Residential construction continued to defy expectations with the latest permit and housing starts data showing ongoing strength.

Residential building permits more than doubled in April to a record-high $2.2 billion (seasonally adjusted). The Vancouver census metropolitan area (CMA) drove the gain with dollar-volume permits up 164% to $1.42 billion almost entirely for multi-family projects, while Abbotsford-Mission permits rose to $69.8 million – more than six times March levels. Kelowna permits rose 46% from March to $76.6 million, while Victoria permits declined 32%.

The surge in the Vancouver CMA reflected developers expediting activity in advance of changes in development cost charges in May.

With April’s gain, year-to-date activity in B.C. rose 13%, led by an 18% increase in the Vancouver CMA and a 58% increase in Abbotsford-Mission. This permit surge is temporary and will decline sharply in coming months.

Similarly, urban housing starts rose to a seasonally adjusted annualized pace of 53,350 units in May to extend April’s sharp gain. Multi-family starts rose while detached starts declined. This was the strongest month since October 2017 and compared with a first quarter trending near 25,000 units. Not surprisingly, the Vancouver CMA led this increase, with starts up to a 42,700 seasonally adjusted annualized rate from 34,200 in April.

Year-to-date starts increased 7%. Gains were led by a 10% increase in the Vancouver CMA and an 11% increase in Victoria.

Housing starts are expected to wane. Elevated inventory and federal and provincial policy measures are hampering pre-sale activity, which will delay and curtail new construction over the next year. This will particularly be the case in the Vancouver CMA, where prices are declining and building activity is near a record high. We continue to forecast a drop in provincial housing starts of up to 10% this year on a second-half slowdown, with further declines in 2020.

Non-residential permit volume also remained robust despite declining from March. Following a 50% increase in April, permits fell 13.6% to $661.6 million. Nevertheless, levels remained elevated and double those of a year ago. Private-sector permits were broadly unchanged from April at $581.9 million (up 1%) but offset by a 58% pullback in public-sector building permits.

While permits are volatile, the current trend speaks to a strong construction cycle. Year-to-date non-residential permit volumes rose 63% to $2.25 billion. Among metro areas, gains were led by a 52% increase in Vancouver CMA permits, which reached $1.38 billion, accounting for just over half of the net provincial gain. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.