By Mario Toneguzzi, Calgary Herald
CALGARY — Total housing starts in the Calgary region were down in August, according to Canada Mortgage and Housing Corp.
The agency reported Tuesday that starts of 982 in the Calgary census metropolitan area were off from 1,039 in August 2012.
The single-detached market saw starts rise from 505 last year to 571 this year but the multi-family market experienced a decline from 534 in 2012 to 411 in 2013.
“The trend in single-detached construction remains steady as new home demand benefits from job creation, equity gains in the resale market and rising incomes,” said Richard Cho, senior market analyst in Calgary for the CMHC. “Many prospective buyers have taken advantage of the options in the new home market, especially with mortgage rates relatively low and a decline of active listings in the competing resale market.
“Multi-family starts had declined on a year-over-year basis in August, with fewer semi-detached, row, and apartment units breaking ground. Despite the decline from the previous year, August multi-family starts are not far off from historical averages.”
Year-to-date, total starts are down to 7,929 from 8,993 for the same period last year.
The single-detached market has seen year-to-date starts increase from 3,941 in 2012 to 4,228 this year while the multi-family market has seen a decline to 3,701 this year from 5,052 a year ago.
Cho said multi-family starts are expected to total 5,200 units for the year, down 24 per cent from 2012. Single-detached units, on the other hand, are forecast to increase four per cent in 2013, reaching 6,200 units
“The flooding in June is not expected to have a big impact on the total housing starts number this year,” said Cho. “There have been a number of other factors supporting new home construction and a majority of the housing starts in Calgary takes place in the suburbs, which were less affected by the flooding.”
Across Canada, the seasonally-adjusted rate fell to 180,291 units from 193,021 in July.
Benjamin Reitzes, senior economist with BMO Capital Markets, said Canada’s housing market remains in good shape despite the larger-than-expected decline in August housing starts.
“Indeed, through the first eight months of 2013 starts are averaging 183,200, essentially right on demographic demand. Building permits have also remained healthy in recent months, hinting at some near-term upside for starts. While higher mortgage rates are going to restrain housing sector activity in the second half of the year, the soft landing story remains intact,” he said.
“Alberta accounted for the bulk of the drop in the Prairies, as perhaps the flood cleanup is diverting resources away from new home construction.”
David Onyett-Jeffries, economist with RBC Economics Research, said new home construction in Canada has been fairly stable in 2013 despite monthly gyrations.
“As we move toward 2014, our expectation is that a modest deterioration in housing affordability will weigh on demand and lead to a moderation in starts. We expect housing starts will drift lower over the next year and finish 2014 at levels that are more consistent with household formation in Canada,” he said.
Francis Fong, economist with TD Economics, said the pullback in August is mostly consistent with the bank’s view that the extended period of overbuilding in the Canadian housing market is likely on its last legs.
Fong said a number of factors will keep a lid on construction going forward: the trend pace of homebuilding remains slightly above the rate of household formation and a rising interest rate environment will weigh on the price support needed for builders to continue putting shovels into the ground.
“Ultimately, our view is that housing starts will likely remain close to their current levels for the remainder of the year, but fall to 175,000 units by the end of next year,” said Fong.
Fong said a number of factors will keep a lid on construction going forward: the trend pace of homebuilding remains slightly above the rate of household formation and a rising interest rate environment will weigh on the price support needed for builders to continue putting shovels into the ground.
“Ultimately, our view is that housing starts will likely remain close to their current levels for the remainder of the year, but fall to 175,000 units by the end of next year,” said Fong.
