Thursday, September 29, 2011

BC Population Growth to Q2 2011

BC Stats just released (PDF) its quarterly population estimates and BC is what we would term "sluggish" in terms of population growth. (HT VMD)

Population growth consists of the following bulk components:
  • Natural increase (births - deaths)
  • Net interprovincial migration
  • Net international migration
So let's look at how recent quarters look in a historical context (there is seasonality so quarters are best compared to each other):

The most recent Q2-2011 data indicate the lowest Q2 immigration numbers since 2004, negative net interprovincial migration, and continued below-trend non-permanent resident (NPR) in-migration. (NPRs mostly consist of students and temporary workers.) Since unemployment has remained elevated for over 2 years, there is, unsurprisingly, pressure to employ local residents; as fallout from this, non-permanent residents in-migration has remained subdued. Below are graphs up to 2010:

Weak population growth in Q4-2010 and Q1-2011 has further extended into Q2-2011. These recent population data are what I would characterise as a continuing bearish indicator for BC real estate.

Addendum: There are worrying signs that the inter-provincial migration trends are going to follow patterns seen in the late-1990s. Looking at the data there is some indication that dropping construction investment corresponded to out-migration to other provinces, and cracks (albeit small ones) started appearing before the Asian financial crisis that started in 1997. Construction employment today remains above its long-term average and dwelling formation will start lagging going forward with persistently lower population growth. This would mean that primary industry construction employment would ebb and net population outflows from BC would accelerate.

Looking at historical data from the past 20 years, lower immigration and increased out-migration would portend several effects:
  1. Higher numbers of for-sale houses and lower sales. This will push up months of inventory significantly.
  2. Construction employment will likely drop by over 30% without significant government spending increases.
  3. Unemployment will rise and wage growth will be subdued.
  4. Rental rate growth will remain subdued.
It is unclear whether or not government policymakers fully understand the impact an ebbing of a construction employment and investment boom, and the resultant inter-provincial out-migration, will have on the provincial economy. If China enters a severe downturn in the next few years instead of a "mere" correction, things could be even worse.

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