Tag Archives: banking system
Canada housing starts up; condo strength to unwind
* February starts rise 6.6%, January revised up
* Urban starts up; multi-, single-family homes both rise
* Underlying trend suggests activity stabilizing
By Ka Yan Ng – Reuters
Canadian housing starts rose a better than expected 6.6% in February from January, thanks to a jump in condominium construction, though analysts warned the strength is unlikely to carry into coming months and could be a mild drag on overall economic growth.
Housing starts climbed to a seasonally adjusted annualized rate of 181,900 units in February from a revised 170,600 units in January, Canada Mortgage and Housing Corp said on Tuesday. January starts were revised up slightly from 170,400.
Analysts, on average, had forecast 173,000 starts in February.
“The details reflected somewhat of a lack of breadth, so we discount the strength on volatility concerns and are not convinced this is a sustainable break from a lower trend,” wrote Scotia Capital economists Derek Holt and Gorica Djeric.
Urban starts rose by 9.4% to 161,000 units, CMHC said, driven by a 14.5% rise in construction of multiple-unit buildings, mainly condominiums, accounting for 94,900 units.
Analysts said strength in the condo market may not continue as there has been a recent drop in building permits issued for the sector.
The closely watched single-family homes segment edged 3.0% higher to 66,100 units in February.
Despite the month-to-month swings in the volatile multi-unit group, the underlying trend suggests housing starts are averaging 176,000 units a month.
“Activity appears to be stabilizing around a level consistent with demographic demand,” said Robert Kavcic, economist at BMO Capital Markets.
Compared with global trends in the face of the financial crisis, Canada’s housing market has been resilient, due mainly to a strong banking system and low interest rates. After a brief retreat during the crisis, the residential housing sector was able to post double-digit price gains in late 2009 and early 2010.
But Canada’s economic recovery is now seen depending less on consumer-driven growth and more on business and export growth. Analysts expect that a rise in interest rates later this year and tighter mortgage rules will combine slow the housing sector.
“We continue to expect a softening in overall housing starts, particularly with the anticipated higher interest rates and a slower second half of the year, keeping home prices under wraps,” said Krishen Rangasamy, an economist at CIBC World Markets.
Atlantic Canada saw the biggest decline in urban housing starts in February with a 24.7% drop, CMHC said, while Quebec followed with a 7.1% fall. British Columbia was down 5.9%.
Urban starts increased by 29.3% in Ontario and by 26.1% in the Prairie provinces.
Rural starts were estimated at a seasonally adjusted annual rate of 20,900 units in February.
———————————————————————————————————————
Contact the Jeffrey Team for more information – 416−388−1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
———————————————————————————————————————
Related posts:
- Housing starts rise in February The seasonally adjusted annual rate of urban starts increased by…
- Housing pace cools on fewer condo starts National starts have been generally rising in recent months as…
- Housing starts rise 6.1% in February Home construction rose by a more-than-expected 6.1 per cent to…
- Canada house starts drop on Ontario condo slump Canadian housing starts fell by a greater-than-expected 13.5% in December…
- Canada April housing starts edge up, condos strong Canadian housing starts inched up 1.3% in April, offering further…
Canadian Chamber of Commerce Reports Canada’s Economy On Way To Recovery
PropertyWire.ca
The Canadian economy is well on its way to recovery, but has some distance to make up yet, according to a recently released outlook from the Canadian Chamber of Commerce.
According to the 2011 Economic Outlook report, the “Canadian economy has transitioned into a period of subdued growth.”
After showing strength in a rebound after the recession, Canada’s economy lost some of ground, expanding at a meagre 2.3% annual rate in the Q2 of 2010 and 1% in Q3.
“The Canadian economy is chugging along but not at full steam,” says Perrin Beatty, President and CEO of the Canadian Chamber of Commerce. “A number of factors are expected to constrain growth below 2.5 per cent in 2011,” says Beatty.
Contributing factors for this forecast include: Canadian households focussing on paying off existing debt, and fixing debt problems rather than acquiring new debt; ensuing cooling of consumer confidence; the cooling of a hot Canadian housing market; the ending of fiscal stimulus; slowing US demand, and the rising of the Canadian dollar.
Looking forward, there is anticipation that business investment, particularly in machinery and equipment (M&E), is the likely leader in economic growth in 2011-12.
“With strong headwinds buffeting the economy and competitive pressures remaining fierce, it is encouraging to see the increased push by Canadian companies to invest in productivity-enhancing goods,” says Beatty.
M&E imports saw a 13-year high in October, and a number of factors will help with increased capital investment going forward, including the strong Canadian dollar, the continuation of low borrowing costs, high corporate cash balances and the elimination of tariffs on a range of M&E.
“We believe Canada’s relatively strong fundamentals-an enviable fiscal position, a strong banking system, widening interest rate differentials and favourable commodity prices-will save the loonie from excessive downside pressures. These forces should hold the Canadian dollar near and slightly above parity in 2011 and 2012,” says Beatty.
The Canadian Chamber of Commerce believes that the Bank of Canada will not be active until the summer of 2011; they also feel that the overnight target rate will reach two % by the end of 2011 and three % by the end of 2012. This goes along with concerns about Global instability.
