Spokesman for Homebuilders of BC: “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.”

“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.
- vreaa


[Chart source: BNN interview with David Lepoidevin, 8 Jun 2012.]

69 responses to “Spokesman for Homebuilders of BC: “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.”

  1. I looked at the numbers back in early 2010 and I calculated (based on the numbers published by StatsBC) that the home building market represents ~12.5% of the Province’s GDP in 2009, another 12.5% were generated by people BORROWING money for their first house (yes, that was a separate line item), so we’re looking at 25% of the Province’s GDP just for building homes, pardon, investments and first time buyers borrowing money.

    Add to that all those “second home” buyers and all the stuff they need to finish off their new investment and it wouldn’t surprise me if we’re above 40% as far as the GDP goes.

    Oh yes, that downturn will be very very painful.

  2. The Poster Formerly Known As Anonymous

    What if… we build houses and then knock them down and rebuild them and then knock them down and build again. Then we would all have jobs and lots of work and the economy would run self-sustained forever!

    Problems?

  3. “without such a successful industry, our economy would be in much rougher shape”

    Probably. By the way, mortgages are due at the beginning of the month.

  4. Renters Revenge

    So we are committing nearly 10% of GDP directly to home building (along with another 10-15% for the rest of FIRE); all to build a housing stock that MAY last 50 years – if we are lucky. This is a colossal waste of resources.

  5. And by 9% he means 9% of the voters

  6. After this cycle ends, not only construction jobs are at risk. Financial institutions that offer mortgages, insurers, lawyers, government taxes, and etc…. All of the above is at risk for a serious downturn!!! The correction in the 90′s showed us what a 20% correction can do. This bubble could do massive damage as we have never before experience a bubble of this size.

  7. Don’t discount the possibility that the growing percentage of employment dedicated to housing is partly due to non-housing jobs leaving the province.

  8. Re: Vancouver indvidual property sales details
    by gse36 » Mon Jun 18, 2012 10:33 am

    59 w21st. livable house
    realtor’s house no less.
    paid 1.303M. May 2011
    sold 1.281M Jun 2012.

    Realtor taking a loss.. hmm
    ——————————–
    I found this at RET. It would be a great story if someone can confirm the name of this realtor.

  9. “Unemployment as a result of loss of jobs in this sector will be part of the unfortunate fallout.”
    Another fallout would be that a lot of these workers are migratory, hence if/when RE goes bust, a lot of the landlords depending on these workers to pay their mortgages will also be in big trouble.

  10. 4SlicesofCheese

    I wonder if this includes all the namless white vans with ladders I see driving around every morning.

    • Likely not. There are many Asians that work in the renovation industry that work for cash. So this is not part of the stats.

      • “There are many Asians that work in the renovation industry that work for cash”

        Freaking “Asians”. You suck.

      • Jesse,

        Actually, you are the sucker. You must be white for making this comment. You’re an idiot

      • Okay, enough of this kind of exchange, please. -ed.

        [Your editor’s capacity for balance between desire for absence of censorship versus desire to avoid racial slurs and name calling challenged by above exchange. In this case, decided to leave up verbatim.
        Please keep things civil on all levels. – ed.
        ]

      • +1 vreaa!
        Race has nothing to do with avoidance of tax. It’s a universal thing. Plenty of Caucasians do the same thing.
        Same with shoddy/quality work, scams etc.

      • Dont be too down on asians Jesse…most everyone (like Alexcanuck mentions) will try and scam you for your hard earned monies if they can get away with it. Just thank our country for having (sort of…) a bit of teeth in our justice system, that we would be able to sue “scums” like that…which you probably cant get in countries like China or India…

      • Lol sorry when you claim some “Asians” work for cash I can point to dozens of “Europeans” who will work for cash too. Singling out “Asians” is dangerous and hurts those who do thingsby the book.

        Please understand there is a difference between Asian and Asian.

