Vancouver region faced a 35-per-cent drop in September
Fiona Anderson
Sun
Housing starts in the Vancouver region fell 35 per cent in September, the second month in a row that starts have dropped, according to the Canada Mortgage and Housing Corp.
The biggest decline was in multiple units, which plummeted 45 per cent, while starts for single-family homes in the area were down just six per cent.
“In spite of low new home inventories, builders and developers are hard-pressed to continue increasing the number of housing starts,” CMHC’s senior market analyst Cameron Muir said Tuesday. “A limited supply of developable land, the trend toward more complicated mixed-use developments, and competition for skilled trade workers are significant constraints to producing more than 21,000 housing starts per year.”
For the first nine months of the year, housing starts in Greater Vancouver are up six per cent to almost 15,000 units, compared to the same period in 2005. Single detached homes lead the surge with a 22-per-cent increase, while multiple starts have remained constant.
In the province as a whole, housing starts in urban centres are down 16 per cent for September compared to the same month in 2005. Year-to-date housing starts are up 7.5 per cent.
Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said the fall in housing starts is not surprising.
“When we started the year we expected this to be a year of moderation,” Simpson said in an interview. “We didn’t expect any sharp increases in starts, nor did we expect a dramatic drop. And the early successes through the spring surprised us.
“So now we’re starting to get back to levels where we thought we would end up.”
Nationally, housing starts unexpectedly dropped to 211,300 units in September, down slightly from 216,600 in August, but the new-home market continues to fare better in Canada than in the United States.
Economists said that while last month’s decline was a disappointment, it was attributable to the volatile multiple-starts segment — consisting of condominiums, rental apartments and townhouses — which fell to their lowest level since July 2004.
That stood in sharp contrast to single-family units, a more stable housing measure, which edged upward in September for the fourth straight month, reflecting fundamental strength in the housing market, the CMHC report shows.
“Certainly, the [single-family homes] suggest the game isn’t over yet,” said Bart Melek, senior economist with BMO Capital Markets. “At the end of the day, anything over 200,000 [units] in Canada is indicative of a very strong housing market.”
And despite the backslide, Canada’s housing market continues to be more resilient than its American counterpart, with housing starts dipping 6.6 per cent year-over-year in the third quarter, versus a much steeper 20-per-cent drop in the U.S.
That softer slump is indicative of robust job creation north of the border, especially in resource-driven western provinces like B.C. and Alberta, and relatively tame mortgage rates.
“At the same time, we’re getting fiscal stimulus from lower taxes from the Feds,” Melek said.
“We’ve just posted a huge [$13-billion] surplus in Canada, and I suspect that much of that will translate into lower taxes for corporations and individuals as the year unfolds. So the Canadian consumer should do fairly well.”
In its report, CMHC said the annual rate of urban starts fell 2.9 per cent to 176,900 units in September, with urban multiples declining seven per cent to 81,200 units and singles inching up 0.8 per cent to 95,700.
“In the U.S., starts are down in every region,” TD economist Sebastien Lavoie said in a note to clients. “Slicing starts by housing type reveals a similar story. Both starts of multiple and single units are cooling off rapidly in the United States.”
Looking ahead, Canadian housing activity is expected to cool further for the rest of this year and next due to crumbling affordability, a rise in home construction costs and a forecast increase in multiple-unit supplies.
“There’s also more competition for home builders coming from the existing home market, which should cool things off as well,” said Adrienne Warren, senior economist with Scotiabank, who pointed to a rise in the number of resale listings.
“But I would say you’re still looking at relatively buoyant conditions in most parts of the country, and still very buoyant out in the West.”
© The Vancouver Sun 2006
