Report Projects Canada’s New Hous­ing Starts Will Increase In 2010

Nuwirein​vestor​.com

New prop­erty starts in Canada are expe­ri­enc­ing a steep decline in 2009 due to eco­nomic uncer­tainty but are expected to increase again in 2010, accord­ing to a new report.

The mar­ket is mod­er­at­ing due to three key fac­tors, says the report from the Canada Mort­gage and Hous­ing Cor­po­ra­tion.

First, strong house price growth between 2002 and 2007 has tem­pered home own­er­ship demand par­tic­u­larly in West­ern Canada. Sec­ond, the record high lev­els of new list­ings have increased the com­pe­ti­tion from the exist­ing home mar­ket and reduced spillover demand. And, finally, uncer­tainty about the eco­nomic out­look is a con­tribut­ing fac­tor restrain­ing demand for home ownership.

Over­all in 2009, prop­erty starts will decline in all areas of Canada and more so in West­ern Canada and Ontario. By 2010, how­ever, all provinces will see increases in prop­erty starts, the report states.

Ana­lysts point out that strong sell­ers’ mar­ket con­di­tions in recent years were reflected in strong upward pres­sure on the aver­age price of res­i­den­tial prop­er­ties, which increased in the 9 to 11% range between 2002 and 2007. The first half of 2008 saw an eas­ing of sales and higher lev­els of new list­ings. This brought the Cana­dian resale mar­ket back into buy­ers’ mar­ket ter­ri­tory by the end of 2008.

For 2009, prices are expected to decrease by 6.8% to $283,100 and remain at that aver­age in 2010, the report says. While the Atlantic provinces will see sta­ble or ris­ing prices, the other provinces will see declines in 2009. The adjust­ments will be more impor­tant in British Colum­bia and Alberta, where price gains were par­tic­u­larly strong in recent years.

The report also warns that if the US reces­sion proves to be deeper and more pro­longed than is cur­rently expected, then job losses in Canada could be greater than fore­cast. In turn, this could cause the demand for home own­er­ship to fall.

How­ever ana­lysts point out that there has been a strong pol­icy response to the eco­nomic down­turn. ‘This will con­tinue by gov­ern­ments at all lev­els in many coun­tries. Cen­tral banks through­out the world, includ­ing Canada, have dra­mat­i­cally cut inter­est rates. The impact of exist­ing and future stim­u­lus could boost eco­nomic growth beyond expec­ta­tions, which would lead to stronger job cre­ation and increased demand for own­er­ship hous­ing,’ it says.

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