Builders are seeing more interest in new projects, but recovery is expected to be gradual for the rest of 2009
Derrick Penner
Sun
Residential housing construction activity in Metro Vancouver jumped in August from July’s dismal lows, indicating a continuing trend toward a gradual recovery, Canada Mortgage and Housing Corp. reported Wednesday.
Builders started work on 927 new homes in August, a significant improvement from the 516 started in July, but still some 41 per cent below the 1,561 new homes started in August 2008.
To the end of August, Metro homebuilders had started 4,786 new homes, which is just over one-third the 13,643 started to the end of August 2008. But the numbers appear to heading higher later in the year.
“We’ve seen several very solid months on the resale market with home sales increasing and fewer active listings,” CMHC analyst Robyn Adamache said, “so builders, I guess, are starting to respond by taking a look at starting their next projects now that they’re seeing a bit more demand out there.”
Peter Simpson, CEO of the Greater Vancouver Home Builders’ Association, said the combination of developers lowering prices, low interest rates and renewed consumer confidence have sparked buyer interest, and August’s start numbers reflect improved pre-sale activity.
Construction workers have begun to return to job sites after thousands of job losses in the sector since late last year.
Adamache said she expects to see a gradual return to better numbers. She forecasts that by the end of the year, Metro Vancouver housing starts will be down 50 per cent from the numbers recorded in 2008. To the end of August, starts were 65 per cent below last year’s numbers.
The increased activity has occurred in pockets around the region. Adamache noted that New Westminster and Surrey in particular saw larger projects started in August.
In New Westminster, developers started work on multi-family projects totalling 158 units in August, compared with multi-family construction totalling 56 units for all of the first eight months of 2008.
Surrey saw 177 single-family homes started in August compared with 124 for the same month a year ago.
However, while New Westminster has seen a total of 183 units of housing started, up from 78 in the first eight months of 2008, other communities still show significant declines.
Surrey saw 1,238 units of new housing started to the end of August, a 70-per-cent decline from 4,090 in 2008. Vancouver saw a mere 863 new units started, 79 per cent below the 3,569 stared to the same point in 2008.
Across B.C.’s urban centres, builders started work on 1,414 new homes, which was 37 per cent lower than in August of 2008. To the end of August, builders had 7,433 new homes under construction, 64 per cent below the 20,837 underway to the end of August a year ago.
Nationally, home construction increased by a greater-than-expected 12.1 per cent in August as the country’s housing market continued to show signs of recovery.
The federal agency said the annualized pace of housing construction increased to 150,400 starts in August from 134,200 units the previous month.
Most economists had expected housing starts to increase to about 139,000 units in August.
“Housing starts are trending higher, reflecting improvements in both the single and multiple segments,” said Bob Dugan, CMHC’s chief economist. “The improvement in housing starts is consistent with our expectation of a stronger second half for 2009.”
Robert Kavcic, an economist at BMO Capital Markets, said, that “the rebound in residential construction activity in August is further evidence that the Canadian housing sector is in recovery mode.”
“This was undoubtedly a strong report, and it indicates that some momentum is perhaps beginning to build in the new homes market, thereby complementing the dramatic turnaround seen in the existing homes market recently,” said Millan Mulraine, economics strategist at TD Securities.
“However, while we believe that the recent gains in new residential construction may be sustainable, we are unlikely to see further sharp advances in the pace of construction, particularly given the weak economic backdrop and soft labour market conditions,” he said. “In fact, we expect the level of residential starts to remain in the current range in the coming months.”
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