Housing starts near 10-year high
CMHC REPORT
• Canada Mortgage and Housing Corp. announced Monday that housing starts reached their highest level since September, 2007, a development the Crown corporation said was a response to market demands.
Based on a six- month rolling average, CMHC said there were 211,342 new construction starts in March on an annualized basis, up from 205,521 a month earlier. Using the stand- alone number for March, starts were 253,720 on a seasonally adjusted annualized basis with urban starts jumping 20.2 per cent from February.
“Stronger residential construction at the national level is reflected by a rising trend in single- detached and multi- unit starts in Ontario and continued growth of new rental apartments in Québec,” said Bob Dugan, chief economist with CMHC.
In the Greater Toronto Area’s red- hot housing market, where average resale prices jumped 33 per cent in March from a year ago, CMHC said the trend line shows total starts were up among all housing types. Single detached home construction has been rising since the end of last summer.
“Demand for new housing is growing as supply in the rental and resale markets is short, reflected by low rental apartment vacancy rates and declining active listings,” said the Crown corporation, in its release.
CMHC has talked about Toronto’s housing demand spilling into neighbouring regions and said the effects continue to be felt in the market. Buyers are not only fleeing Toronto but Hamilton as well to seek affordable housing.
“Resale inventory is being squeezed and prices are soaring. This is prompting buyers to turn to the new housing market, where singles in land- abundant Niagara Falls remain a sought-after commodity,” said CMHC.
Nathan Janzen, senior economist with Royal Bank of Canada, noted that most of the surge last month was from urban multiples that i nclude highrise condo- miniums. ( A small number of condominium buildings breaking ground at t he same time can heavily influence the annualized number.)
“Looking through monthly volatility, it remains the case that strength has generally been weighted to areas where housing markets have been tighter,” said Janzen, pointing to Ontario and British Columbia. “An earlier slowdown in the national resale market later in 2016 — in part, perhaps, related to the implementation of new macro- prudential policy measures in the fall — appears to have proven short- lived with demand picking up once again in early 2017, particularly in hotter markets in and around Toronto but also recent gains in Quebec and Alberta where sales have started to perk up once again.”
Janzen expects stretched affordability conditions, modest increases in lending rates and potentially new regulatory measures, in particular in Ontario, will eventually slow home demand this year with spillovers to new building activity.
In t he s hort t erm, a bump up in supply should help overheated markets, economists say. “The supply response in Toronto is particularly welcome, given the white- hot pace of price growth and dearth of inventory on the market. The completion of these units should help take some steam out of Toronto’s home price growth, although this won’t happen overnight and is likely a story for next year and beyond,” said Michael Dolega, senior economist with Toronto-Dominion Bank.
Shaun Hildebrand, senior vice- president of Urbanation, which tracks the GTA highrise sector, said condo sales numbers reached a record in 2016 and that’s been reflected now as buildings begin construction. Longterm, he said the Toronto condominium market has seen a decrease of projects in the pipeline.
“New project sales openings haven’t been growing for three years and that’s putting a lot of pressure on i nventories,” said Hildebrand.