Garry Marr
Sun
TORONTO — Canada‘s housing market is heading for a “tipping point” driven by construction activity that has been even greater than the United States, according to a report from Merrill Lynch Canada economist David Wolf.
He said there is a “high correlation” between price action in the Canadian market and the U.S. housing market two years earlier. U.S. prices started to increase in 2005, peaked in 2006 and have been falling ever since.
“If anything, the ramp-up in building in Canada looks to have been larger than the U.S.,” said Wolf.
He points out that as of August, there were 34,635 multiple units under construction in Toronto and 19,973 in Vancouver.
Multiples generally consist of condominiums. Both cities have built more condos than all Canadian cities combined a decade ago.
“The number of housing units now under construction in Canada is just shy of the May peak, which was the highest figure ever in the 36 years of data available,” Wolf said.
He says the market here resembles the U.S. with completed units piling up and not selling, a sign of overbuilding.
When the U.S. market peaked in April 2006, inventories of unsold single-family homes rose 26.5 per cent from a year earlier.
As of last month, Wolf said inventories of unsold new single-family homes in Canada were up 56.1 per cent compared with last year.
© The Vancouver Sun 2008
