Potash slowdown expected to hit new home starts

Housing starts in Saskatchewan are expected to decline slightly from 8,290 in 2013 to 7,700 in 2014 and 7,500 in 2015, reflecting the slowdown in the potash industry, according to the Canada Mortgage and Housing Corp. (CHMC) market outlook released Thursday.

“In Saskatchewan, an improving global economic outlook is expected to help increase its exports, thus generating more economic growth,’’ CMHC said. “However, economic activity in Saskatchewan will be held back by lower potash prices, which will impact production and investment in this sector.’’

Employment growth is projected at 2.1 per cent in 2014 and 1.8 per cent in 2015, while unemployment is forecast to be 4.2 per cent this year and 4.3 per cent next year.

Net migration will continue to support housing demand, with 12,700 additional people projected to move to Saskatchewan in 2014 and another 10,800 in 2015.

After posting 4,184 units in 2013, single-detached starts in Saskatchewan are forecast to edge lower to 3,900 units in 2014 and to 3,800 units in 2015. Rising supply and slower net migration will moderate starts, the report said.

After posting 4,106 units in 2013, multi-family starts in Saskatchewan are forecast to moderate further to 3,800 units in 2014 and 3,700 units in 2015.

Rising inventory and a significantly higher number of units under construction at the end of 2013 will motivate some builders to either delay or slow the pace of initiating new projects in 2014 and 2015.

Regina is expected to see slightly fewer housing starts at 2,800 in 2014 and 2,735 in 2015, compared with 3,122 in 2013, while Saskatoon is projected to see a similar slowdown to 2,900 units in 2014 and 2,850 in 2015 after posting 2,980 starts in 2013.

Nationally, builders will likely reduce housing starts in 2014 and 2015 as they adjust to rising interest rates and a slowdown in demand from first-time buyers.

“While housing demand will be supported by an improvement in fundamentals, total housing starts will remain more or less stable over the forecast horizon,” CMHC said.

“With a relatively high number of units under construction in some local markets, builders are expected to adjust the pace of new activity in order to manage their inventory levels.”

CMHC estimates there will be about 187,300 housing starts in 2014, relatively unchanged from 187,923 units in 2013.

In 2015, CMHC forecasts about 184,900 units.

CMHC said housing starts will moderate in seven out of 10 provinces this year with Alberta, British Columbia and Quebec expected to post gains.

Housing starts in 2015 are expected to post a modest rebound in Manitoba and in Quebec, with British Columbia showing no change. The other provinces are forecast to see housing starts moderate.