BLAZING AHEAD

Canada’s housing market steams ahead
Reuters  Oct 11, 2011

TORONTO — Canadian housing starts jumped much more than expected in September, helped by a surge in the condominium sector, suggesting Canada’s property boom stayed intact last month and should help the economy avert recession.

Canada Mortgage and Housing Corp. said on Tuesday that starts rose to seasonally adjusted annualized rate of 205,900 units last month. August starts were revised up to 191,900 from 184,700.

September starts far exceeded the consensus expectation of analysts, who had called for 188,000.

Driving the gains were a jump in construction of multi-residential buildings such as condominiums.

“Housing starts picked up in September due to an increase in multiple starts in the Atlantic region, Quebec and in British Columbia,” Mathieu Laberge, a deputy chief economist with CMHC said in a statement.

“Multiple housing starts are expected to move back toward levels consistent with demographic fundamentals in the near term.”

The agency said urban starts increased by 8% to 185,900 units in September, with multiple urban starts up by 14.2% to 118,000 units. Single family housing starts in urban areas decreased by 1.5% in September to 67,900 units.

Rural starts were estimated at 20,000 units.

CIBC World Markets economist Emanuella Enenajor said in a note to clients that while multiple starts are widely expected to scale down in the months ahead, residential construction could be a plus for GDP in the third quarter.

Canada’s economy contracted marginally in the second quarter, partly due to the supply chain impact of Japan’s earthquake and tsunami. There had been fear the economy could shrink again in the third quarter, meeting the textbook definition of a recession.

But recent data has been encouraging. A report on Friday showed Canada created six times as many jobs as expected in September, helped by an economy that is largely humming along even as other rich nations struggle with debt and slumping confidence.

Canada’s housing sector has played a major role in the recovery. The country avoided the subprime housing boom that drove the United States into recession and helped trigger the global financial crisis.

Property prices and sales briefly weakened after the crisis. But the Bank of Canada’s decision to cut interest rates to a record low, which pulled mortgage rates lower, fueled a fresh boom.

The housing boom was helped along by the fact Canada’s conservative banks escaped the crisis largely unscathed and were able to keep lending.

The fear now for many policymakers is a fresh asset bubble could be in the works.

STATS ON STARTS

Housing starts jump in February
Ka Yan Ng, Reuters
Tuesday, Mar. 8, 2011

TORONTO - Canadian housing starts rose a better than expected 6.6% in February from January, thanks to a jump in condominium construction, though analysts warned the strength is unlikely to carry into coming months and could be a mild drag on overall economic growth.

Housing starts climbed to a seasonally adjusted annualized rate of 181,900 units in February from a revised 170,600 units in January, Canada Mortgage and Housing Corp said on Tuesday. January starts were revised up slightly from 170,400.

Analysts, on average, had forecast 173,000 starts in February.

“The details reflected somewhat of a lack of breadth, so we discount the strength on volatility concerns and are not convinced this is a sustainable break from a lower trend,” wrote Scotia Capital economists Derek Holt and Gorica Djeric.

Urban starts rose by 9.4% to 161,000 units, CMHC said, driven by a 14.5% rise in construction of multiple-unit buildings, mainly condominiums, accounting for 94,900 units.

Analysts said strength in the condo market may not continue as there has been a recent drop in building permits issued for the sector.

The closely watched single-family homes segment edged 3.0% higher to 66,100 units in February.

Despite the month-to-month swings in the volatile multi-unit group, the underlying trend suggests housing starts are averaging 176,000 units a month.

“Activity appears to be stabilizing around a level consistent with demographic demand,” said Robert Kavcic, economist at BMO Capital Markets.

Compared with global trends in the face of the financial crisis, Canada’s housing market has been resilient, due mainly to a strong banking system and low interest rates. After a brief retreat during the crisis, the residential housing sector was able to post double-digit price gains in late 2009 and early 2010.

But Canada’s economic recovery is now seen depending less on consumer-driven growth and more on business and export growth. Analysts expect that a rise in interest rates later this year and tighter mortgage rules will combine slow the housing sector.

“We continue to expect a softening in overall housing starts, particularly with the anticipated higher interest rates and a slower second half of the year, keeping home prices under wraps,” said Krishen Rangasamy, an economist at CIBC World Markets.

Atlantic Canada saw the biggest decline in urban housing starts in February with a 24.7% drop, CMHC said, while Quebec followed with a 7.1% fall. British Columbia was down 5.9%.

Urban starts increased by 29.3% in Ontario and by 26.1% in the Prairie provinces.

Rural starts were estimated at a seasonally adjusted annual rate of 20,900 units in February.

HOUSING STARTS SHY

Housing starts show rebound
Figure still shy of level seen in 2008
By Dan Healing, Calgary Herald
February 9, 2010

The home building industry in Calgary staged a strong rebound in January from last year's 18-year depths, but failed to recoup all the ground lost since the same month in 2008.

According to Canada Mortgage and Housing Corp., total housing starts in the city reached 514 units last month, more than double the 243 in January 2009 but 28 per cent lower than the 711 units started in January 2008.

Richard Cho, CMHC's senior market analyst for the city, said the general direction for new housing is stable.

"Housing activity is encouraging in January. It's a good start to the year," he said.

"We're still seeing a fair number of singles being started, if not the same level of activity we saw in the latter part of 2009. The momentum is still being carried over to this year."

He said fewer incentives are expected to be available for buyers this year due to the stronger market, but higher interest rates expected at midyear will tend to prevent the market from growing beyond a sustainable level.

Todd Hirsch, senior economist for ATB Financial, agreed 2010 will be stable, noting a cold January also likely slowed housing start statistics.

"It's coming off a bit of a surge we saw in fall of last year . . . (but) there's no sign that housing starts are collapsing at all," he said. "They're up from where they were a year ago, so that's positive, and overall I think we'll have a balanced year of housing starts."

He said there will be fewer construction jobs on commercial projects this year, but more in home building and institutional and infrastructure projects.

Both single-detached and multi-family housing starts were up in January, with builders starting work on 413 homes, versus 204 units a year earlier, and 101 multifamily units breaking ground, up from 39 units in the previous year.

Cho said there were no apartment units started, reflecting the oversupply of inventory in Calgary. He predicted the trend this year will be toward medium-density housing.

The peak January for single-family starts came during the overheated economy of 2006, when 838 houses contributed to 1,086 housing starts.

The more volatile multifamily sector posted its biggest January in 1978, when 1,718 units were started.

Provincially, housing starts in Alberta's seven largest centres totalled 1,271 units in January, up 52 per cent from January 2009.

Nationally, the seasonally adjusted annual rate of housing starts reached 186,300 units in January, up from an annual rate of 176,100 units in December.

According to final figures, housing starts for 2009 totalled 149,081 units, with activity improving as the year progressed.

In the Prairie region, the seasonally adjusted annual rate of urban starts decreased by 4.8 per cent in January from the previous month.

Also on Monday, the Canadian Real Estate Association revised its forecast for MLS home sales in 2010.

It forecasts national sales activity will reach 527,300 units in 2010, up 13.3 per cent from 2009. This would represent an annual record -- 1.2 per cent above the previous peak in 2007.

Sales in Alberta are forecast to be 63,050, up 9.1 per cent from 2009.