Cooler housing market is dragging down B.C.'s economic growth, report says

B.C.'s economic growth is expected to slow over the next three years, according to a new report from Central 1 Credit Union. 

It projects the province's economy will grow 2.1 per cent in 2019, down from 2.8 per cent in 2018 and 3.8 per cent in 2017.

"The big driver of this is the housing market," said chief economist Brian Yu. "The depth of the slowdown is more than we had anticipated."

He said many had expected the market to stabilize by now, but housing sales and prices remain low, especially in the Lower Mainland.

"We're looking at housing starts dropping off quite sharply this year and that's going to lead to fewer residential construction jobs as well as residential construction spending and activity."

Yu calls it a 'policy-induced' downturn, triggered in large part by recent government changes.

"At the beginning of 2018 we saw the introduction of the stress tests for mortgages, then the implementation of the speculation tax in addition to the enhanced foreign home-buyers tax."

Major projects to pick up slack

Housing market aside, the outlook finds B.C.'s economic conditions remain firm thanks in part to big capital investments.

"LNG Canada's $40-billion project, the Patullo Bridge reconstruction, the subway line to UBC, and hospital redevelopment in multiple regions."

However, Yu said much of the economic optimism about those projects could be lost if they don't stay on schedule.

"There is some risk; if some of these major projects face delays or factors that can throw off the timing, that could put us into a weaker economic position."

A tight labour market is also expected to help make up for the lagging housing market, combined with a relatively low unemployment rate and strong population growth.

"Weaknesses in some of the other provinces could lead to more families moving to B.C. in order to find jobs."

'Our plan is working', says government

Despite a continued slow down in the housing market, the province insists government policy changes were a good thing.

"Moderation in the housing market is a positive sign for people who want to put down roots and own a home in the community where they live and work," said Finance Minister Carole James. 

"B.C. is in a strong position. Our budget is balanced and prudent. Our plan is working," she said in a statement to CBC. 

"Our unemployment rate has been the lowest in Canada for over a year, wage growth was the strongest among provinces in 2018, and retail sales rose significantly last year."

The report predicts B.C.'s economic growth will gradually climb back up to 2.4 per cent in 2020, and 2.8 per cent in 2021.