Housing starts slow in February after January surge

New home prices in January show year-over-year gains above 10 per cent

CBC News

Canadian housing starts slowed by about 21 per cent in February, failing to keep up a pace set in a mild January.

The figure — reported Thursday by the Canada Mortgage and Housing Corp. — may be a blip in an otherwise strong Canadian housing market, exempt so far from some of the credit headaches plaguing the U.S. market.

A separate report by Statistics Canada on Thursday showed prices of new homes rising moderately across most of the country between December and January, maintaining year-over-year increases of more than 10 per cent.

The biggest jumps were were in Edmonton and Calgary, where the 12-month gains exceeded 40 per cent.

The CMHC report shows builders beginning work on houses and apartments in February at a rate that would yield about 196,200 units a year, down from 248,500 in January. The figures are statistically adjusted to remove normal seasonal variations.

Even so, the federal agency expects the year to turn out better than its report suggests.

"Following the unusually strong surge in construction activity in January, which was partly attributable to the unseasonably warm weather, housing starts in February returned to levels more in line with expectations," CMHC economist Bob Dugan said in a statement.

"Housing starts are likely to increase in the coming months and are forecasted to reach 209,500 units in 2007."

BMO Capital Markets economist Bart Melek said the 21-per-cent drop was much larger than expected but was not cause for alarm in a chilly Feburary after a January thaw.

In a commentary on Thursday, Melek called it "a giving-back of borrowed activity" that "does not point to a deepening downward trend."

In the CMHC report, multiple-family projects in urban areas showed some of the sharpest declines in February, down 33 per cent from January on a seasonally adjusted basis There were declines in all regions except in the Atlantic, which showed a 15.6-per-cent increase.

Urban single-family home starts fell 12.6 per cent amid slowdowns everywhere but British Columbia, where the rate was unchanged from January.

The Statistics Canada report on contractors' selling prices showed a January-to-January national increase of 10.1 per cent, down from a December-to-December figure of 10.7 per cent.

The national increase from December to January was 0.3 per cent.

Edmonton's prices showed a one-month gain of 1.6 per cent and a 12-month gain of 40.2 per cent. Calgary's figures were 0.8 per cent and 40.8 per cent.

City set to lead house prices

'Sizeable' double-digit increases likely again, housing study predicts

Ron Chalmers
The Edmonton Journal
Thursday, March 08, 2007

EDMONTON - Edmonton will see the biggest jump in housing prices in Canada this year, according to a major Scotiabank study released Wednesday.

"Edmonton is the only city to meet all three criteria of strong demand, tight supply and affordability," said Scotiabank economist Adrienne Warren, who studied 23 Canadian cities.

"This powerful combination will sustain a market-leading pace of construction, sales and price increases."

The Edmonton area will see the largest price increases of any major market, Warren said, predicting "double-digit increases below last year, but still sizeable."

By the end of December 2006, Edmonton prices were up 48.7 per cent from December 2005.

The Edmonton Real Estate Board predicted price growth would slow to 15 per cent in 2007.

But after only two months, prices are already up almost 10 per cent over last year, to an average of $321,307 for all housing and $375,412 for single-family homes.

Housing demand in Edmonton is sustained by Canada's second-highest rate of combined population and employment growth, trailing only Calgary.

She rated Edmonton's housing supply as tighter than any other metropolitan area of more than one million people.

Rising prices are "a major concern," said Richard Nutter, a retired professor of social work who works with the Greater Edmonton Alliance to organize renters threatened by conversions of low-rent apartments to condominiums.

Middle-income families still can buy homes, but "there is a real shortage of affordable housing in Edmonton" for people on low incomes, he said.

Warren measured affordability by comparing mortgage payments to rents, and found that owning a home in Edmonton costs on average $590 more per month.

The gap is $899 in Toronto, $952 in Calgary and $1,794 in Vancouver. On balance, Warren rated Edmonton homes as relatively affordable.

Nutter sees little affordability for the tenants of 504 Strathearn Heights apartments that may be demolished and replaced by 1,750 condo units.

"I met one woman who has lived there for 50 years. A substantial number of tenants have no place to go."

The City of Edmonton has a policy that includes a vague requirement that five per cent of units in new developments be reserved for affordable housing.

"The Greater Edmonton Alliance would like to expand that to 10 or 15 per cent," Nutter said. "Twenty per cent of families are living below the low-income cut-off."

Warren's prediction of strong housing starts sounds right to Reza Nasseri, CEO of Landmark Group of Builders.

"We certainly have felt it already," he said. "In the last three or four months of last year, there was a pause by purchasers and by builders -- because there was no land available."

But sales and starts have been brisk since January, and "a lot of the land that was being serviced last year will be available in June and July," he said.

"We see sales continuing at least as good as last year."

Warren called Canada's housing market "the rabbit that just keeps on going and going," while in the U.S., housing starts are down roughly 25 per cent and resales by 10 per cent in the past year, and prices "are posting significant declines" in many markets in the western and southern states.

Canada is unlikely to follow the U. S. because "speculative investing has been less active, overbuilding less prevalent, and high-risk lending less widespread," she wrote.