B.C. housing starts rise 6.3 per cent in April: CMHC
OTTAWA — Housing construction starts blew past expectations in April, according to data released Tuesday.
Canada Mortgage and Housing Corp. said there was a seasonally adjusted annual rate of 244,900 housing starts last month. That was up 14 per cent from the previous month, and well ahead of what the 204,000 economists polled by Bloomberg had been predicting.
"While unseasonably warm weather has been helping starts in recent months, April's return to more normal seasonal temperatures still saw home building soar," CIBC World Markets economist Emanuella Enenajor said in a research note.
"That's even with data on building permits pointing to some moderation in home-building intentions. That suggests that low (interest) rates remain the principal catalyst for continued robust construction activity in Canada."
Urban starts were up 18 per cent to an annual rate of 226,200, while the estimate on rural starts were down 19 per cent to 18,700.
Construction on multiple-housing units in urban areas drove the overall gains. They were up 27.4 per cent to a rate of 158,500. Urban singles saw a gain of 0.6 per cent to 67,700.
Regionally, there was a surge of 56.5 per cent in urban housing starts in Quebec. They were up 12.2 per cent in Ontario, 6.3 per cent in the Prairies and British Columbia, and 2.6 per cent in Atlantic Canada.
Economic conditions and new laws supporting strong housing sector, CMHC says
Canada's national housing agency says it expects the country's real estate industry will remain healthy in the second half of the year, building on favourable economic conditions in the first six months of 2011.
Canada Mortgage and Housing Corp. said Monday that there have been fewer claims under its mortgage insurance programs, which protect lenders from defaults by borrowers.
CMHC attributed the reduced number of claims to continued low interest rates and an improved employment situation.
The agency said it expected fixed mortgage rates to stay relatively flat for most of the year, with the five-year posted rate at between 4.1 per cent and 5.6 per cent, then increase slightly in 2012.
CMHC said variable rate mortgages would remain near historically low levels, although some banks recently increased their variable rates to reflect the higher cost of raising money.
Prices of homes shown on the Multiple Listing Service are expected to grow only slightly going forward because the supply and demand for resale homes will likely stay in balanced territory, CMHC said.
A least one analyst agreed that the real estate market should stay fairly healthy for the rest of 2011, but said it's already cooling slowly and home prices may decline in the longer term.
"What you're probably looking at is a period where prices are relatively flat, maybe a little bit lower in the next few years," said Adrienne Warren, an economist at Scotiabank who specializes in the real estate industry.
"Affordability from a price perspective has deteriorated and that's going to have to, over time, come back to more normal levels but it doesn't imply that that has to happen quickly as a type of correction that occurs quickly."
She said interest rates are low and attractive right now and encourage first time home buyers to enter the market, which drives up prices. Once those rates begin to rise — likely in the second half of 2012 — the current price of homes will become unaffordable for many, putting downward pressure on future prices.
Meanwhile in its report Monday, CMHC said changes to mortgage rules introduced by the federal government earlier this year played a part in reducing mortgage interest payments and allowed Canadians to build equity in their homes faster.
Canadians are finding it easier to pay off their mortgages, with arrears levels improving and the volume of mortgage insurance claims lower than expected.
In March, the federal government put through new rules that reduced the maximum amortization period to 30 years and cut the maximum amount Canadians can borrow to 85 per cent of the home's value.
After the changes, refinancing activity fell by nearly 40 per cent, which means fewer Canadians took on more debt. Federal Finance Minister Jim Flaherty and Bank of Canada governor Mark Carney have repeatedly warned of the ballooning debt level of Canadian consumers.
Ten per cent fewer Canadians bought mortgage insurance immediately after the new rules began, and the level was five per cent lower than sales before the changes came into effect.
CMHC reported its net income for the quarter was $383 million, up $61 million from $322 million in the same quarter last year. Revenues were down slightly at $3.3 billion, versus $3.4 billion.
The agency's predictions for the rest of the year echo a revised forecast by the Canadian Real Estate Association released earlier this month. CREA said it expected higher national home resales this year, reversing upward its previous forecast of a one per cent dip.
National average prices will be in the range of $347,700 to $374,300, growing to between $349,500 to $385,000 in 2012, CREA predicted.
