The stark mismatch between housing supply and demand is top-of-mind in B.C., but the push to build more houses is complicated by the cost pressures faced by the construction industry.

The problems are compounding: The construction industry is being squeezed on the revenue side, with a soft market due to rising interest rates, and an increase in costs as a result of supply chain shortages and inflation. The result is the eroding of potential profitability which causes developers to see projects as less economically viable, said Brendon Ogmundson, chief economist for the British Columbia Real Estate Association.

Fifty per cent of builders and developers surveyed in 2022’s second quarter indicated that there has been less traffic from prospective buyers as a result of the interest rate increases, according to the Canadian Home Builders’ Association’s Housing Market Index. Another 45 per cent said that buyers were delaying home purchases, and 38 per cent said buyers have started changing their minds about purchases.

In order to see the long-run rate of price appreciation on homes go down, more housing supply is needed and it needs to get to market a lot faster, Ogmundson said.

“What tends to happen is we have these disconnects where we have low supply, we have a demand shock that hits the market and listings get depleted. That causes prices to accelerate really fast, and we can’t get the new supply to the market fast enough to offset those demand shocks,” he said.

But building more housing in B.C. is easier said than done.

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