Housing starts fall in October with drops in all regions, CMHC says

The Canadian Press
Published Thursday, Nov. 8, 2012 3:26PM CST
Last Updated  Thursday, Nov. 8, 2012 3:32PM CST

OTTAWA — The pace of home building slowed in October to a softer reading  than economists expected in a report by the federal mortgage insurer, providing  yet more evidence of a cooling housing market.

Canada Mortgage and Housing Corp. said Thursday there were 17,507 actual  housing starts last month. That translates into a seasonally-adjusted annual  rate of 204,107 starts, down almost nine per cent from an annual rate of 223,995  recorded in September.

CMHC said there were drops in both single- and multiple-unit starts in urban  areas last month.

Declines were recorded in all regions, with Quebec reporting the biggest  drop at 16.9 per cent.

“The monthly decrease in total housing starts posted in October was mostly  due to a decrease in both single and multiple starts in urban centres in Quebec  and the Prairies,” Mathieu Laberge, deputy chief economist at CMHC, said in a  release.

“Multiple starts also declined in many urban centres in Ontario, more than  offsetting an increase in such starts in Toronto.”

Seasonally-adjusted urban starts decreased 1.5 per cent in British Columbia,  6.4 per cent in Ontario, 12.3 per cent in the Prairies, and 16.8 per cent in  Atlantic Canada.

The agency, which provides mortgage insurance to home buyers and market  intelligence to the real-estate industry, estimates rural starts came in at a  seasonally-adjusted annual rate of 21,973 units in October.

Earlier this week, the federal Crown corporation predicted 177,300 to  209,900 of housing units will be started next year — substantially less than  the forecast of 210,800 to 216,600 for 2012.

Bank of Canada governor Mark Carney said the slowdown is consistent with the  bank’s expectations.

“We view household formation around 190,000 annualized and the starts are a  little north of 200,000, so they’ve slowed from a very rapid pace to a pace  that’s still above household formation,” Carney said in Montreal.

“We’re expecting this decreased contribution from housing relative to GDP…  We’re starting to see some things that are consistent with that, so it’s  entirely consistent with expectations.”

Emanuella Enenajor of CIBC WM Economics noted that “despite low (interest)  rates and surprisingly resilient investor demand, housing construction looks to  be struggling to attain new heights in recent months.”

“Although the housing starts data tend to be volatile month-to-month, we  expect to see a trend in softening starts through 2013, as a slowdown in  secondary market activity weights on homebuilding.”

The CMHC data suggests housing starts — where trends tend to lag those in  the home resale market — are falling in line with home sales figures released  in the last few months, which points to a broader slowdown in Canada’s housing  market.

The latest figures from Canadian Real Estate Association found sales in  September fell 15.1 per cent from a year earlier, due in large part to a further  tightening of mortgage rules and a slowdown in Vancouver.

A real estate expert at Queen’s University called the drop in housing starts  in October “significant” and said it’s “clear evidence” that the housing market  is slowing down.

“(The numbers) provide sound evidence reinforcing the idea that housing  markets in most regions and cities are cooling off rapidly,” John Andrew,  director of the Queen’s real estate roundtable, said in a release.

“Housing starts are clearly responding to the decrease in new and existing  home sales that we’ve seen in most markets over the past few months, especially  for condos. I expect this trend to deepen over the remainder of 2012 and likely  into 2013.”

In a global outlook released last month, the International Monetary Fund  singled out housing and household debt, which currently sits at a near-record  163 per cent of income, as the key areas of concerns for Canada.

Those concerns have been voiced before, including by Bank of Canada governor  Mark Carney and Finance Minister Jim Flaherty, who has moved four times in as  many years to reduce mortgage lending.

Over-saturation, high prices, high debt levels and recent tightening of  mortgage rules are impacting the resale market, economists have noted,  particularly in the previously torrid markets of Toronto and  Vancouver.

Read more: http://winnipeg.ctvnews.ca/housing-starts-fall-in-october-with-drops-in-all-regions-cmhc-says-1.1030510#ixzz2Bk8mT3Po

Leave a Reply

Your email address will not be published. Required fields are marked *