening path. The next rate hike could come as early as September though more likely in October once current NAFTA negotiations have concluded.

Canadian housing starts declined 16 per cent on a monthly basis in July to 206,300 units at a seasonally adjusted annual rate (SAAR).  The six-month trend in Canadian housing starts has been on a steady decline in the past few months and is now at  220,000 units SAAR.

In BC, total housing starts increased 24 per cent on a monthly basis to 42,500 units SAAR but were down 7 per cent year-over-year. On a monthly basis, starts of multiple units were up 35 per cent to an annual rate of 33,200 units while single detached fell 4 per cent. Compared to July 2017, multiple units starts were down 5 per cent while single detached starts were 11 per cent lower.
 
Looking at census metropolitan areas (CMA) in BC: 

• Total starts in the Vancouver CMA were down 10 per cent year-over-year but jumped 48 per cent on a monthly basis from June due to a surge in multiple unit starts.

• In the Victoria CMA, housing starts fell 18 per cent from June to 4,880 unit SAAR and were down 40 per cent year-over-year. Total housing starts in the Victoria CMA are up 14 per cent in the first seven months of 2018 as builders respond to strong housing demand in the area, particularly in West Shore municipalities like Langford and Colwood.

• In the Kelowna CMA, new home construction increased 23 per cent year-over-year as a result of new multiple unit projects getting underway.  However, on a monthly basis, total starts were down 47 per cent from a very strong June to a rate of just under 2,000 units SAAR.

• Housing starts in the Abbotsford-Mission CMA fell 15 per cent on a year-over-year basis, with the decline entirely due to lower levels of new construction in multiple unit housing. However, starts in July were more than triple those recorded in June, coming it at a rate of 1,750 units SAAR.

The total value of Canadian building permits declined 2.3 per cent on a monthly basis in June. The decline was the result of lower construction intentions for residential buildings after a strong May.

In BC, the total value of permits fell 1.8 per cent on a monthly basis with non-residential permits posting a 7.8 per cent decline while residential permits were essentially flat. Year-over-year, total permit values were up 6.6 per cent to $1.45 billion as residential permits rose nearly 14 per cent to $1.16 billion.

Construction intentions in June were down in three of BC's four census metropolitan areas (CMA):

• Permits in the Abbotsford-Mission CMA fell 27 per cent on a monthly basis to $31.9 million. Year-over-year, permit values were down 26 per cent.

• In the Victoria CMA, total construction intentions were up 9.2 per cent to $160.4 million, a nearly 30 per cent rise over this time last year.

• In the Kelowna CMA, permits fell 12.3 per cent on a monthly basis, but were up 20.5 per cent year-over-year to $95.5 million.

• The Vancouver CMA recorded permit activity valued at $832.6 million, a 2.6 per cent decline from May and roughly flat year-over-year.

Copyright British Columbia Real Estate Association. Reprinted with permission.