Figures no surprise to CMHC analyst after multiple starts rose over several months
Michael Kane
Sun
Housing starts in Greater Vancouver took one step back in May while prices continued to climb and home builders continued working flat out in the face of high demand and low supply.
Starts dipped 29 per cent to 1,270 units compared to the same month last year, according to figures released Thursday by Canada Mortgage and Housing Corp. Single detached starts were up 18 per cent to 490 units while multiple starts fell 44 per cent to 780 units.
That came as no surprise to Cameron Muir, senior market analyst with CMHC in Vancouver, who said “a short-lived dip” in new construction activity is typical after rising multiple starts over a number of months.
“We had three big months — February, March and April — which were huge in terms of housing starts, particularly on the multi-family side,” Muir said in an interview.
CMHC says the lull is only temporary. Starts are expected to climb eight per cent to 20,500 units this year, the third-highest total ever and the highest in more than a decade.
Year-to-date, housing starts in the Vancouver metropolitan area are up 19 per cent to 8,667 units, compared to the same period last year. Single detached starts are up 40 per cent to 2,251 units while multiple starts are up 13 per cent to 6,146 units, compared to the first five months of 2005.
Muir said new home inventories remain historically low — 10 times lower than six years ago — while demand is being driven by a healthy economy, robust job growth, rising wages in many sectors, strong consumer confidence and borrowing rates that have inched up but remain relatively modest.
“What we have seen is demand in excess of what builders and developers have been able to build to date and that’s one of the strongest reasons for prices to rise as strongly as they have.”
CMHC expects prices to rise between 10 and 12 per cent this year, in line with construction costs, which could suggest some easing in the months ahead as affordability concerns drive more buyers from the market.
Prices for single family homes are already up 25 per cent in the first five months of this year, compared to the same period last year, according to the Real Estate Board of Greater Vancouver. Prices for condos are up 14 per cent and townhouses are up 13 per cent.
Year-over-year, the board says prices are up 30 per cent for detached homes, 21 per cent for condos and 16 per cent for townhouses.
Statistics Canada released data Thursday showing new home prices up only 6.1 per cent in the Vancouver area for the 12 months to April, below the national average of 8.2 per cent, but the agency’s Albert Near acknowledged that the survey’s methodology is under review after criticism that it fails to accurately reflect the Greater Vancouver marketplace.
StatsCan excludes apartment condos which dominate the Vancouver new homes market and critics say the survey is over-reliant on tract home builders, who tend to be more active in the lower-priced, outer suburbs.
Nationally StatsCan’s new housing price index rose 1.2 per cent in April, the biggest month-to-month increase since April 1989. Prices advanced in 14 of 21 metropolitan areas surveyed with Calgary leading the way for the seventh month in a row with a monthly increase of 4.7 per cent.
StatsCan registered a 0.9 per cent increase in Vancouver area prices in April, placing the metropolitan area fifth behind Calgary, Edmonton, Regina and Montreal.
© The Vancouver Sun 2006
