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Hot housing market helps yield modest surplus for B.C.

The B.C. government projects a modest budget surplus this year on the strength of a hot housing market and higher-than-expected income tax returns, a new report shows.
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Construction of new condos at the Railyards. The B.C. government projects a modest budget surplus this year on the strength of a hot housing market and higher-than-expected income tax returns, a new report shows.

The B.C. government projects a modest budget surplus this year on the strength of a hot housing market and higher-than-expected income tax returns, a new report shows.

Finance Minister Mike de Jong, who released his second quarterly update Tuesday, said the surplus is now forecast to come in at $265 million — down $19 million from the budget estimate in February.

The province is pulling in less money from natural gas and coal due primarily to low commodity prices.

But those declines have been offset by $389 million in unexpected revenue from personal and corporate income tax and a projected $350-million increase in property transfer tax money from a strong housing market.

The report notes that housing starts jumped more than 12 per cent across the province through the first 10 months of the year, compared to the same period in 2014.

Residential building permits increased 29 per cent, “suggesting that strength may continue in B.C. home-building in the near future,” the report said.

In Victoria, the increases topped 11 per cent in housing starts, 21 per cent in home sales and three per cent in the average home price, de Jong said.

“Volumes are up, values are up and the construction of new homes [is] up as well,” he said.

NDP finance critic Carole James, however, said the report raises concerns about the extent to which the Liberal government seems to be relying on the real estate industry to balance its books.

“That’s worrisome,” she said. “That is not a long-term economic plan to say that you hope that the industry continues and prices continue to climb.”

She said government should be doing more to diversify the economy rather than focusing on real estate and the unrealized promise of a liquefied natural gas industry. She said the LNG dream now seems “remote at best,” given the low price of natural gas.

“I think with the prices the way they are, I don’t think you’re going to see LNG move along,” she said.

The province’s natural gas royalties are now expected to come in $159 million below forecast due to falling prices.

ICBC’s net income is also forecast to fall by $199 million because of increased claims costs.

Despite that, de Jong said the provincial outlook remains positive. B.C. continues to forecast “steady, stable growth” of two per cent this year and 2.4 per cent in 2016.

That news is tempered somewhat by “troubling signs” and volatility among the province’s trading partners whose economies are mostly headed in the other direction.

“I don’t want to leave the impression that anything I’ve showed you here points to a pending, looming catastrophe internationally,” de Jong said. “It’s just sluggish.”

lkines@timescolonist.