Red Deer’s residential construction sector stumbled slightly in 2011, according to figures released Tuesday by Canada Mortgage and Housing Corp.
The national housing agency reported that there were 585 housing starts in the city last year, down 5.1 per cent from the 585 starts in 2010. The tally was 497 in 2009 and 572 in 2008.
The decline last year was due to fewer single-detached homes being built, with the total in this category dropping 16.4 per cent to 295 from 353. In the case of units in multi-family projects, the number of starts improved by 12.1 per cent, to 260 from 232.
The overall decrease in local housing starts last year would seem to contradict the City of Red Deer’s building permit statistics, released Monday, which indicated that the value of residential construction projects approved in 2011 was up 8.1 per cent, to $73.8 million from $68.3 million.
But Regine Durand, a market analyst with CMHC, explained that not all building permits translate into construction starts that calendar year.
Durand said CMHC is expecting Red Deer’s housing market to improve significantly this year. In its last outlook, issued in November, CMHC was projecting 625 housing starts in the city this year: 340 single-detached and 285 multi-family. That number will probably move higher when CHMC’s next forecast comes out in February, she hinted.
The Central Alberta branch of the Canadian Home Builders Association is optimistic. Steve Bontje, marketing manager with Laebon Homes and past-president of the association, said on Monday that industry indicators are positive: unemployment has come down, interest rates are low, the oilpatch is humming, people are migrating into the region and the number of homes listed on the used market is declining.
Among Alberta’s seven largest urban centres, Grande Prairie enjoyed the greatest year-over-year improvement in housing starts, with a 37.5 per cent increase. The regional Municipality of Wood Buffalo was up slightly at 1.4 per cent, the Calgary census metropolitan area edged up 0.3 per cent, Lethbridge declined by 0.5 per cent, the Edmonton census metropolitan area slid 18.9 per cent and Medicine Hat tumbled 55.1 per cent.
Among communities with 10,000 or more people, Sylvan Lake posted a 37.6 per cent increase in housing starts last year, jumping to 139 from 101. Starts in Lacombe fell by 28.1 per cent, to 105 from 146.
During the final month of 2011, homebuilders in Red Deer began work on 40 projects, including 11 single-detached houses and 29 units in multi-family complexes.
That total was down 21.6 per cent from December 2010, when there were 51 starts, consisting of 12 in the single-detached category and 39 in multi-family buildings.
Across Canada, home construction rebounded in December, with condos in Toronto and the Atlantic region leading the way.
The increase beat economists expectations and again raised the issue of when Canada’s housing market would begin to cool to what analysts regard as a more sustainable, replacement level.
There’s a suspicion that at least some types of housing in some markets has been overbuilt as builders and consumers take advantage the low interest rates that have been available for several years.
“There is now a large overhang of completed, but unoccupied multi-units as low interest rate likely fuelled some overbuilding in the condo market, which puts some downside risk to future building in this sector,” said TD bank economist Diana Petramala,
Interest rates are not expected to increase in the coming year, but analysts noted that Canadian households are already at record high debt levels, and the growth of both jobs and income has stalled.
Some analysts, such as David Madani of Capital Economists, have suggested Canada’s home prices might fall as much as 25 per cent in the next few years, while the Bank of Canada has also forecast a correction, although much more mild.
December’s rebound, however, concluded another solid year in Canada.
For 2011 as a whole, the preliminary seasonally adjusted estimate is that 193,000 units were begun, with the last six month seeing an average pickup of 200,000 annualized.
Scotiabank’s Derek Holt said it was unclear whether housing would add to gross domestic product growth in the fourth quarter, given that it was even stronger — in terms of starts — during the third, when the economy expanded by 3.5 per cent.
“What we don’t know is how renovation spending performed during the quarter and some value-added administrative functions to round out the full perspective on how housing contributed to GDP growth in Q4,” Holt explained.
Canada Mortgage and Housing Corp. says urban starts rose in December by 52.9 per cent in Atlantic Canada, 35.3 per cent in Ontario and 9.0 per cent in Quebec. They fell 19.8 per cent in British Columbia and 11 per cent in the Prairies.
Starts of single homes in urban areas increased by 3.5 per cent, while urban starts of multiple dwellings — condos, apartments and retirement homes — rose by 14.5 per cent.
With files from The Canadian Press.