Calgary single-detached housing starts in September were up 13% from last year according to CMHC’s Preliminary Housing Start Data released today. Year-to-date, single-detached starts in Calgary are still down -20% from last year.
Row, Apartment and Other Dwellings were down -8% on a y/y basis which means the total market saw a 2% gain from September 2010.
Canada wide, single-detached homes were up 5% y/y, but down 14% year-to-date.
In TD’s research note on the data, they highlighted 2 key implications:
• There are several factors that continue to keep homebuilders optimistic. Employment and incomegrowth remains sufficiently healthy and economic fundamentals, though having slowed recently, remainstable. In addition, recent financial turmoil emanating from Europe has hit Canadian markets hard and has led to a renewed flight towards the safety of government bonds. This has helped to keep mortgage rates at their record low levels, meaning affordability is still supportive of housing demand
• However, TD Economics expects that spending fatigue and high levels of debt among Canadian households will lead to further moderation in the housing market. Ultimately, this will be the dominating factor with regards to homebuilding activity, going forward. We forecast that housing starts will slow to an average of 180,000 by next year, only to trend lower the year after.
Debt & Real Estate
On a related note, TD also released a special report today entitled, “Canada’s Aging Household Debt Burden.” It had this to say regarding real estate:
A closer look shows that a large part of the growing debt burden among older Canadians reflects investment in real estate. Indeed, the trend toward real estate has been more prominent than average among the 65+ group, where average holdings have doubled since 2002. Like others, older Canadians have been lured by the attractive combination of low interest rates and home price appreciation.
And for those in or close to retirement, low returns on interestbearing securities and sharp equity losses in recent years have provided an added incentive to diverisfy portfolios into real estate. We’ve argued in earlier reports that debt used to fund asset accumulation (rather than consumption) is more sustainable.
That said, those aged 44-64 and 65+ years are the only age groups where debt growth has outstripped asset growth over the last decade. For those aged 65+ years, debt grew at a pace that was double that of assets. Accordingly, most broad metrics of household financial health – ratios of debt-to-income, debt-to-assets and debt-to homeowner’s equity – have been on a deteriorating trend since 2002.
Moreover, the share of income earmarked towards servicing debt has edged up for these age groups despite record-low interest rates. In contrast, Canadians under the age of 44 years have posted rising debt-to-income ratios, but other metrics have remained relatively stable.
Read the entire report here