Toronto Condo and Real Estate Blog

By Jamie Sturgeon - Canwest News Service

Construction on new homes remained above 200,000 starts in October, Canada Mortgage Housing Corp. said Monday, defying expectations among most industry watchers calling for a protracted slowdown.

Also on Monday, Statistics Canada reported that new-home prices rose unexpectedly in September - even as the year-over-year price increase was the slowest since 2000.

Prices gained 0.1% in September after staying unchanged in August, Statistics Canada said Monday from Ottawa. Meanwhile, the 2.1% increase from September 2007 was down from 2.3% in August and was the slowest pace since March of 2000, the agency said.

Economists predicted new home prices would decline 0.1% in September from the month before, according to the median of 14 responses in a Bloomberg survey.

The seasonally adjusted annual rate of housing starts was 211,800 in the month, down from 218,600 units in September, but still well above the consensus view among economists that predicted between 195,000 and 200,000.

“Housing starts remained strong in October and are consistent with our new home construction forecast for (the year),” said Bob Dugan, chief economist at the agency. He said the modest decline was spread equally across single-detached starts and multi-family dwellings, such as condominiums and townhouses.

By province, urban starts decreased in British Columbia, the Prairies and Ontario, CMHC said. In contrast, starts leaped 41,300 in Quebec, while builders began construction on 9,600 units in the Atlantic provinces.

Starts on detached urban housing declined in every province except Ontario, where construction increased 10%, the agency said.

It is the second month in a row that CMHC figures have come in better than expected, even as prices fall on new and existing homes across the country.

October’s numbers are in line with the 212,000 annualized rate the agency forecast for this year. However, last month’s pullback from September may also indicate the country’s housing market has begun to downshift toward CMHC’s projection of 178,000 starts for 2009, a more constant rate, historically.

“For the first 10 months of 2008, actual starts in rural and urban areas combined were down an estimated 1.6% compared to the same period last year,” the agency said.

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The Canadian Press

Canada’s housing market bucked the gut-churning downward spiral south of the border, with new homes commanding higher prices and developers going ahead with building a surprising number of new homes, according to the latest figures released Monday.

The housing picture appeared to be far rosier in the early fall than most analysts had predicted, but economists warned that looks can be deceiving.

“While new home construction in Canada has been holding up quite well thus far, we expect starts to weaken considerably over the next year,” said Dina Cover, an economist with TD Financial Group.

“Already, we are seeing evidence that existing home prices are softening, particularly in Alberta and B.C.”

Canadian Mortgage and Housing Corp. reported housing starts nationally slipped 3.1% in October from a month earlier, but remained robust at 211,800 units on an adjusted annualized basis.

At the same time, new-house prices continued to climb, albeit at their slowest pace in about eight years, Statistics Canada reported.

New homes cost 2.1% more in September than they did a year earlier, but the increase was lower than the 2.3% rise recorded in August.

St. John’s and Regina saw the largest year-over-year gains at 22.7%.

On the other ends of the spectrum, new-home prices in Edmonton fell 5.8% in September compared with a year earlier, the city’s biggest yearly decline in more than 20 years.

Robert Kavcic, of BMO Capital Markets Economics, noted that single-unit starts fell in October to below the 70,000-level for the first time since 2000 — part of a five-year downward trend.

The decline of 14.5% over the past year is still nothing like the 40% meltdown seen in single-family starts in the United States.

However, Kavcic warned the solid overall housing-start numbers are a reflection of ongoing strength in multi-unit construction, a situation he said is unlikely to persist.

“Starts in this segment are up a solid 11.5% year over year so far in 2008, but could be at risk in the coming quarters as the credit crunch and economic headwinds take their toll,” Kavcic said in an analysis called “Strong Facade, Shaky Foundation.”

“Canadian residential construction activity has held steady since 2003 thanks to strong multiple-unit starts and strength in western Canada, two sources of support that are likely to wane in the coming quarters.”

Paul Ferley of RBC said new construction will slow substantially next year, falling to about 180,000 units in light of “a worsening in the financial market turmoil or from a knock-on effect of a more pronounced weakening in the U.S. economy.”

Nationally, actual starts were down about 1.6% so far this year compared to the first 10 months of 2007, CMHC reported.

Overall, prices gained 0.1% in September after staying unchanged in August, Statistics Canada said.

New home prices rose fastest in Atlantic Canada, led by a 22.7% surge in Newfoundland and Labrador, but the situation looked a lot different in the west.

Prices in Alberta fell 3.4% in September — the only province to see a year-over-year decline.

On a annual basis, new home prices were up 1.4% in Vancouver, 4.3% in Ottawa, 3.0% in Toronto and 4.8% in Montreal. Prices were off 1.2% in Calgary.

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Ottawa Business Journal

The Canadian real estate market will be shielded in 2009 by the more cautious behaviour exhibited by industry players compared to those in the market south of the border, with Vancouver ranked as the city to watch for real estate investment, according to a new PricewaterhouseCoopers and Urban Land Institute report.

The report said it’s currently a “moderately good time” to sell property, with western provinces boasting the strongest growth trends and lowest vacancies in North America.

“U.S. housing woes haven’t extended to Canada, where banks and regulators have managed the excessive mortgage lending practices of our neighbours to the south,” said PwC partner Frank Magliocco in a statement. “Property markets, including housing, track at or near equilibrium, with high occupancies and controlled development. We always get caught up in U.S. trends, but given our strong fundamentals they shouldn’t affect us to the same magnitude.”

The percentage of firms who responded to the survey who said they had good prospects for profitability remains high, with 35.8% saying they had “very good” prospects and 22.4% saying they had “excellent” opportunities for profitability. However, the report noted that those numbers are lower than last year, when 38.5% said they had “very good” prospects while 23.8% said opportunities were “excellent.”

Meanwhile, while credit tightness will likely mean it will cost more to get financing even in Canada, the report said capital has “remained disciplined” and should steady in 2009.

“In fact, Canada ranks third in the world – preceded by Asia Pacific and the Middle East – for a moderate to high increase in the availability of capital for real estate,” said Chris Potter, who is also a PwC partner.

The report said industrial real estate will be the strongest category next year, although all sectors will show strength, including housing. However, while the home sale market will hold steady, new housing development is expected to cool, the study noted.

Across Canada’s top real estate markets, Vancouver was named as the highest-rated city for 2009, with Calgary and Edmonton also receiving high ratings for “investment prospects, development and for-sale housing.” The report also named Ottawa as one of the markets with a fairly strong score.

Out east, however, the property markets appear to be weak, with the report warning investors to be cautious when looking into the Maritime markets, except if they are “knowledgeable about the specific centres in this area.”

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