Real estate ‘headwinds’ could slow retail, construction sales
Joanne Lee-Young
The Vancouver Sun
The province’s economy, which enjoyed a robust year in 2017, is expected to downshift in 2018, according to the Business Council of B.C.
The residential real estate industry has driven so much growth across the B.C. economy in recent years. Now, with so-called “policy headwinds” in sight, there will also likely be an accompanying impact on retail sales and construction, says BCBC chief economist Ken Peacock, whose group analyzes economic prosperity and competitiveness.
Total retail spending in B.C. was up nearly 10 per cent in 2017. In particular, sales at building material stores were up nearly 30 per cent in the second and third quarters of 2017. Automobile retailers posted an annualized gain of more than 25 per cent in the third quarter.
“The steady inflow of foreign money and wealthy immigrants are factors, but so is the broader wealth effect from soaring real estate values as more B.C. homeowners tap into their home equity to help finance renovations and other large purchases,” wrote Peacock.
“The resiliency of the real estate market has been a surprise, but it’s a characteristic of the Vancouver market,” says Peacock.
Ahead, however, rising interest rates and possible provincial government action to dampen speculation in the housing market “could have a material effect on economic growth in the province over the next two years.”
It’s difficult to quantify predictions, and Peacock declined to give even a range, but says, in general, it will be tougher for borrowers to qualify for loans in order to purchase properties.
“We’ve had record low interest rates, with some bumps up, here and there, but for over a decade it’s been low. And now, we are moving out of that in a more serious way. The direction we are headed is clear.”
Says Peacock: “It’s not calamitous. It will be gentle. As long as we have good job growth, in-migration, then traditionally, we have been OK.”
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