Condos bear brunt of slowdown
Total housing starts in the Calgary census metropolitan area fell by a staggering 76.5 per cent in February compared with a year ago, according to preliminary figures released Monday by Canada Mortgage and Housing Corp. — the lowest monthly level since January 1991.

It was also the lowest February level since 1987. And even lower than numbers posted in January.
CMHC said total housing starts last month were only 206 units, while in February 2008 they were 877 units.


After two months, total housing starts have reached 449 units, lower by 1,139 units compared with year-to-date production in 2008 — down 71.7 per cent from last year.
Market correction ‘in full swing’

Multi-family s t a r t s , whi c h i nclude s emidetached, row and apartment starts, were only 22 units in February compared with 589 units started in February 2008 — a fall of 96.3 per cent.

“Multi-fami ly starts are forecasted to be lower this year as compared to last year,” said Lai Sing Louie, senior market analyst in Calgary for the CMHC. “A lower level of demand and rising inventory levels has prompted developers to rapidly adjust new construction activity. It will likely take until 2010 before we see higher year-over year activity.”

Year-to-date February, there have been 61 multi-family starts, down 93.5 per cent from the same period in 2008.

Meanwhile, there were 184 singledetached starts in February, a drop of 36.1 per cent from the 288 units started in February 2008. This year’s two-month total of 388 single-detached starts is down by 40.4 per cent from the same period last year.

“Once the inventory of completed and unabsorbed units declines to manageable levels, we expect to see the housing market expand again in 2010,” added Louie.

Housing starts across Alberta’s seven largest centres totalled 574 units in February compared with 1,867 units a year earlier — a decline of 69.3 per cent.

The Calgary census metropolitan area includes the city, Airdrie, the Municipal District of Rocky View, Chestermere, Cochrane, Irricana, Beiseker and Crossfield.

Todd Hirsch, senior economist at ATB Financial in Calgary, said activity for Alberta home builders was at a fever pitch over the past few years.
“Now, however, builders are pausing to catch their breath and allow the market to correct,” said Hirsch.

“Alberta’s housing starts continue to reflect the softer economic conditions that started to settle on the province in early 2008. Given that building permits have also been lower, the softer statistics on housing starts are not surprising.”

Developers and home builders in the province may still be working off some inventory of new homes, many of which were planned and built over the past year when the market was more active, added Hirsch. As well, there is a large inventory of existing homes on the market in both Calgary and Edmonton.

“Buyers have plenty of selection. Those factors combined have left the housing market somewhat overbuilt. As a result, for now, builders in Alberta are pulling back,” he said.

At the national level, Canadian housing starts fell a worse-thanexpected 12.3 per cent to 134,600 annualized units in February, the sixth consecutive monthly decline and the slowest pace of residential construction activity in about eight years, said economist Robert Kavcic with BMO Capital Markets.

In a research commentary, he said that at 44,500 annualized units, single-family construction activity hit the lowest level since early 1996 while multi-unit starts at 63,300 fell to the lowest level since early 2002.

“The Canadian housing correction is in full swing with starts now well below the rate of household formation, offsetting the overbuilding of the past five years,” he said. “With sales activity showing little sign of life, housing starts should average a sluggish 150,000 units in 2009.”

Pascal Gauthier, an economist with TD Bank Financial Group, said improving home affordability, including a low interest rate environment and the recently added first-time buyer fiscal incentives, will slowly sow the seeds of recovery in home sales. The existing home market is likely to pick up first, sometime next year, with an ensuing stabilization in resale home prices, he said.


“The new home market should then follow in lock step a few quarters after the signals from the resale home market warrant a modest pickup in residential construction,” he said.