A group of leading economists broadly praised the B.C. government’s push to create more housing, but also dampened expectations of lower housing prices soon while calling for more measures to increase rental housing.
Some also warned of a recession ahead and predicted B.C. would suffer if former US president Donald Trump were to return to the White House.
Finance Katrine Conroy heard these and other assessments from government’s economic forecast council, with whom she meet for several hours Monday morning. Conroy’s annual gathering with the group — many of them chief economists with Canada’s largest financial institutions — came after she had presented her government’s second-quarter economic outlook.
Both occasions point to slower economic growth in 2024. The economic forecast council pegged average growth for 2024 at 0.5 per cent GDP. Some predict conditions that will feel like a recession even though B.C. might not technically experience negative growth. But economists also generally praised the state of B.C.’s finances and the recent run of housing legislation, saying housing affordability is going to get worse, before getting better.
One economist said current measures won’t help with affordability until 2029 and won’t start bending the cost curve downward until 2035. Another predicted declining home-ownership rates and urged government to increase rental housing.
Part of the pessimism around housing stems from interest rates. While the council is predicting declining rates in 2024, they will not return to the low levels before the COVID-19 pandemic.
Elevated interest rates will not only mean higher mortgage payments, they will also make it more difficult for developers and would-be buyers to enter the market.
B.C. has been especially sensitive to high-interest rates, several economists noted, adding its housing issues were decades in the making.
Several economists lamented B.C.’s low productivity, especially in the area of construction, which will make it difficult for it to build the necessary infrastructure for its growing but aging population.
Immigration from outside of Canada has helped to fuel B.C.’s economy, but at least one economist said this population growth has been masking structural deficits.
Economists also weighed in on the economic effects of B.C.’s climate change policies. Up to four members of the council urged additional investments in mining and liquefied natural gas, both sectors with high productivity rates. Such investments would not only improve B.C. low per-capita productivity, but could also help fight climate change by supplying critical minerals. Developing economies could also transition away from harmful coal thanks to LNG, while developed economies in Europe would break their dependence on Russia.
Many of those same voices also argued that B.C.’s climate change policies could make the province uncompetitive. Other voices, however, argued climate change could hurt tourism, a major sector, and discourage immigration to B.C.
Several voices pointed to uncertainties beyond provincial borders that could impact B.C. They include the ongoing conflict in the Middle East, the state of the Chinese economy, and looming elections in Ottawa and Washington, D.C.
Multiple but not all council members argued that the possible return of former president Donald Trump could usher in an phase of economic protectionism, which would hurt B.C.’s export-oriented economy.
Conroy ackowledged B.C.’s slowing growth in the face of elevated interest rates and slower economic growth around the world.
“But we are well-positioned to support people through the challenges we are seeing around the globe with our diverse economy and prudent fiscal planning,” she said. Forecasters also said that B.C. is focusing on the right priorities such as housing, she added.
“We do have an abundant natural resource sector and we are well-positioned to see growth in the area. Our population is growing and we are focused on ensuring that our infrastructure and communities are prepared for that growth.”
Conroy also confirmed earlier signals that government won’t depart from the current financial course.
“We know that supporting people is the right approach to strengthen our economy first and we are going to continue to put people first,” she said.
Conroy acknowledged “some of the housing will be somewhere in the future, but others are quicker” in pointing to the legalization of secondary suites and steps to increase density, incuding round housing hubs. Investments in student housing also ease housing pressure across communities, she said.
BC United’s Peter Milobar said his biggest take-away from the meeting was the absence of major projects to fill the pending end of the Site C Dam and multiple LNG projects in northern B.C.
“Certainly, we are going to need to see that type of investment to make sure that we actually keep our economy growing,” he said. “Also, the underlying feeling that immigration is masking somewhat what is feeling like in peoples’ daily lives a recession,” he said.
Milobar also expressed concern about B.C.’s productivity.
“That creates a big problem to our overall economy,” he said.
He also reiterated his party’s promise to get rid off the provincial carbon tax if the federal Conservatives win the next federal election and dump the federal carbon tax.
Editor’s Note. Rules prohibited reporters to record any portion of the meeting or attribute quotes to individual forecasters or experts for statements made during the meeting.