Huge hikes in Vancouver area while national figures falter
Province
Construction workers build new homes in Calgary where buyers currently are favoured over sellers. Decline in home building was most pronounced on the Prairies.Photograph by: Reuters, From Canwest News Service
Housing starts across the Vancouver area showed healthy increases in May, posting a year-over-year jump of 150 per cent, according to Canada Mortgage and Housing Corp.
In Abbotsford starts climbed 159 per cent and in Chilliwack they were up 128 per cent, the housing agency said Tuesday.
“The single-family housing market is performing well and overall new-housing construction is in line with key economic indicators,” CMHC said.
Nationally, housing construction in Canada is coming off the boil, economists say, pointing to weaker-than-expected levels of home starts in May.
The seasonally adjusted level of activity slipped 6.3 per cent in the month to 189,100 units, compared with expectations of 202,000 starts, CMHC said. April was revised up slightly to 201,800.
But “the details of today’s report were softer than the headline would suggest,” said Douglas Porter, deputy chief economist at BMO Capital Markets.
He cited the fact that the closely watched single-family component of starts fell for the second month in a row, off 14.1 per cent after an 11.4-per-cent slide in April and now at an eight-month low. Multiple-unit starts also fell, down 5.6 per cent.
As a result, TD Economics forecasts that resale home prices in Canada will drop six to seven per cent over the next four to five quarters.
Even with May’s declines, new-home construction is still running hotter than the market needs, said Porter, pointing out that May’s total lies well below the volume needed to meet the demands of newly formed families, currently 175,000 homes a year.
Burleton calls for the number of starts to moderate in the second half to an annualized pace of 160,000 to 170,000 homes. At the same time, seller’s market conditions are quickly on the wane.
“Some centres, including Vancouver and Calgary, are already beginning to favour buyers over sellers, while others such as Toronto are becoming far less competitive,” said Adrienne Warren, senior economist at Scotia Capital.
The CMHC report stated that declines in home construction were most pronounced in the Prairie region, off 21.8 per cent, followed by Quebec, down 13 per cent, and B.C., off 12.9 per cent. Ontario dipped 2.7 per cent, but rose 23.3 per cent in Atlantic Canada.
Still, Tuesday’s data won’t be enough to stop Bank of Canada governor Mark Carney from raising interest rates another 100 basis points in 2010, as some slowing was widely anticipated, said RBC assistant chief economist Paul Ferley.
The central bank increased its key rate by 25 basis points to 0.5 per cent last week, after holding borrowing costs at a record-low level for nearly three years in an effort to pull the economy out of recession.
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