New home construction in Red Deer continues to exceed 2013 levels, with Canada Mortgage and Housing Corp. reporting that there were 50 housing starts in the city last month — up from 36 in July 2013.
Starts on single-detached homes numbered 36, with units in multi-family projects adding another 14. Last year, the tallies for July were 32 and four respectively.
Red Deer builders had combined for 521 total housing starts to the end of July in 2014 — with 222 of these in the single-family category and 299 in multi-family projects. A year ago, the tally was 450, including 232 single-detached and 218 of the multi-family variety.
Total housing starts among Alberta’s seven largest urban centres during the first seven months of this year are up nearly 10 per cent from the same point in 2013 — to 21,105 from 19,223. The pace of construction has quickened in Calgary, Lethbridge, Medicine Hat and Red Deer, but is down in Edmonton, Grande Prairie and the Regional Municipality of Wood Buffalo.
Nationally, some economists are warning that the surge in the number of new homes being built in Canada is unsustainable and could approach “worrying” levels if interest rates remain at the current level. That follows CMHC’s report on Monday that housing starts increased to a seasonally adjusted annual pace of 200,098 in July — a slight increase from 198,665 in June. Gains in urban starts were concentrated in Ontario and Atlantic Canada, with the Prairie provinces and Quebec recording declines and a modest decrease in British Columbia.
July’s results mark the fifth consecutive monthly increase in new housing construction.
According to analysis from TD Economics, builders are taking cues from the current housing market, which is riding high on lower interest rates and solid growth in resale prices.
“This level of activity is unsustainable over the near term, on account of an already moderate level of overbuilding as well as the likely gradual increase in interest rates,” says TD economist Jonathan Bendiner.
The Bank of Canada’s overnight rate has been set at one per cent since September 2010.
Bendiner forecasts that the pace of housing starts will work its way downward to the 175,000 to 180,000 unit range through 2015.
The results coincide with Statistics Canada’s report last week that a paltry 200 jobs were added to the economy last month, raising questions as to what’s really driving the demand for new housing.
Demand for housing is strong among the 25 to 35-year-old demographic, counters BMO senior economist Benjamin Reitzes.
Young people are increasingly moving to provinces that offer better prospects for employment, driving up demand for housing in a few key provinces, he adds.
However, if building continues at the current pace, it might be difficult to absorb all the units that are currently under construction, says Reitzes.
“We’re not quite at that worrying stage yet but it’s something to keep an eye on.”
With files from The Canadian Press.