BMO has made their stance clear. No Canadian housing bubble. CMHC is solid. And now: the new construction market is steady.
First, just the facts:
197,900 annualized housing starts in January 2012, slightly down from December’s 199,900 starts. Multi-unit starts rose 0.4% in January, while singles fell 7.8%.
Here is BMO’s conclusion:
Despite some wide regional and sectoral differences, overall Canadian residential construction appears to be settling in at a well-behaved pace just below 200,000 units per year, slightly below the average of the past decade (which covers the strong period in the mid-2000s as well as the recession).
Canadian residential construction activity continues to look steady overall, but there are some notable trends taking place below the surface—namely the robust pace of building in the Ontario condo sector to meet equally robust demand.
Contrast this with TD’s report from today on the same exact figures & data:
While housing continues to surprise on the upside, we caution that this pace of homebuilding is unsustainable. Firstly, housing construction is running at a pace that is well above what would be consistent with demographic fundamentals, particularly in the condo market. The result has been a large over hang of newly built and unoccupied multiple units, putting significant downside risk to home building once interest rates begin to rise.
Second, labour market weakness since July of 2011 will likely put a damper on housing demand through 2012.
TD Economics believes that the Canadian housing market is slightly overbuilt and overpriced. Overall, we anticipate that a low interest rate environment through the next year will continue to keep housing activity at lofty levels, but weakened fundamentals should keep further growth in check. However, once interest rates begin to increase – likely by mid-2013 – we do anticipate some of the excess in the housing market to unwind.