CMHC said sales of existing homes should range between 429,500 and 480,000 units in 2011 and between 410,000 and 511,900 units in 2012.
Earlier this month, the CMHC said that national housing starts rose to 205,100 units on a seasonally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and 4.3 per cent more than the 196,600 recorded in June.
The uptick, driven by strong construction on condos and apartment buildings in urban centres, is likely due to builders catching up to robust demand last year rather than expectations of coming growth, it said.
Home building activity has been increasing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.
Predictions for the Canadian market were in stark contrast with the most recent figures from the United States, which showed that country's depressed housing market is still trying to get back on track.
The U.S. National Association of Realtors said Monday that its index of sales agreements fell 1.3 per cent in July to a reading of 89.7. A reading of 100 is considered healthy by economists
The association also said a growing number of buyers had cancelled contracts after appraisals showed the homes they wanted to buy were worth less than they bid.
Canada Real Estate - Housing starts rise in July, CMHC reports
OTTAWA — A stronger than expected housing market has helped propel growth in the Canadian economy this year, but economists say recent economic and market tumult could jeopardize momentum in the sector.
The Canada Mortgage and Housing Corp. said Monday that national housing starts rose to 205,100 units on a seasonally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and up 4.3 per cent from the 196,600 recorded this June. However, the pickup, driven by strong construction on condos and apartment buildings in urban centres, is likely due to builders catching up to robust demand last year, rather than expectations of coming growth.
Home building activity has been increasing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.
During the first half of last year, the market was rebounding from recession and buyers were on a tear, prompting an influx of demand and the need to build more units.
Housing starts tend to lag activity in the resale market, and economists believe the recent strong construction activity is the result of increased demand last year.
But they doubt whether the pace can continue as the prospect of a double dip recession in the U.S. forces them to rethink the prospects for economic growth in Canada.
"While many economic indicators have pointed to much softer growth through the summer, Canadian housing starts is not one of them, still likely responding to a firm rebound in sales activity in the second half of 2010," said Bank of Montreal economist Robert Kavcic.
"Going forward, expect underlying household formation (about 175,000) and current economic concerns to apply some gravitational pull to starts."
Stock markets -- although they rebounded sharply on Tuesday -- have seen severe selloffs in recent days over fears about U.S. and European debt loads and the potential for a double-dip recession south of the border.
The Canadian economy is so closely linked to the U.S. that slower American growth translates into less demand for Canadian goods, and lower employment and income growth in Canada.
Those worries could soon sour the mood of real estate investors who may not want to bet on an improving economy by the time new builds go on the market.
Buyer sentiment is "vulnerable to recent market turmoil," as the large decline on stock markets has a negative effect on consumer wealth and confidence, making them less inclined to make big purchases, said CIBC economist Peter Buchanan.
"That of course can cut both ways, it can make investors fearful of buying real estate, on the other hand it does mean the Bank of Canada won't be tightening quite as early," Buchanan said.
"The other thing is that if people are worried about putting their money into the equity market, hey real estate may not look so bad."
Many observers believe the Bank of Canada may now its overnight rate -- which affects variable mortgage rates tied to bank prime rates -- at the current low one per cent until next spring. Fixed rate mortgages could also fall as bond markets react to government debt issues.
The U.S. Federal Reserve announced Tuesday that it will likely keep interest rates at record lows near zero through mid-2013. The Fed had previously said only that it would keep it low for "an extended period" and the more explicit time frame was aimed at giving nervous investors a clearer picture of how long they will be able to obtain ultra-cheap credit.
Low mortgage rates are a big incentive for buyers to get into the market, and led to rampant activity last year.
But even with low rates that make the cost of carrying a mortgage cheaper, pent up demand in the housing market could be largely exhausted.
Many buyers rushed into the market during the closing months of 2009 and early 2010, when the Bank of Canada rate was set at an emergency low of 0.25 per cent. Others decided to buy before the implementation of the new HST in Ontario and British Colombia in July 2010, or to beat two rounds of tighter lending rules.
Some observers say it's unlikely Canada's housing market can continue at a strong pace, with prices continuing to rise relative to rent and income levels, even as home prices in the U.S. market have tanked about 30 per cent since the recession.
