A real estate for sale sign is pictured in front of a home in Vancouver, British Columbia on October 4, 2016. The Vancouver region’s housing industry has been booming since mid-2013, but began slowing down in mid-2016.Ben Nelms/The Globe and Mail
British Columbia's economy is forecast to experience slower growth in 2017, after playing the starring role in Canada for two consecutive years.
In 2015 and 2016, British Columbia saw bustling Canada-Asia trade in the Port of Vancouver, robust population gains and a tourism upswing. A flurry of film and TV productions, as well as a thriving technology and software sector, also contributed to British Columbia's bragging rights as the fastest-growing provincial economy for two years running.
The lower value of the loonie compared with the U.S. greenback has been a boost in British Columbia for hotels and restaurants luring international tourists.
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"The TV and film production sector is similarly benefiting from the exchange rate, and renaissance in TV-show demand due to on-demand distributors like Netflix and Amazon," according to an analysis by Central 1 Credit Union.
The wild card will be the Vancouver region's housing industry, which had been booming since mid-2013, but began slowing down in mid-2016.
Residential construction is expected to decrease after a strong showing in 2016, when British Columbia's population grew the most since 2009. "A forecast slowdown in residential investment reflects both a normal retracement after a very strong year of building, as well as the impact of policy-related measures to cool the housing market," Central 1 Credit Union senior economist Bryan Yu said in his analysis.
The B.C. Real Estate Association predicts that sales of various housing types could decline 15.4 per cent in British Columbia in 2017, while the average residential price might drop 6.4 per cent.
British Columbia posted real growth in gross domestic product of 3.3 per cent in 2015 and led the way with GDP expansion at an estimated 3.5 per cent in 2016, Central 1 Credit Union said.
By contrast, the financial institution expects B.C.'s GDP growth will slow to 2.3 per cent in 2017.
The B.C. Economic Forecast Council, comprising Central 1 Credit Union and 12 other economic prognosticators in Canada, also forecasts growth averaging 2.3 per cent for 2017.
The Conference Board of Canada believes British Columbia's economy in 2017 will expand 2.2 per cent, good for second place after Ontario in the think tank's outlook for the new year.
Marie-Christine Bernard, an associate director with the conference board, estimates the Canadian economy grew a tepid 1.3 per cent in 2016 and envisages an increase of 2 per cent nationally in the new year.
Royal Bank of Canada, by contrast, expects Ontario and Manitoba to be co-leaders in economic growth in 2017 while Alberta could place third and British Columbia and Saskatchewan may tie for fourth spot.
The conference board and RBC are members of the B.C. Economic Forecast Council, which provides advice to B.C. Finance Minister Mike de Jong as part of the province's budget preparations.
RBC is on the lower range of predictions for 2017, forecasting British Columbia's economy to expand 1.7 per cent – just shy of the chartered bank's expectation of GDP increasing 1.8 per cent nationally.
RBC points out that British Columbia outperformed that national economy for six consecutive years, including leading Canada for the past two years: "We expect the recent cooling in home resale activity in the Vancouver area will be largely sustained in the period ahead, which will quiet down a powerful source of growth in recent years in the province."
In August, the B.C. government implemented a 15-per-cent tax on purchases by foreign home buyers in the Vancouver region. And in October, the federal government tightened mortgage rules, adding a new standard for gauging whether buyers can handle an eventual increase in interest rates.
"We expect this policy-engineered cool-down to rein in the flow of foreign wealth into the province and slow down the rate of home price increases significantly," RBC said. "Moreover, the likelihood of another trade conflict with the United States on softwood lumber threatens the vitality of many communities across the province."
In the new year, the B.C. government will launch a new program aimed at making it easier for local residents to buy entry-level homes. The B.C. Liberal government will begin offering loans that are interest free over a five-year period to B.C. residents who are first-time home buyers in need of help to have down payments on properties costing up to $750,000.
"Housing affordability will remain a challenge over the medium-to-long term," Central 1 Credit Union said.
Prosperity from liquefied natural gas isn't on British Columbia's short-term agenda. "We do not anticipate construction of a large LNG facility in Prince Rupert or Kitimat until into the mid-2020s, given pricing conditions and weakness in the broader energy market, and significant LNG supply coming onstream globally," said the group representing more than 110 member credit unions.
Brent Jang