But steadying trend may be on the horizon, strategist says

Province

TD Securities strategist Ian Pollick says ‘the lack of supply coupled with falling prices will eventually create a more stable price environment.’ Photograph by: Adrian Lam, Times Colonist, Canwest News Service

Vancouver and Victoria posted year-over-year declines in new housing prices in December, marking their third-consecutive month of erosion.

Prices in Vancouver dropped 2.3 per cent from a year earlier, while those in Victoria fell 2.9 per cent, Statistics Canada said yesterday.

Nationally, the selling price of new homes fell by 0.1 per cent between November and December, the third-consecutive monthly slide, StatsCan said.

On a year-over-year basis, the new-housing price index increased by 0.4 per cent in December, a slower pace than the 0.7-per-cent increase recorded in November.

“On balance, while this report was slightly stronger than the market consensus, it is indicative of a cooling housing market,” said Ian Pollick, an economics strategist with TD Securities.

“It is universally expected that Canadian home prices will continue to retreat in the foreseeable future, though there is a silver lining here.

“We know that housing starts declined by 9.3 per cent year-over-year, suggesting a reduced amount of new inventory hitting the market,” Pollick added.

“The lack of supply coupled with falling prices will eventually work together to create a more stable price environment. Compared with the U.S., the Canadian housing market is not nearly in as bad shape.”

Builders in Saskatoon cited reduced labour costs as new housing prices fell by 0.7 per cent in that city, while prices went down by 1.3 per cent in Calgary and 0.3 per cent in Edmonton, the federal agency said.

Monthly prices remained unchanged in Vancouver, Toronto and Oshawa, Quebec and Montreal in December but increased slightly by 0.2 per cent in Ottawa-Gatineau.

The largest year-over-year increase in new housing prices was registered in St. John’s at just over 24 per cent, followed by Regina at 21.7 per cent.

Compared with December 2007, Statistics Canada said contractors’ selling prices were 4.5 per cent higher in Ottawa-Gatineau and nearly two per cent higher in Toronto and Oshawa.

New housing prices in Saskatoon rose by 0.9 per cent year-over-year, confirming a continuing trend of deceleration in this city.

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Builders responding to slow sales

Derrick Penner
Sun

January saw Metro Vancouver builders start work on fewer than half the number of new homes they started in January 2008, a sign of things to come in 2009, according to Canada Mortgage and Housing Corp.

Builders started work on just 609 new homes in January, down 54 per cent from 1,332 homes in January 2008, and down 45 per cent from the 1,108 new homes started in December.

“We were kind of expecting [a significant drop],” Robyn Adamache, a Canada Mortgage and Housing analyst said in an interview. “I don’t know if we expected it to be this big.”

Adamache said inventories of unsold new homes built up over 2008 were double the number unsold at the end of 2007.

She said builders were responding to the signal sent by slow sales, along with a drop in resales in the latter half of 2008, by slowing down construction.

Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said bad weather in December and January also slowed construction sites down, but added that the slowdown in sales is the main reason for the decline in starts.

“Starts are low because a lot of builders are taking a wait-and-see approach,” Simpson said. “They’re going to be very cautious about putting a shovel in the ground if they’re not confident with a particular project selling out.”

Simpson said banks and construction lenders are making some decisions as well, by not approving financing for projects.

He said the drop in housing starts looked particularly steep because 2008 was an unexpectedly busy year for housing starts.

Starts for most of 2008 were on track to be the best since 1993 until falling off towards the end of the year, he said.

The bottom line, though, is that the low level of real estate sales that Metro Vancouver experienced through the fall of 2008 was bound to be reflected in lower housing starts, Simpson said.

Adamache said that with a record number of condominium units under construction — in the order of 18,000 units — she expected the inventory of unsold new homes could increase further over the next couple of years. Among municipalities, Bowen Island, Langley City, North Vancouver City, Pitt Meadows, Port Coquitlam, Port Moody and White Rock recorded no housing starts, according to Canada Mortgage and Housing.

Vancouver, which saw 294 starts in January 2008, recorded 151 starts this January.