        Sorry for the harsh words, VCI had me raw I guess

    • I shopped around for a deal last summer for a roofing job. I called legitimate businesses, and was quoted $16k-$19k. Then I found a couple east Indian guys, I was quoted $11k and $13k. Cash deals. See what I mean?

      • Homeowners take a risk hoping nobody falls off the roof and holds them liable.

      • Liable for what? There’s obviously a way to protect yourself. People like you pay 35% more for a roofing job. That’s why many here don’t own. They donate their $ to stupidity

      • I wouldn’t touch those paperless contractors. One is paying for shoddy works and poor quality (sometimes rejected) building materials that leave you without legal warranty.
        However I do agree that if you see something in your own backyard – speak out.

      • “There’s obviously a way to protect yourself. ”

        Please explain.

      • BubbleBoy -> “People like you pay 35% more for a roofing job. That’s why many here don’t own. They donate their $ to stupidity.”

        You mean like pay taxes, employ registered tradesmen, and declare their income? And all the other “stupid” things that citizens of Canada are expected to do?
        You should realize that a sense of a semblance of fairness is a cornerstone to an orderly democracy.
        We personally believe that the ‘fast and loose’ attitude that appears more prevalent lately has been fostered by the way in which quick profits (in the stock and RE markets) have challenged the wisdom of being a 9-to-5, hard-working, tax-paying, law-abiding citizen.
        Thus: “If everybody is hustling for the quick (and barely legal) buck, and getting away with it, why shouldn’t we?”
        This is not good for our society.

        PS: Also, an interesting point you make about having to break the law to be able to stretch to own!

      • If HAM is allowed to fly in Canada with corrupt cash, how is this any different. The government is shady. Look at politicians that have been involved in criminal activities. Its a doggy dog world and you need to step it up if you want a piece of the pie.

      • “Its a doggy dog world and you need to step it up if you want a piece of the pie.”
        Great example of the ‘fast and loose’ attitude to which we are referring.

        Politicians that have been involved in criminal activities, we would hope, get booted out of office and charged with their crimes.
        Isn’t that what you’d want from the society in which you live?

      • “Politicians that have been involved in criminal activities, we would hope, get booted out of office and charged with their crimes…”

        …and then receive the Order of BC.

      • You, as the homeowner, would be liable for any injuries incurred by the workers as they’re obviously not paying WCB premiums.

    • debt free = stress free

      Um, I believe the correct saying “is its a dog eat dog world”…not a doggy dog world.

      • I think “doggy dog” was a rap reference.

      • I apologize for some of these comments. I got all rattled up from Jesse’s comment towards Asians.

        Jesse,

        I suggest you choose a Vietnamese restaurant on kingsway and tell them how you feel about Asians. Man up little boy.

      • Jesse seems to have inadvertently kicked the hornet’s nest.

        I’m pretty sure he was being sarcastic in his comment about “Asians”. He has pretty consistently had the viewpoint that asians are just a scapegoat for many of the problems in Vancouver. Let’s give him the benefit of the doubt.

        If you want a heated debate on racial issues, join the fray at VCI.

      • Why doesn’t he come forward and recant/apologize/rectify/clarify then?

        Jesse bro, having a bad day?

      • I agree, Jeff. I don’t think Jesse meant that to be read quite so literally. The remark does not bother me at all knowing his usual perspective…….or he was loaded and had a spontaneous moment. Just smoke.

  11. Don’t forget the underground economy!

  12. Nine percent of BC employment is directly tied to RESIDENTIAL construction? That is a shocking figure. Right off the charts as they say and it means that the province is incredibly vulnerable to any slowdown in the housing sector. It could be precipitous if house prices fall sharply. Unfortunately, we already know from past models that homebuilding will decline as the market softens. We can easily conclude therefore that this bust will be nasty as revenues tied to personal income taxes drop and as construction dries up and expenses increase as unemployment claims rise. Both the direct costs and reduced revenues will be borne by Ottawa though where employment and taxes are concerned. The province is hardly off the hook. I am shaking my head in disbelief right now. Really shocked. That number of 9% is much, much too high. I think it cannot be right but if it is then BC is really headed into a sh*t storm.

