Housing starts rise in Q1

Housing starts in Red Deer through the first three months of 2013 are 72 per cent higher than for the same period last year, although the pace of work slipped in March. Canada Mortgage and Housing Corp. reported on Tuesday that work began on 236 homes in the city from January to March, as compared with 137 during the first quarter of 2012.

Housing starts in Red Deer through the first three months of 2013 are 72 per cent higher than for the same period last year, although the pace of work slipped in March.

Canada Mortgage and Housing Corp. reported on Tuesday that work began on 236 homes in the city from January to March, as compared with 137 during the first quarter of 2012.

This year’s tally included 71 single-detached houses and 165 units in multi-family projects, as compared with the 2012 breakdown of 49 single-family dwellings and 88 multi-family units.

But last month there were only 52 housing starts in the city: 31 single-family and 21 multi-family.

That marked a 51 per cent decline from March 2012, when there were 107 housing starts, consisting of 25 single-family and 82 multi-family homes.

Elsewhere in Central Alberta, there were 39 housing starts in Sylvan Lake to start the year, down 31 per cent from 51 in the first quarter of 2012.

Lacombe’s three-month tally slipped 32 per cent, to 15 in 2013 as compared with 22 in 2012.

Year-over-year housing starts for March were down in four of Alberta’s seven major urban centres.

Medicine Hat experienced a 47 per cent slide, the Regional Municipality of Wood Buffalo was down 46 per cent and the Calgary metropolitan area dropped 17 per cent.

Conversely, building in Lethbridge jumped by 73 per cent, Grande Prairie was up 41 per cent and the Edmonton metropolitan area climbed 14 per cent.

Nationally, CMHC said the pace of housing starts crept up slightly from February but were down 13.6 per cent from a year ago.

Meanwhile, Statistics Canada released a report on building permits that showed future building intentions for residential construction fell 7.2 per cent in February.

Both numbers suggest that the housing market will be a drag on growth during the quarter and likely in the near term, as starts and sales come off higher levels of previous years.

But analysts added that the recent slow descent from very high altitudes in a sector that some calculate is overpriced by as much as 25 per cent and overbuilt — especially in Vancouver and Toronto — is actually what the doctor ordered and may hold off a punitive collapse.

“The slowdown suggests we are not crashing, people are not panicking, especially condo builders,” said Benjamin Tal, a senior economist with CIBC World Markets.

“All the indicators we are seeing as of today, in the resale market and in the housing start market, suggest this is a market that is slowing softly.”

Canada’s housing market, which had been among the world’s hottest following the recession, began to slow at about this time last year and braked sharply after Finance Minister Jim Flaherty tightened mortgage rules in July. The policy move, which made it more difficult for first-time buyers to enter the market, was widely praised at the time as necessary to avoid a U.S.-light housing crash that would be crippling to the economy.

Recently, Flaherty has upbraided lenders from cutting mortgage rates too far and undercutting his policy objectives, succeeding in having both the Bank of Montreal and the Manulife reverse mortgage rate cuts.

Arlene Kish of IHS Global Insight said she expected residential construction to remain subdued for the rest of the year, but added that it has become “increasingly unlikely there will be any kind of precipitous collapse in new home building activity.”

A major ballast for the market is that despite Flaherty’s recent efforts, mortgage rates remain at historic lows, and affordability — the measure of household disposable income in relation to home ownership costs — remains near historic levels.

Tal said the cooling, if it continues for a year so, will prepare the market for the eventual squeeze when interest rates start rising, likely in 2014.

“We’ve never seen a crash without a trigger. In 1990-91, the trigger was a huge increase in interest rates. In the U.S., the trigger was an increase in interest rates and the sub-prime shock,” he explained.

“So any slowing we are doing now without those triggers is a bonus because it means we will be more ready to absorb interest rates rising.”

The March start numbers show the downturn was all in urban construction, which dipped 2.7 per cent. Single-unit construction fell 6.6 per cent and multiples by 0.1 per cent. By contrast, rural starts had their best month in three years, increasing 24 per cent.

Regionally, urban starts decreased 15.7 per cent in Ontario on a seasonally adjusted annual rate and were down 13.5 per cent in Quebec. However, urban starts jumped 27.1 per cent in Atlantic Canada, were 13.8 per cent higher on the Prairies and 13.1 per cent higher in British Columbia.

With files from The Canadian Press.

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