Housing starts slip

The pace of residential construction in Red Deer was slower last month than in April 2010.

The pace of residential construction in Red Deer was slower last month than in April 2010. But local builders fared better than their counterparts in most other major cities in Alberta.

Canada Mortgage and Housing Corp. reported on Monday that there were 45 housing starts in Red Deer last month: 29 single-detached homes and 16 units in multi-family buildings.

That’s down two per cent from a year ago, when work began on 40 single-detached and six multi-family homes for a total of 46.

Total housing starts in Alberta’s seven largest urban centres last month dropped a combined 41 per cent from April 2010.

The Edmonton metropolitan area recorded the greatest slide, at 46 per cent, followed by Medicine Hat (42 per cent), the Calgary metropolitan area (39 per cent), Lethbridge (23 per cent) and the Regional Municipality of Wood Buffalo (19 per cent). Grande Prairie was the only major city to post a year-over-year gain in April housing starts, improving by 13 per cent.

During the first four months of 2011, housing starts in Red Deer have numbered 130, which is 49 per cent fewer than for the same period last year. By comparison, Medicine Hat’s year-to-date housing starts are 58 per cent lower this year than last, Edmonton is down 33 per cent, Calgary is off 32 per cent and the Regional Municipality of Wood Buffalo is five per cent lower. Residential starts in Lethbridge are up 42 per cent so far this year, while Grande Prairie is 13 per cent higher.

Nationally, CMHC reported that the seasonally adjusted annual rate of housing starts slipped three per cent from March. It attributed this to fewer starts on multi-family projects across the country, particularly in Ontario and Quebec, and reduced activity in rural areas.

The Canadian numbers were much weaker than economists had been expecting, as construction activity usually picks up in the spring.

“Overall, this is a weak report, considering that starts were in the 200-250K range before the recession,” Krishen Rangasamy, an economist at CIBC World Markets, said in a note.

“We expect housing starts to continue to soften (i.e. a 10 per cent or so drop in starts compared to last year) as home prices stagnate in light of forthcoming interest rate hikes and an anticipated slower second half of the year,” he said.

Douglas Porter, deputy chief economist at BMO Capital Markets, said he expected housing starts to pick up in April after seeing a surprising surge in March residential building permits.

Urban starts declined 9.4 per cent in Quebec and eight per cent in Ontario, while they increased by 5.3 per cent in the Prairies, 10.4 per cent in the Atlantic region and 23.5 in British Columbia.

The housing market has been cooling over the last several months following a post-recession surge in demand that led to bidding wars, higher prices and a pickup in construction of new buildings.

A drop in housing starts and sales of previously occupied homes had been widely anticipated. However, the expected drop in home sales across Canada this year will be less than previously forecast because of stronger sales of mega-homes in British Columbia in the first quarter, the Canadian Real Estate Association said Monday.

CREA now expects that unit sales for 2011 will dip 1.3 per cent, less than the 1.6 per cent decline it forecast in February.

National sales activity of homes sold on CREA’s Multiple Listing Services should rebound by 2.6 per cent in 2012, it added. That’s in line with the previous forecast and the 10-year average for annual activity.

The national average home price is forecast to rise four per cent in 2011 to $352,500 and by 0.9 per cent to $355,800 in 2012.

CREA expects home sales activity to regain traction after dipping in the second quarter as economic recovery and hiring continues.

Although interest rates are expected to increase later in the year, they will still be supportive of housing sales, as will continuing job growth, he added.

CREA has said that this year’s real estate market is poised to reflect a slightly less distorted version of last year, when sales spiked in the early months of the year before dropping to a trough in the summer as a string of regulatory changes impacted the market.

With files from The Canadian Press.

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