The year 2017 was not without challenges for British Columbia. The uncertainties over NAFTA renegotiations began last year and continue today. American duties on Canadian softwood lumber dampened forestry activity in the province, and we experienced one of the worst wildfire seasons in our province’s history.
Despite these setbacks, BC enjoyed another year of robust economic growth in 2017. Although GDP slowed from 3.5% to 3.2% between 2016 and 2017, our provincial economy saw record employment growth, gaining 87,300 jobs across the province in 20171,2. As a result, the unemployment rate fell by 0.9 percentage points, dropping to 5.1%, its lowest level since 20093. In addition, BC’s population grew by another 1.3%, reaching 4.8 million residents last year4.
Continued population growth and demand for housing kept BC’s real estate market busy. The British Columbia Real Estate Association reported that 103,763 residential unit sales were recorded by the Multiple Listing Service (MLS) across BC and the average MLS residential price in BC went up 2.7%, reaching $709,579 in 20175. A hot housing market also prompted more residential development projects. The overall value of building permits in the province increased by 15.3%, reaching $11.4 billion. RBC Economics also estimated that housing starts reached 42,600 units6.
A closer look at regional data from CPABC’s Regional Check-Up report indicates that jobs related to construction and real estate activity continue to propel BC’s job growth, particularly for our urban regions, including Southwest BC, Vancouver Island/Coast, and Thompson-Okanagan. Collectively, these three regions accounted for 96% of BC’s population growth and 92% of our province’s new jobs in 2017. Almost 80% of the 80,700 total new jobs in these three regions were in the construction industry and the finance, insurance, real estate, rental and leasing industry7.
In addition, activity in the mining industry picked up as commodity prices recovered, creating new investment opportunities that benefited BC’s rural communities. According to the Association for Mineral Exploration British Columbia, mineral exploration spending picked up for the first time since 2012 and grew by 20% in 20178. Another positive sign is the fact that junior mining companies increased their spending on exploration activity by $41.6 million, up to $246.6 million. This indicates renewed optimism for the mining industry in the province9.
With 600 fewer jobs, Northeast BC was the only region to experience job losses last year. The region’s unemployment rate also fell by 3.8 percentage points, dropping to 5.9%, reflecting the outflow of unemployed workers in the previous two years and a slight decline in labour force participation. Northeast BC’s economy is closely tied with the province’s oil and gas activity. This sector saw a revival in the second half of 2017 due to the Pembina Pipeline expansion and AltaGas’s Townsend expansion and North Pine liquids facility projects, which are expected to have a positive impact on the region’s economy10.
Looking at 2018, one of the biggest concerns is BC’s major projects inventory, which saw a decline in value for the second year in a row and declined by 5.1% between September 2016 and September 2017, dropping to $412.7 billion. This was largely due to a 7.7% decrease in the value of mining, oil and gas extraction projects, which together make up 45% of the total value of our major projects. The cancellation of the Aurora LNG and Pacific Northwest LNG projects, as well as the cancelled construction of two Northern Gateway Pipelines projects, contributed to a loss of $17.4 billion in potential investment and related economic activity in Northwest BC.11
Despite these concerns, BC is expected to be a growth leader among the other provinces in 2018, even with GDP growth expected to slow to 2.3%.12 Similarly, job creation will likely continue but at a more moderate pace. Interest rate increases, a tightening of mortgage lending standards, and the provincial government’s new housing strategy may moderate real estate activity in the province. The anticipated slowdown in real estate activity will likely spill over to retail sales and other related industries. For BC’s rural regions, the recent revival in commodity prices should continue to encourage mining activity and help offset some uncertainties over NAFTA renegotiations and the final decision on softwood lumber tariffs.
This editorial was adapted and updated from its original publication in Business in Vancouver's Invest in BC 2018.
Lori Mathison, FCPA, FCGA, LLB is the president and CEO of the Chartered Professional Accountants of British Columbia (CPABC).
1RBC Economic Research, Provincial Outlook: March 2018
2Statistics Canada, Labour Force Survey Estimates (LFS), by Provinces, Territories and Economic Regions Based on 2011 Census Boundaries, annual (persons unless otherwise noted), CANSIM Table 282-0123 (database). Accessed February 2018.
4Statistics Canada, Estimates of Population, by Age Group and Sex for July 1, Canada, Provinces and Territories, annual (persons unless otherwise noted), CANSIM Table 051-0001 (database). Accessed February 2018.
5British Columbia Real Estate Association, “BC Home Sales above 100,000 for Third Consecutive Year,” 2017-12 Statistical Release, January 12, 2018.
6RBC Economics | Research, Provincial Outlook: December 2017
7Source: CPABC Regional Check-Up 2018. The report will be available at bccheckup.com in late May.
8Association for Mineral Exploration, Annual Report 2017
10Labour Market and Information Division, Ministry of Advanced Education, Skills and Training, British Columbia Major Projects Inventory: Third Quarter 2017.
11Source: CPABC Regional Check-Up 2018.
12RBC Economic Research, Provincial Outlook: March 2018, rbc.com/economics.
In Other News
Last year, rapid inflation resulted in the fastest interest rate increase in a generation. While investment in the province remained resilient in 2022, there are signs high interest rates are slowing capital expenditures and weakening our economic outlook.
While inflation remains well above the Bank of Canada’s 2% target, it continues to slow both provincially and nationally. In March 2023, overall prices in BC rose by 4.7% in BC and 4.3% in Canada compared to March 2022, the slowest rate in BC since February 2022. In comparison, BC’s annual inflation rate was 6.2% to start this year and peaked at 8.1% last May.
According to BC Check-Up: Invest, an annual report by the Chartered Professional Accountants of British Columbia (CPABC) on investment trends across the province, there were 43,106 housing units started in 2022, down slightly from the 43,360 started in 2021.
Starting in early 2022, central banks around the world began to increase interest rates to combat inflation, resulting in significant and quick successions of interest rate increases. As of the writing of this article, the Bank of Canada’s (BoC) key interest rate stands at 4.5%, up from 0.25% at the start of 2022.