The sharp slowdown in the British Columbia housing market has not resulted in a major impact for the province’s economy.
A TD Economics report says that the economy has provided a robust defence against slowing home sales with continued growth and strong labour market.
Despite ‘body blows’ to the economy, the fact that the housing slowdown has been mostly about weaker sales, while homebuilding has remained relatively strong, has helped mitigate the effect on the wider economy.
The diversification of the province’s economy has also meant resilience for BC.
The report, from economists Omar Abdelrahman and Derek Burleton, calls for a continuing 2% growth rate despite signs of a rebounding housing market; this is far lower than the 3% and above seen frequently across the years since 2013.
In their analysis, they note the heavy influence that the housing market had on the BC economy during the 2013-2016 period.
While they acknowledge that ascertaining the exact impact is complicated and takes in metrics such as retail sales, boosted by growing housing wealth; and foreign ownership of homes; the economists say that “it is clear that housing activity and its indirect impacts were responsible for more than a third of the overall expansion.”
However, with many homeowners having seen the values of their homes surge post-recession, the estimated 10-15% moderation in average home prices in the province since the introduction of measures to cool the market, will still mean many have seen notable appreciation.
The province has also largely avoided surging listings.
Looking ahead to 2020
The report’s outlook for 2020 is for continued challenges from lower levels of demand from foreign homebuyers, together with affordability issues.
“We expect resale activity and prices to trend up only modestly from current levels. At the same time, we are forecasting a moderate drop in housing starts for the province on the heels of this year’s outsized gains, which will lean against any positive swing in growth contribution from the resale housing market,” the report says.
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