I’ll be posting Calgary’s real estate update for September 1-7 tomorrow, and there will be more housing industry reports in the week to come.
From BMO’s Focus:
There is a full gamut of housing-related indicators on tap for Canada next week from August, and the overriding message is expected to be that the previously red-hot sector is cooling markedly.
First up will be starts on Tuesday, and they are expected to dip 4% to 200,000 units. While still a healthy level, that’s down from the frothy average pace of 230,000 units in Q2. After hitting its second highest reading in 30 years in April, multi-unit starts (i.e. condos) are poised to recede further amid slowing sales.
Friday’s report on existing home sales activity is expected to provide much starker evidence that activity is gearing down in a big way. August was the first full month of the new mortgage insurance rules (notably the 25-year amortization maximum), and by all accounts sales suffered accordingly. Toronto, Edmonton, Ottawa, Victoria and Vancouver have all reported double-digit declines in sales from year-ago levels for August, with the latter posting a nasty 30.7% slide.
Only Calgary has bucked the trend, still managing to post a 16.2% y/y rise. While smaller centres that have yet to report likely saw more modest declines, we still expect a national drop of 9% for sales. Most cities are still managing to grind out modest price gains, but the huge drop in sales in high-priced Vancouver is likely to knock down average transactions prices again in August. The MLS Home Price Index, released the same day, will provide a truer picture of underlying price moves, and is expected to still be up roughly 4% y/y.
Scotiabank is expecting figures next week to show a similar slowdown:
Housing starts for August will be released on September 11 and Scotia is anticipating a 200k print. The big picture issue is that housing starts have been strong all year even amidst other signs of softening in the Canadian housing sector. Scotia’s 200k housing starts call is premised on building permit issuance havingremained robust through the summer: 229k in July, 241k in June, 225k in May, etc. (the June number was the highest amount of permits issued since the summer of 2008).
The rub is that the key component fuelling permit issuance is Toronto condo development — and that market has been cooling over the summer. According to data released by the Toronto Real Estate Board, sales and listings of Toronto condos were lower during August 2012 than during August 2011. Have home builders adjusted to the softening market conditions? Construction employment was weak during August (-44k nationally according to Statscan) and anecdotally, homebuilders are behaving more cautiously. That leads us to expect an eventual slow-down in condo starts as we head into the back end of 2012, even as permit issuance was quite high earlier in the year.
Be sure to check back tomorrow and throughout the week to stay on top of the Calgary and Canadian real estate market. Have a great weekend! 🙂