Escalating costs due to shortages of both building materials and construction labour do not mean that the Greater Vancouver housing market is going to cool off drastically in the near future, according to the Canada Mortgage and Housing Corp. (CMHC).

"There's really very little inventory out there, so the risk to this housing bubble - that we're going to see a drop in demand and have all these units lying open - is really fictitious," CMHC senior market analyst Cameron Muir told a real estate management audience in Vancouver recently.

Muir was one of the panellists speaking to an audience at Buildex Vancouver, an exposition and conference that attracted 350 exhibitors and more than 10,000 real estate managers and construction, architectural and interior design specialists to the Vancouver Trade and Exhibition Centre.

Muir noted that while current high commodity prices are good for the province and are helping to offset the strong Canadian dollar, they are also resulting in higher building costs. Even so, he said, building developers are much more concerned about the shortage in the labour supply. Of the approximately 45,000 new jobs created in B.C. last year, 30,000 were in the construction sector.

Photo courtesy of CMHC
Cameron Muir notes that construction workers' wages have been flat.

Muir said many of the province's skilled tradespeople moved to Alberta in the late '90s when B.C.'s economy was performing poorly - and they aren't coming back. "One of the reasons behind that is the wage growth in the construction industry has been very flat," he said, noting that average union wages for many skilled trades are less in Vancouver than in Calgary or Toronto.

"It's interesting that while we hear a lot about the demand for skilled tradespeople, and that the average skilled tradesperson is 55 years old, the wages of construction workers have actually been flat last year, it was about 0.2 per cent," Muir said.

"We would expect them to start to climb this year and next, particularly when you add the demand coming from the non-residential sector around the Olympics and transportation. They are going to demand these skilled trades people," he said. "And if they aren't out there someone is going to have to come and take their place. The people that are going to do that are people who are going to demand higher wages."

Those higher wages, working their way through the system and adding to construction costs, present a challenge to developers who sometimes pre-sell almost 100 per cent of the units they are building, Muir said.

By the time the project is finished as much as three years later, projected profits can be down substantially.

Low inventory is also a factor in the commercial real estate sector, where investment interest remains strong, the conference heard.

"Optimism and awareness has never been greater," said Lee Blanchard, associate vice-president with Royal LePage Commercial Inc., noting the need for additional serviced land to be brought on stream more quickly.

Buildex Vancouver ran concurrently with the British Columbia Construction Show, the Homebuilder & Renovator Expo and Design Northwest, drawing most of its participants from Greater Vancouver.

(Jan Mansfield can be reached at jan@businessedge.ca)