A “disproportionate” amount of growth is still flowing into the B.C. housing sector this year even as business investment remains soft, according to a report from the Business Council of British Columbia.
Meanwhile, higher than expected job growth and consumer spending also helped the BCBC revise an earlier economic forecast from 2.2% real GDP growth in 2017 to 2.7%.
“The momentum from last year is carrying forward more so than previously anticipated, prompting us to adjust our 2017 forecast upwards,” the BCBC said in its quarterly economic review and outlook.
The lower value of the loonie coupled with higher commodity prices helped B.C. merchandise exports reach nearly $40 billion in 2016
But the BCBC expects new U.S. duties targeting Canadian softwood lumber to hurt exports in that sector this year.
The BCBC highlighted job growth as one reason it revised its economic forecast.
Job growth was up 3.6% in the first quarter and 4.1% in the second quarter of 2017 compared with 3.1% growth in 2016.
“Encouragingly, job creation is now spread across most of the province, instead of being overwhelmingly concentrated in the Lower Mainland,” the report said.
“The province’s job market is healthy overall, with rising employment lending support to consumption and helping to sustain the multi-year upswing in the housing market.”
Real estate is still expected to be a big driver for the economy.
The BCBC said new mortgage lending rules from Ottawa and Metro Vancouver’s foreign buyers tax, both introduced last year, initially dampened the housing market.
“It now appears that these policies have had only a mild impact on demand. While down considerably from 2016’s record levels, home sales are still running well above their long-term average,” the report said.
Last week, the Real Estate Board of Greater Vancouver reported condo prices were up 17.6% year-over-year at a benchmark price of $600,700.
The BCBC said it’s likely the BC Liberals’ first-time homebuyers program introduced last December gave the condo market a boost this year.
The outgoing government promised $703 million over three years for first-time buyers seeking interest-free down payment loans up to $37,500 for the first five years.
“If there is a lack of balance in the provincial economy, it is that a disproportionate amount of growth continues to flow from housing-related activity while business investment remains tepid.”@reporton