Home sales began to moderate in January, owing to a combination of high household indebtedness and recently implemented tougher lending rules, which should take some of the heat out of home building activity, said Francis Fong, an economist at TD Economics.
"All said, the current pace of home building activity is well-beyond the fundamental level of household formation and we expect a slow decline over the next 18 months," Fong said.
TD Economics expects starts fall to a monthly average of about 164,000 starts in 2012. The trend toward much higher construction on multiple-unit dwellings, and a decline in single family starts, could indicate the housing market isn't as strong as it appears at first glance. Single family homes are usually the barometer of growth in household formation and more multiple unit homes could signal more people are looking to rent.
Multiple urban starts were 13 per cent higher at 120,200 units, while urban single starts decreased by 7.8 per cent to 65,000 units.
It was only the fifth time since 1990 that multiple units outpaced single family builds by such a wide gap, the Bank of Montreal's Kavcic said.
For the first seven months of 2011, multiple units starts are up 16.4 per cent year over year while single units are down 22.1 per cent.
"Clearly the trend continues to be multis over singles, and that has created more ample supply conditions for condos in Canada," he said.
"As of June, newly completed and unoccupied multis sat 51 per cent above the 10-year average (mostly due to Vancouver and Calgary, with Toronto close to average), while that of singles was four per cent below."
CMHC overall urban starts were up 36.1 per cent in the Atlantic region, 33 per cent in British Columbia and 1.7 per cent in Ontario. Quebec posted a decrease of 7.8 per cent in July, while urban starts were off 0.3 per cent in the Prairies.
TORONTO (Reuters) - Canada Mortgage and Housing Corp (CMHC) slightly raised its forecast for 2011 housing starts on Monday, citing an improving economy and still-low interest rates.
In a second-quarter housing outlook, the federal housing agency also forecast higher existing home sales than industry group Canadian Real Estate Association (CREA).
It said it expected housing starts to total 179,500 units this year, then climb to 185,300 units in 2012.
In February, CMHC had said it expected 2011 housing starts of 177,600, rising to 183,800 in 2012.
New Canadian government regulations are expected to take the heat off the housing market, once the main source of Canada's economic growth. The latest changes, aimed at mortgage amortization and refinancing, came into effect in the spring.
"We are expecting new and existing housing markets to fall in line with demographic fundamentals, as changes to mortgage rules take hold," said Bob Dugan, chief economist for CMHC.
Additionally, Canadian interest rates are expected to stay low for a little while longer despite Monday's data that showed Canadian growth accelerated to almost 4 percent in the first quarter. Second-quarter growth is expected to be around half of that.
The Bank of Canada will raise interest rates some time in the third quarter, in either July or September, a Reuters survey last week showed.
CMHC predicted existing home sales of 452,100 units this year, which would be 1.16 percent above the 2010 tally of 446,936 units. That is also slightly ahead of CREA, which sees 2011 sales dipping 1.3 percent to 441,100 units from 2010.
In 2012, CMHC sees sales moving up to 461,300 units, also higher than CREA's forecast of 452,500 units.
Both groups say the recent increase in the average national price reflected strong sales in Vancouver's resale market. CMHC expects the average price to moderate for the remainder of the year but gave no figure.
Housing starts drop in B.C., but rise in Metro Vancouver: CMHC report
HST uncertainty blamed for 5.9-per-cent drop, but metropolitan area sees 23-per-cent hike
** See bottom of the post for the full Report
VANCOUVER - Housing starts were down in B.C. in February, with uncertainty over the HST being blamed for part of the problem.
"I'm not surprised the starts are down, but I'm surprised they're down that much," M.J. Whitemarsh, CEO of the Canadian Home Builders' Association of B.C., said in an interview Tuesday after the Canada Mortgage and Housing Corp. released a report showing starts were down 5.9 per cent in February to 24,100 on a seasonally adjusted basis.
"One of the things that's impacting housing starts is uncertainty over the HST," she said of the controversial tax, which will go to referendum this year. "People are holding off either buying new houses or even doing renovations because [the HST] may be gone. It's stifling consumer confidence.
"And if people aren't purchasing, builders aren't building."
