The Canada Mortgage and Housing Corporation (CMHC) released its January 2010 housing start data today that suggests that Canada is returning to a more healthy economic footing.
Image: Salvatore Vuono / FreeDigitalPhotos.net
In January 2010, the seasonally adjusted annual rate for new home construction was 186,300 units. This is slightly up from the December 2009 rate of 176,100 units. The revised figures for 2009 were also released, and the data shows that housing starts steadily increased over the year.
Chief Economist at the CMHC’s Market Analysis Centre Bob Dugan says, “Housing starts improved in both the singles and multiples segments in January.”
Many analysts point out that some of this increase still seems to be tied to the Olympics. The seasonally adjusted rate of urban starts in British Columbia lead the country, jumping by nearly 20%.
An economics strategist at TD Securities, Millan Mulraine, says, “However, with part of the uptick in starts likely to be coming as a result of temporary factors, namely the surge in Olympic-related housing in B.C., we believe that this report overstates the true strength of the recovery in residential construction and expect to see a modest pullback next month.”
Nevertheless, there is plenty of good news in other residential markets: urban starts rose by 7.3% in Quebec, 2.3% in the Atlantic provinces and 1.5% in Ontario. The Prairies, particularly Alberta, continue to see a decrease in activity due to the lingering overstock of housing.
Some analysts are also suggesting that the HST and expectations of higher interest rates in the latter half of the year are driving some of the starts. An economist for BMO Nesbitt Burns, Robert Kavcic. “New home sales should taper off in July as buyers are jumping the HST gun in B.C. and Ontario, and those same buyers are also likely pulling forward some purchases given well-ingrained expectations of rate hikes in the second half of the year.”
But Kavcic is also optimistic about the continued strength of the recovery, due to the low inventory levels across the country. “Given that supply still has some catching up to do,” he says, “housing starts should hold up around current levels through the remainder of 2010.”
Let’s hope that Kavcic is right. With prices continuing to rise in many markets due to low inventory levels, sustained strength in housing starts will help to ease the inflationary pressure on prices.
But if you do have a house in mind that you are thinking of buying, it might make sense to do it sooner rather than later, as the spectre of rising interest rates in the latter half of the year could make home buying increasingly less affordable.
Heleen Jacobsen
Broker of Record with InfoMarket Group GMAC Real Estate
www.infomarketgroup.com