———————————————————————————————————————
Contact the Jeffrey Team for more information – 416−388−1960
Laurin & Natalie Jeffrey are Toronto Realtors with Century 21 Regal Realty.
They did not write these articles, they just reproduce them here for people
who are interested in Toronto real estate. They do not work for any builders.
———————————————————————————————————————
Related posts:
- Canadian economy set for growth The latest forecast from RBC Economics suggests the Canadian economy…
- Canadians More Optimistic About The Economy,The Canadian Consumer Confidence Index While they are decidedly more optimistic, they are avoiding luxury…
- Canadian housing market not in recovery yet The Canadian market is not at risk of collapsing, as…
- Economy back even stronger In July, Bank of Canada governor Mark Carney appeared to…
- High Hopes for Canada to Lead G7 in GDP Growth A recent poll of economists done by Reuters suggests that…
Canada housing boom ending with whimper, not bang
By Ka Yan Ng – Reuters
Canada’s rapidly cooling housing market is robbing the nation’s economic recovery of one of its main drivers, but most industry watchers still think the once booming sector will avoid a U.S.-style crash.
Low mortgage rates, a healthy banking system and higher lending standards than in the United States are expected to support a market that saw double-digit price and sales gains in late 2009 and early 2010.
But many analysts and industry figures warn sales levels will slow, and property prices, at best, are likely to stagnate over the next 12 months.
“It was one of the key drivers of the recovery. We can’t expect that, in 2011, to continue. It gave us what it could and it doesn’t have anything else to give,” said Phil Soper, chief executive of Royal LePage Real Estate Services, one of the country’s largest brokers.
After taking a brief hit from the financial crisis, Canada’s housing sector broke away from the global trend and rebounded forcefully last year.
Bidding wars broke out for properties in Vancouver and Toronto, even as homeowners from Florida to California struggled to sell, or to abandon heavily mortgaged homes to their lenders.
With the bursting of U.S. and European property bubbles fresh in its mind, the Canadian government tightened lending rules earlier this year to cool the market.
Still, activity and prices heated up in the first half as buyers raced to avoid the stricter rules and new blended sales tax regimes introduced in two of the country’s biggest markets, Ontario and British Columbia.
Some transactions were also brought forward to sidestep anticipated interest rate hikes by the Bank of Canada, which tightened policy in June and July, and has also warned that residential investment will weaken.
“It brought forward some activity and now we’ve entered the payback period and so I’m not shocked,” said Robert Hogue, senior economist at Royal Bank of Canada.
“I don’t think the recent trends are a sign that a bubble had formed and a bubble is now bursting.”
LOST GROWTH DRIVER
Indisputably, the sector is cooling. Sales of existing homes fell nearly 25%, seasonally adjusted, in July from a year earlier, while the average home price was up a slim 1%, according to the Canadian Real Estate Association.
Bank of Nova Scotia recently declared that housing was “lost” as driver of growth after housing starts fell in July for a third straight month.
Talk of a U.S.-style housing crash was revived this week when the Canadian Centre for Policy Alternatives said the housing market was “an accident waiting to happen”. It predicted that in a worst case scenario, prices could fall more than 30% in some markets.
But that view was contradicted the same day by a report from another think tank. The C.D. Howe Institute argued that Canada’s housing policies would blunt the risk of a massive wave of defaults.
It noted tighter lending standards protected the Canadian housing market from the build-up of high-risk mortgage loans seen in the United States. It argued this should shield the Canadian market from the fate of its southern neighbor.
But an equally important factor for Canada’s housing market may be a bond market rally that has kept mortgage rates near historic lows. Bank of Montreal cut its five-year low-rate mortgage to 3.59% from 3.79% this week.
BETTER THAN U.S. ALTERNATIVE
Low rates may support the Canadian market, but few see much upside. David Rosenberg, who correctly predicted the U.S. housing downturn when he was a Merrill Lynch economist, said he expects Canada’s housing market to go through four to six quarters of extremely sluggish growth.
“That mini-housing boom was not what I would refer to as totally organic. All these policies and the expiry dates brought forward a tremendous amount of housing consumption,” said Rosenberg, chief economist at Gluskin Sheff & Associates.
“We’re paying the price for that distortion right now. We have to couple that distortion now with the reality that the economy broadly is going to be slowing down.”
Royal LePage’s Soper also sees stagnant prices over the next 12 months, but he said prices will return to a steady rate of appreciation, around 3%, after that.
“The real estate market in general should chug along nicely at about the same rate — which is not exactly exciting. But it’s much better than the alternative, which we saw south of the border,” he said.
————————————————————————————————————–
Contact the Jeffrey Team for more information - 416-388-1960
————————————————————————————————————–
Related posts:
- Housing boom is finally ending But in spite of the sharp drop in demand, prices...
- Bank says Canada’s housing boom is over By Virginia Galt – Globe and Mail After a long run of...
- Housing starts to slip as boom eases Canadian Press Rising prices and higher mortgage costs mean housing starts...
- Canada Housing Resales Climbed to Record in November Canadian home resales rose to a record 46,450 units in...
- Canada’s housing boom over, but no collapse in sight CBC News Canada’s longest real estate bboom in 60 years is...
