“Here are some facts about residential construction.
Nine per cent of all employment in British Columbia is in the residential construction field. That’s 192,400 jobs related to new home construction, home renovation and home repair. The home building and renovation community earned $10 billion in wages last year, while $22.7 billion in investment value was created by residential construction.” …
“We can easily see that this industry is a massive contributor to British Columbia’s well-being and future success, as well as a huge indicator of the province’s economic climate. Just think: For every single home we build, 3.5 person years of employment are created and more than $60,000 is generated in spinoff spending.” …
“The next time the housing market in B.C. comes up in conversation – and we know it will – let’s try to remember that without such a successful industry, our economy would be in much rougher shape.”
– excerpts from ‘Benefits of home buying’, M.J. Whitemarsh [CEO of the Canadian Home Builders' Association of B.C.], The Province, 17 Jun 2012
We fully acknowledge BC’s dependence on residential construction — when you add in other aspects of the RE industry, and knock-on spending in household goods, a very substantial percentage of our economy is driven by real estate. Under normal circumstances we would celebrate a robust construction industry, and we certainly wouldn’t wish for anything other than prosperity for BC Homebuilders.
It must be realized, however, that this sector of the economy has ballooned unnaturally with the speculative mania in housing; an example of the misallocation of resources that results from a massive asset bubble. In BC, if 9% of employment is in residential construction (as Mr Whitemarsh reports), this is strikingly large compared with 7.5% for the whole of Canada, and 3.5% for the US currently (they hit 6% at the peak of their bubble) [see chart below].
This overgrowth will shrink back with the demise of the bubble. We don’t ‘wish’ for this, and we don’t point to it to be difficult to the builders; it simply is part of the inevitable boom-bust cycle that comes when speculative manias in RE develop and then dissolve. Unemployment as a result of loss of jobs in this sector will be part of the unfortunate fallout.
[Chart source: BNN interview with David Lepoidevin, 8 Jun 2012.]