Monday, November 20, 2006

Housing Starts continue to do well in Canada - TD Canada Trust

Toronto Real Estate Board (TREB) Average Prices and Graph


November 8, 2006

Condo surge boost starts in October to 223K
Starts activity in line with recent trend
Builders remain very busy

Housing starts rose by 7% in October to reach a solid 223,200 annualized units, the first gain in four months. October’s starts activity is in line with the 6-month average and the year-to-date tally is virtually the same as last year. However, starts were down from the recent peak of almost 250,000 annualized units reached in the first quarter of 2006.

October’s increase was driven by a sizeable 23% rebound in multiple units. This surge is related to activity in Montreal, Toronto, and Vancouver, where condos have gained in popularity in view of scarce land and rising demand for downtown living. Meanwhile, single starts dropped 4% to its lowest level since May.

Year-to-date figures continue to show the all-too-familiar regional story: A decline in starts in Ontario and Quebec are offset by gains in Western Canada. Still, the drop in starts in Central Canada is not broadly-based. In Ontario, starts are up in 4 out of 10 CMAs in comparison to last year– Kingston, Oshawa, Ottawa, and London. In Quebec, starts are stronger in 4 out of 6 CMAs – Trois-Rivières, Sherbrooke, Saguenay, and Gatineau. Central Canada’s new housing market is losing steam because starts are down in the big cities of Montreal and Toronto. In Western Canada, none of the 8 CMAs have recorded year-to-date declines in starts in 2006, with Victoria and Abbotsford registering the biggest gains. It is very likely that Calgary and Edmonton are not ranked first and second because of labour constraints.

Over the near term, Canadian starts are likely to remain at healthy levels. Notably, building permits – a leading indicator of starts activity – averaged a solid 232,000 annualized units in the last six months. This means that starts in 2006 should be about the same as in 2005 – around 225,000 units. But as we move forward through the first half of 2007, a downtrend in Canadian starts is likely to become noticeable, as builders adjust to a likely weakening in job creation and thus, housing demand.

Lastly, it is important to make the distinction between housing starts and residential construction activity. While growth in starts is flat on a year-to-date basis, the number of units under construction has been strong lately at about 146,000 units – 5 per cent higher than last year. Construction workers are busy with condo towers, which take several months to build. As these large residential buildings move closer towards the final stages of construction and completion, the level of residential construction activity will pull back further and become a drag on Canada’s economic expansion in 2007.

This article is courtesy of Paul Chadwick from TD Canada Trust

For more information please contact A. Mark Argentino

A. Mark Argentino Associate Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc.
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS 905-828-3434
FAX 905-828-2829

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