Although total sales in the Calgary resale market were up nearly 10% in August, new construction didn’t follow suit according to Preliminary Housing Start data released by CMHC today.
Last month, 505 single-detached homes were started which was an increase of only 2% year-over-year. Townhome & Apartment starts were down -28% to 534. Total starts for the month were down -16% to 1,039.
Year-to-date (Jan-Aug) single family starts are up 18% y/y and townhome & apartments are up +143% for an overall increase of +66%.
You can view the CMHC report here (Take note of Toronto’s condo market)
Here’s what the banks had to say on Canada’s housing start figures:
Volatility in housing starts numbers is always to be expected, but this month’s data clearly shows that Canadian housing construction remains in high gear. The rest of the economy is growing much slower and as a consequence is not likely to be able to support this level of housing supply for much longer.
While recent changes to mortgage insurance rules will likely limit the growth in demand for new homes, low interest rates remain an incentive for buyers to borrow and keep the housing market overvalued. In the end, higher interest rates are needed to bring the Canadian housing market back to a sustainable expansion pace. We expect the Bank of Canada to make that move in the spring of 2013. (Source)
Regionally, Ontario led the advance in August, up nearly 20% as a few large condo projects broke ground in the month. While multi-unit starts in the province were up a sizzling 33% y/y through August, singles were down 1.4% y/y—this dearth of single detached homebuilding in the GTA is one fact often overshadowed by booming condo supply. Meantime, results were mixed across the rest of Canada in August, with B.C. rebounding from a steep drop in the prior month—activity has held relatively steady in the province over the past 2 years despite month-to-month volatility—while Alberta and Quebec were soft spots.
The August housing starts report told a familiar tale of strong multi-unit activity, particularly in Toronto. But, the report is looking more like an historical artifact given that sales have begun to cool significantly—look for a gradual softening in housing starts through 2013 (Source)
New home construction in Canada continued at a robust pace in August and extended the monthly streak of above-200,000 annualized units to nine, which is the longest such streak since 2007. Year-to-date housing starts have averaged 218,000, which is 15% above the pace seen last year, and were led by a 25% surge in multiple-unit construction.
The elevated level of building permits suggested that starts could maintain this momentum in the coming months; however, we continue to believe that the pace of homebuilding activity will moderate toward the end of this year and into 2013 as the restraining effects from the changes to government-backed mortgage insurance rules that came into effect July 9 become more evident.
As well, the recent cooling seen in the resale markets, especially in Vancouver and Toronto, will likely gradually spillover into the new home sector, thereby supporting our view that starts activity will ease during the medium term as the housing market transitions to a more moderate and sustainable path (Source)
The pace of new home construction provides one of the best gauges of economic activity. And, judging by Alberta’s latest figure on housing starts, the economy appears to be slowing. However, there’s still no reason to sound the alarm.
The number of new homes that got underway in Alberta dropped to 27,700 in August. That figure is annualized; that is, if the pace of housing starts in August held up for 12 months, there would be this many starts in a year. It also accounts for housing starts in all areas of the province.
There’s no question that Alberta’s home building market has cooled over the spring and summer. August starts are down 12 per cent from July and a whopping 30 per cent from the recent high point in April.
Some of the drop could be due to a slight slowing of the provincial economy. While Alberta remains one of the best labour and investment markets in North America, most of the economic indicators, such as retail sales, employment, and manufacturing, have pulled back from their white-hot pace in 2011. Softer oil prices throughout the summer are responsible for much of the pull-back.
Still, a longer term perspective is necessary. The overall home building market in 2012 remains stronger than last year. Over the first eight months of the year, housing starts are still 37 per cent higher than the same period last year. And even with the current slowdown, Albertans are still building new homes at about the same pace as the 20-year average of 28,800 per year (Source: Troy Media)