According to figures released by CMHC, home construction across Canada edged up more than expected in February, but those gains are unlikely to be matched in the coming months as tighter-mortgage rules and higher-lending rates could begin to dampen building activity.
CMHC said the seasonally adjusted annual rate of housing starts was 181,900 units during the month, led mainly by condominium construction in Ontario and the Prairie provinces.
Although housing starts were down 5.9 per cent in B.C., there were differences around the province, with Metro Vancouver much stronger than other areas.
"For the first two months of the year, Vancouver housing starts are up 23 per cent [compared to January and February 2010]," CMHC's regional economist Carol Frketich said in an interview. "That reflects a stronger resale market in [Metro Vancouver]. Also, Vancouver has had stronger job creation than the rest of the province."
Frketich said urban B.C. starts were also up 5.1 per cent for the first two months of 2011 compared to last year, but fell in February.
"The numbers can fluctuate from month to month," said Frketich, adding that the results reflect CMHC's forecast.
CMHC noted there were 1,414 housing starts in the Vancouver CMA in February, a slight increase from the same month a year ago, with strength in multiple unit housing starts in Richmond, Coquitlam and Surrey accounting for most starts.
Greater Vancouver Home Builders' Association president and chief executive officer Peter Simpson noted in an interview that there were 2,850 housing starts in Metro Vancouver for the first two months of 2011, compared to 2,319 in the same period in 2010.
"We've certainly come a long way from the dark days of 2009," he said. "We're going in the right direction."
The Abbotsford CMA had 25 housing starts in February, down slightly from 37 starts during the same month a year ago.
"Canadian residential construction activity appears to be stabilizing at a level consistent with underlying demographic demand," said BMO Capital Markets economist Robert Kavcic.
"In the quarters ahead, home sales could be challenged by higher mortgage rates and shorter amortizations, which will eventually weigh on starts, but the maturing economic recovery should help," he added.
On Monday, Statistics Canada reported the value of building permits fell unexpectedly in January due to weaker residential and non-residential activity.
The agency said permits were down 5.1 per cent to $5.4 billion during the month.
B.C. housing starts to trend higher in 2011, 2012: CMHC
VANCOUVER - Housing starts in British Columbia will trend higher over the next two years, totalling 26,900 units in 2011 and 29,000 units in 2012, Canada Mortgage and Housing Corporation forecasts in its Housing Market Outlook, released today.
CMHC also expects the existing home market to stabilize in 2011, then strengthen in 2012.
"A stable existing home market, combined with positive economic factors, support the conclusion that the residential construction outlook will continue to be balanced, providing opportunities for both developers and home buyers," noted Carol Frketich, CMHC's B.C. regional economist.
"Mortgage loan interest rates which will remain low by historic standards, together with stable employment and strong population growth, will support the resale and new home markets in 2011 and 2012," she added.
CMHC said resales are expected to remain in line with job and population growth, approaching 81,000 sales in 2011 and 88,900 sales in 2012, slightly above their ten-year average.
The sales to new listings ratio, an indicator of resale home price change, points to balanced market conditions and moderate price movements in 2011, the outlook added.
OTTAWA, February 8, 2011 — The seasonally adjusted annual rate1 of housing starts was 170,400 units in January, according to Canada Mortgage and Housing Corporation (CMHC). This is up from 169,000 units in December 2010. According to final figures, actual housing starts for 2010 totalled 189,930 units, with activity moderating towards demographic fundamentals by the final quarter of 2010.
“Housing starts moved slightly higher in January because of an increase in rural starts,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Single-detached and multiple starts showed a moderate decline.”
The seasonally adjusted annual rate of urban starts decreased by 1.7 per cent to 146,900 units in January. Urban multiple starts moderated by 1.5 per cent in January to 82,900 units, while single urban starts moved lower by 2.0 per cent to 64,000 units.
January’s seasonally adjusted annual rate of urban starts decreased by 19.0 per cent in the Prairie Region, by 7.9 per cent in British Columbia, and by 1.0 per cent in Québec. Urban starts increased by 13.3 per cent in Atlantic Canada and by 10.3 per cent in Ontario.
Rural starts2 were estimated at a seasonally adjusted annual rate of 23,500 units in January.
As Canada's national housing agency, CMHC draws on 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.
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