December 20, 2006

OUTLOOK

Looking out to 2010

PETER MITHAM

Correspondent

The 2010 Winter Olympics is a key point on the economic horizon that most businesses are steering by, whether or not they’re directly involved in Olympic projects on not.

The pace of projects, demand for materials and labour and other elements affecting construction across the province is being impacted by the priority being given to the construction of Olympic venues, upgrading of infrastructure and interest in B.C. real estate stemming from the attention B.C. has garnered since its successful bid for the games in 2002.

“This is an event that is very much like Expo, but ramped up,” Charles King, regional manager responsible for business development with the Canada Mortgage and Housing Corp. in British Columbia told the CMHC’s annual housing outlook conference in November.

The primary real estate benefit of the games will be in the construction of legacy projects such as the athlete’s village in south-east False Creek (a venture already cited as a draw for retail development a few blocks south at Cambie and Broadway), but King noted that the current development environment is also putting upward pressure on prices.

This allows developers to justify higher prices and provide finishes that can justify them. Finishes once considered luxuries in the average condo are now the norm, King said. This is reflected in increased construction costs, with building materials now running between $350 and $400 a square foot for the typical condo.

Buyers have so far been willing to pay the prices, too, with over 80 per cent of the units set to complete in the next three years presold even though project timelines have increased by half from three years ago.

David Baxter of the Urban Futures Institute is less bullish on the impact of the Olympics.

“They’re not transformative, they’re not huge,” he told the CMHC outlook conference during a presentation of a study that sketched a 25-year forecast for the three regional districts in southwestern B.C. and the impact the games will have on their housing markets – the Fraser Valley Regional District, the Greater Vancouver Regional District and the Squamish-Lillooet Regional District.

When it comes to new residents, Baxter expects the Olympics to account for just 200,000 arrivals among the 3.8 million residents forecast for the region in 2031. But anticipation of a significant influx of people could lead to over-development of several thousand units, Baxter fears.

“The Games will lead to an overbuilding of the market in anticipation of what’s going to happen in 2010,” he said. “If historical behaviour prevails, the market will be overbuilt by about 12,000 units by 2010.”

Current forecasts of housing starts temper Baxter’s concern, however. While the Urban Futures study suggests 28,000 housing starts for the southwest region this year and the next three years (about 26 per cent more than anticipated without the games), the current forecast is for just 23,595 starts.

Still, with 600 units currently underway in Squamish and applications for an additional 2,000 pending, the boom isn’t inconceivable.

For the immediate future, however, CMHC is projecting slower growth in housing starts.

Province-wide, starts are projected to drop 4.3 per cent from approximately 36,900 units this year to 35,300 units in 2007. Vancouver will see a smaller decline, with starts dropping just 3.3 per cent from 21,000 in 2006 to 20,300 next year.

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