Friday, December 08, 2006

Housing starts edge higher in November (And htere is still strenght in the Vancouver Market)

Hi All,

This is some tangible evidence of what I have been seeing over the last few weeks. It has slowed because of the holidays, but I forsee a busy New Year.

Looking forward to reading your thoughts!


Globe and Mail Update

The pace of new-home construction edged higher in November, led by strength in condos and apartments, but the overall market is still expected to pull back next year as the economy cools.

Housing starts climbed less than 1 per cent to 225,000 units from 223,200 units in October on a seasonally adjusted basis, the Canada Mortgage and Housing Corporation said Friday. Economists were expecting a rise of 220,000.

Rishi Sondhi, an economist with Royal Bank of Canada, said the report indicates that new home activity "remains decent."

For the second straight month, the gains were driven by the multiunit starts, a volatile segment that gets knocked about by the start of construction on large-scale apartment buildings, and also includes semi-detached homes, townhouses and condos. Urban multifamily unit starts jumped 5.7 per cent to 105,600 units, after surging 23-per-cent in October.

The gains in the multiunit category offset declines in the construction of detached single-family homes, the bellwether component of the new homes report. Urban single-family housing starts, the bellwether component of the new homes report, dipped 4.2 per cent to 87,900 units in November.

David Tulk, an economist at Toronto-Dominion Bank, said multiple-unit starts were bolstered by increasingly scarce land in urban centres like Vancouver and Toronto, as well as declining affordability for detached homes in cities like Calgary.

He expects growth in multiple unit projects will remain robust as Canada's cities" continue to attract new immigrants, while "single unit starts will likely feel the brunt of the cooling housing market."

November's CHMC housing data contained huge regional divides, with activity in the Prairie and Atlantic regions bustling while the rest of Canada declined.

Urban starts dropped 11.7 per cent in Quebec, 7.9 per cent in British Columbia and 3.8 per cent in Ontario. Gains in new home construction were seen in the Atlantic and Prairie regions, with urban starts rising 21.4 per cent and 26 per cent, respectively.

To date, Canada's housing market has defied expectations and avoided the sharp downturn unfolding in the U.S. Canadian building permits surged to their second-highest level on record in October, according to a report released earlier this week, making a mockery of consensus forecasts for a drop.

Most economists expect that strength will wane next year.

”With a slight dip in both economic and employment growth forecast for the coming year, housing starts in both the singles and multiples segments are expected to moderate," sad CHMC economist Bob Dugan.

Jacqui Douglas, an economic strategist with TD Securities, also agreed that an easing is in the cards. ”We expect to see the Canadian housing market make a gradual downward shift, as the economy slows and higher interest rates have an effect.”

TD's Mr. Tulk forecast housing starts will remain solid at 205,000 next year and 195,000 in 2008, on the heels of this year's projected tally of 228,000.

New home construction will be "buoyed by reasonably low inventories of new and existing dwellings" as well as strong economic fundamentals such as low unemployment, higher disposable income and reasonable levels of affordability.

Mr. Tulk pointed to a new generation of home buyers - the echo generation - who will boost sales. "This cohort has been moving into the 25 plus age category, providing a large pool of first time buyers, which when combined with continued immigration, will provide further support to this mature stage in the housing cycle."

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