Economic forecasters and analysts may be watching housing starts to get a sense of where the Canadian economy is heading, but they’re probably not watching the poker faces of homebuilders in this region for clues.
If Victoria homebuilders are panicking about rising interest rates, the high cost of supplies, high cost of land, scarcity of skilled trades and labour they’re not showing it around here.
Builders in Greater Victoria started 604 new homes last month, well above the number started in October 2021, and year to date the region has seen 3,918 new homes started in the first 10 months of the year, up from 3,825 at this time last year.
That means the region is ahead of last year’s record-breaking pace. Residential construction broke a 45-year-old homebuilding record last year with 4,809 new homes started, breaking the record of 4,439 set in 1976.
“These guys are resilient, they’ve seen all this before, they’ve experienced the ups and down of the economy,” said Casey Edge, executive director of the Victoria Residential Homebuilders Association. “They’ve gone through the global housing market crash in 2009 and these kinds of significant declines.”
That would explain why builders, coming out of a roundtable discussion this week with colleagues, suppliers and representatives of all aspects of the residential construction game, remained fairly upbeat
By all accounts the wide-ranging discussion during the closed event detailed the significant challenges builders face, from delays in getting material, soaring costs of lumber and other materials – if they can be sourced — rising costs of labour, the continued shortage of skilled tradespeople and what rising interest rates mean for the housing market.
Dusty Delain is reluctant to suggest there’s a vein of optimism running through local builders. “It’s not optimism, it’s just that it seems like work will be around for a while, that’s all,” said the founder of Amity Construction, which specializes in building single-family homes.
Delain said his cohort know only too well there are factors mounting against them, and that there’s no easy fix, but he said what balances that out is the fact Victoria remains in high-demand with homebuyers, and the ongoing housing crisis necessitates the region continue to build new units.
“There’s no way that housing prices really can really take a tumble when they’re in short supply, and that’s perpetuating the housing crisis even further,” he said, noting the lack of housing and affordability that results has a knock-on effect through the building industry.
It means young tradespeople can’t afford to move here and work on the new builds, which delays things even further and adds cost.
He said many young tradespeople, who are making between $35 and $45 an hour, can’t afford to live in Victoria and it’s also stopped the fluid workforce that used to head to Alberta or B.C. when each province boomed.
He said despite builders working flat-out right now he’s not seeing Alberta licence plates in work yards anymore.
“That’s down to cost,” he said.
The benchmark price of a single-family home in this region remains above $1 million.
Edge noted many local builders have said employees have been moving to Alberta and staying as they can buy a single-detached home for the price of a condo in Victoria, and they face lower taxes.
While these challenges haven’t stopped builders, the effect will be fewer building on speculation of being able to sell, and instead they will focus on building pre-sales and custom work, while others will focus on renovations.
“And I think that has already started,” Delain said.
Delain himself, given the current rising interest rate environment, had little choice but to recently sell a home in Oak Bay for less than cost.
”It was one of those things, the first offer came and we ran,” he said. “We took a hit.”
He said that happened despite the fact people continue to move to Victoria, that homes are in high demand and the natural setting here which gives people selling such an advantage.
Edge agreed the spec-home market has gone quiet and some builders have scaled back their operations, and some projects are being postponed.
“That’s a result of homebuyers having to pass the stress test, and that is now around seven per cent,” said Edge.
The stress test is a group of mortgage rules introduced in 2016 with the intention of cooling off the Canadian housing market by reducing demand. The test ensures borrowers can withstand a jump in interest rates.
Edge noted the housing starts being seen now reflect pre-sales in the spring of this year before the increase in interest rates.
“That’s why we haven’t seen a significant decline in housing starts, these projects were already in the hopper,” he said, though he noted it could show up later next year.
Edge said there is also reason for optimism — the federal government has boosted immigration, the Millennial demographic is starting to establish families and the need for homes, unemployment rate in the region remains low and B.C.’s new premier has promised changes to housing policy to improve affordability.