While the overall global economy is growing slowly, B.C. is being looked upon as a bright spot in Canada, industry experts told attendees at the recent CanaData West conference in Vancouver.
Bryan Yu, senior economist for Central 1, and Michael Ferreira, managing principal at research and advisory firm Urban Analytics Inc., shared their views on real estate, commodities and growth during the forecast event.
"We are continuing to see a slow growth period in the global economy," said Yu. "It is gradually getting better, but it’s a stutter start… B.C. is really head and shoulders ahead of everyone else."
There were shocks to the global economy from low oil prices and the U.S. underperforming, Yu said, and while the economy is starting to pick up steam, it is doing so at a shallow pace.
"We still remain in this low growth cycle and I think that will extend to the end of the decade," Yu said, adding he expects bank rates to remain low.
In Canada, Yu said growth was stunted by massive wildfires in Alberta and low oil investment. However, he expects these numbers will improve as oilsands production comes back online and rebuilding efforts move forward.
"As long as you are outside of the energy sector the economy is doing relatively well," Yu said.
He predicts weak growth over the next two years and expects a mild uplift in oil prices but no surge. He reported that export growth was a drag on the economy and was expected to rebound faster than it has.
"We lost a lot of manufacturing capacity in the past decade or so and it is not likely to return," he said.
In B.C., however, the economic picture is rosy, with the province expected to lead the country in growth. Yu cited high numbers in tourism as one contributing factor to the province’s success as well as a growing forestry industry.
However, he did note that the forestry industry will likely hit a major speed bump as the Softwood Lumber Agreement has expired and new tariffs are expected.
"For now it has been a positive growth driver but it will be a potential drag in the future," he added.
He explained the commodity price profile for Northern B.C. is a challenge, but there are positive signs for coal and forestry ahead. However, he doesn’t expect a lot of major projects, such as LNG, to go ahead until the mid-2020s.
Yu also mentioned the housing market as an area making headlines across the country.
He said the influx of people from other provinces as well as international immigration are several factors that have driven housing activity in B.C., notably a 30 per cent increase in housing starts this year. Ferreira outlined more details on the housing market in B.C., and more specifically, the lower mainland.
"It was one of the craziest years I’ve seen in this market," he said, noting he’s been observing it since 1992.
He said the province saw unprecedented sales and massive rapid price escalation. So far this year there has been incredible sales velocity.
"Had there been more supply some areas would have seen more," he said, noting Burnaby was one of the most active markets in Metro Vancouver.
Ferreira was also critical of government efforts to curb soaring prices with a foreign buyers’ tax.
"The foreign buyer tax hasn’t been as effective as intended," he said. "Vancouver needs more townhomes, more low-rise, more product, period. We are not meeting the demand with enough supply."
The low dollar, low mortgage rates and foreign immigration have all contributed as well to higher prices but more so at the higher end of the market. He said part of the foreign investment stems from a massive wave of building and lending in China which has yielded extreme profits.
"Lots of residents in China aren’t confident in the Chinese banking system," he said. "We are seeing that capital looking for a place to invest around the world."
And while that is one piece of the problem, a small tax of foreign buying does little to curb this, explained Ferreira.
"It’s clear that we are ignoring the supply side of the equation and it hasn’t come close to meeting the demand side," he said.
Ferreira advocated for an increased pace of approving projects. He also criticized stricter mortgage rules, which he says attack buyers who have contributed least to the affordability crisis but are most impacted by it.