    • Actually that’s the official number. You can bet that there will be more that aren’t caught in that stat.

      I do know a guy who works construction, he has worked on things like the Olympic Village but for the past year essentially spent his week in Victoria on work there because there wasn’t anything “suitable” apparently in town. He’s not really a picky guy, rather it seems the market is nicely “pushing down”.

      As others have pointed out, many go into construction because other jobs are leaving. I mean, what’s left here really? My job is technically in Toronto (or anywhere else really), I work from home and in six years here I was not able to land a gig in town, no problem doing remote stuff in the States and the rest of Canada though. Seriously contemplating a move back east if for no other reason than to get away from all this RE talk and navel gazing that’s a trademark of Vancouver.

  13. By the way, does anyone else see the stupidity embodied in the remark?
    “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”

    Future success? Whitemarsh must be joking if he is not a complete fool. Who does this guy think he is kidding anyway? His comment is akin to an apple farmer bragging about the incredible crop his trees produced.

    “Yup, it’s our best year ever. Just lookie see those big fat apples. Course there was so many and they wuz so fat that the branches broke before we could harvest….but boy wuz that a great crop. Too bad we lost it all…….had to cut down the ruined trees too”‘

  14. The article is arguing that we should all realize on which side our bread is buttered, and that we should defend and promote the homebuilding industry.
    It also appears to anticipate a time when the homebuilding industry may need active support. (“Let’s try to remember” to defend the housebuilding industry.)

    The market will play out pretty much without regard to the wishes of the various participants.

    • Agreed. I think I am bothered by what I see as misplaced pride. The good news that the home building industry is experiencing is really a bad news story for the province and city as it is symptomatic of the euphoria of the market.

  15. Anybody out there with the data, ability, motivation and time to calculate the projected effects of a housing market pull-back on the BC economy?

  16. Apologies if the answer to this question is obvious, but according to the table on the screen shot shown, construction jobs as a share of total employement has always (well, since 1975 anyway) been higher in Canada than the US. Why would this be?

  17. Total construction employment in Spain peaked at 12%. BC is 9% for residential only? Wow.

    http://en.wikipedia.org/wiki/Economy_of_Spain

  18. From rp1′s link re BC employment above:


    Construction has become the largest employer in the goods sector.
    Data Source: Statistics Canada

    Q: Can you identify the year in which our speculative mania in housing took off?

    • I would love to hear Whitemarsh’s answer to the question “Let x be the percentage of employment is in residential construction. What value of x is undesirably large?”

    • Yeah, great link RP1. So our economy is less dependent on natural resources and less dependent on goods production — we admit this AND brag about it? And in the same breath we admit that we’re majority dependent on construction? We are so screwed.

  19. How about the negative influence on the current economy this disproportional growth in the construction industy and housing prices is currently having even before the big burst? The work force being drawn from the other industries, the cost of construction increase for the provincial and municipal projects when the money budgeted for the schools and hospitals construction are now only bying a parking lot for them? When the overspending for the housing restricts the consumtion of the other goods and services? When the brain drain increases as the high cost of living and housing inaffordability drives away the smartest, most educated and healthiest? Less kids born as their parents can not afford the SFH for them? Empty houses on an empty streets. Skewed economy…

  20. I mean they claim that their growth is a blessing, but it might be a curse instead until the bigger picture is evaluated.

    • In the old days they called these kind of good news stories Trojan Horses. They look all good and nice at first and then out pop the bad guys who pillage and wreck your town.

      So while labour and unions are cheering (Horay we are winning!) there is a very nasty surprise in store for them and long lines in the EI office. I wish I could say this particular event is part of the normal business cycle but nothing could be further from the truth.

      There is a GD disaster coming for British Columbia.

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