CMHC sounds alarm against over-building

New home construction continued to rise in November, prompting Canada Mortgage and Housing Corp. to issue a reminder to builders to keep an eye on inventory.

The Crown corporation said that, on a seasonally adjusted annualized basis, there were 211,916 starts, up from 197,712 units in October.

The number for urban starts rose by 7.7 per cent in November to 195,121 units while multi-unit urban starts jumped 13.2 per cent to 137,898 units from a month earlier.

“Rising single-home prices continue to support demand for multiples, which are poised to reach the largest proportion of total urban starts since 1971. However, inventory management is necessary to make sure that these units do not remain unsold upon completion,” Bob Dugan, chief economist for CMHC, said in a release.

CMHC uses a six-month trend measure to smooth out its results but that too is rising and reached 208,401 in November, up from 206,125 in October. It was the seventh straight month that saw a jump in the six-month average.

“The trend in housing starts increased for a seventh consecutive month due to the multi-unit segment,” Dugan said.

Diana Petramala, an economist with Toronto-Dominion Bank, noted that while CMHC is correct in its warning to Ontario builders, the situation is different in red hot British Columbia.

“British Columbia has seen some decent gains in new home construction in 2015, but housing starts are still 40 per cent below the peaks reached in 2007 — despite record existing home activity in the province,” she said in a note.

She added that deteriorating economic conditions are more of a concern in the Prairies because of high unemployment. Petramala noted Alberta’s unemployment rate reached seven per cent in November, close to the 7.3 per cent peak during the last recession.

“Overall, we continue to expect a two-speed housing market to persist through much of 2016, but housing activity in the currently hottest markets is expected to return to more normal sustainable activity by the end of 2016,” said the economist.