Surrey, which had 409 starts in January 2008, saw only 94 in the first month of 2009.

The decline in housing starts extended to the entire province. The 925 January starts in all B.C. urban centres represented a 60-per-cent drop from the same month in 2008.

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Prices are expected to fall in 2009 and then rebound slightly in 2010

Garry Marr
Sun

The average price of homes sold in 2009 is expected to decline slightly, then recover in 2010. Photograph by: Steve Bosch, Vancouver Sun, Files, Financial Post

Housing sales this year are expected to drop back to 2000 levels, according to a new report from the Canadian Real Estate Association.

The Ottawa-based group, which represents 100 boards across the country, issued a new forecast for 2009 on Monday and predicted sales would fall to 360,900. That would be a 16.9 per cent decline from 2008.

“We are caught in a cycle where consumer confidence has been eroded because of job losses, and consumer confidence is an essential ingredient for housing sales activity,” said Calvin Lindberg, president of CREA.

His group is forecasting a rebound by 2010 and forecasts sales to jump to 9.9 per cent then, with most of the growth coming in the second half of that year. B.C. and Alberta are expected to have the strongest rebounds in 2010.

Prices are also forecast to fall this year before rebounding slightly in 2010. CREA said the average price of homes sold in Canada will be $279,400 this year, an eight per cent decline from last year.

In 2008, the average sale price in Canada dropped 0.7 per cent.

The increase in price is forecast to be modest next year. CREA said the average sale price of a home next year will be $282,400, a 1.1-per-cent increase from 2009.

“Increasingly, cautious homebuyers and mortgage lenders mean that active listings will take longer to sell in 2009 compared to previous years,” said Gregory Klump, chief economist with CREA.

“The national housing market is recalibrating due to weak sales activity.”

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Average prices to drop 0.6 per cent to $404,000

Province

B.C. is expected to post the country’s steepest drop in house sales in 2009, the Canadian Real Estate Association says.

Home sales in B.C. will tumble 19.2 per cent in 2009 to 55,700 units, slightly worse than the 19.1-per-cent decline foreseen for each of Alberta and Ontario, the association said yesterday.

This year’s drop comes on the heels of B.C.’s 33-per-cent tumble in 2008, the Ottawa-based association said. Average house prices in B.C. will likely drop 10.6 per cent this year to $406,300, following last year’s 3.5-per-cent price increase, it said.

In 2010, a year when average Canadian prices are expected to grow by 1.1 per cent, B.C.’s average price will slip by 0.6 per cent to $404,000, said the association, which represents 100 real-estate boards across Canada.

CREA chief economist Gregory Klump said that growing caution among homebuyers and mortgage lenders means active listings will take longer to sell in 2009.

“Supply will take time to adjust to lower demand but sellers unwilling to accept offers below their expectations will remove their home from the market,” he said.

“Fewer active listings reduces buyer choice and in time puts a floor under prices,” Klump said.

In 2010, B.C.’s overall house sales will rebound by a nation-leading 28.4 per cent. Nationally, the association foresees sales growth of 9.9 per cent next year.

Separately, Canada Mortgage and Housing Corp. said seasonally adjusted housing starts in urban B.C. tumbled 29.1 per cent, between December and January, just behind a 30.3-per-cent plunge on the Prairies.

In the Vancouver area, new-home starts last month fell to only half the level they were in January 2008, CMHC said.

Builders in the area broke ground on 609 homes in January, down 54.3 per cent from a year ago.

CMHC senior market analyst Robyn Adamache called January a taste of things to come.

“The slowing trend that began in the last part of 2008 will continue, with fewer housing starts forecast for the year ahead,” she said.

“A well-supplied resale market and a growing stock of unsold new homes on the market mean that developers are holding off on new projects until more of the existing inventories are absorbed.”

Year-over-year starts fell by 87 per cent in the Abbotsford area and 82 per cent in Chilliwack, CMHC said.

Nanaimo, which saw a 154-per-cent jump, bucked the trend in urban B.C. toward fewer starts.

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