Housing starts rise in May

BY ADVOCATE STAFF Construction starts on single-detached homes in Red Deer slipped in May, as compared with the same month in 2013.


Construction starts on single-detached homes in Red Deer slipped in May, as compared with the same month in 2013.

But the decrease was more than offset by increased activity in the multi-family category.

Canada Mortgage and Housing Corp. reported on Monday that work commenced on 69 homes in the city during the past month, up from 66 starts in May 2013.

Single-detached projects accounted for 48 of last month’s tally, down from 53; while multi-family units numbered 21, up from 13.

During the first five months of 2014, local builders have combined for 419 residential construction starts — including 164 single-detached homes and 255 multi-family units.

The January-to-May total last year was 364, made up of 164 singles and 200 multi-family homes.

Among Alberta’s seven largest urban centres, Red Deer was the only community to post a year-over-year increase in May.

Housing starts in the Calgary and Edmonton metropolitan areas were down, as was the case in Grande Prairie, Lethbridge, Medicine Hat and the Regional Municipality of Wood Buffalo.

However, on a year-to-date basis to the end of May, Calgary and Medicine Hat — like Red Deer — are both up from 2013. Edmonton, Grande Prairie Lethbridge and Wood Buffalo were lower.

On a national basis, CMHC reported a 0.8 per cent gain in May.

However, economists say the housing market can’t sustain such a pace for much longer, given that by most indicators — from prices, to affordability, to home ownership rates to household debt — the sector appears to be at the top of its cycle.

“There are still many signs that the Canadian housing market may be moderately overbuilt. The number of condos for sale in the existing home market has increased considerably faster than demand in (many cities).

Meanwhile, the number of new homes under construction is at an all-time high,” said TD Bank economist Diana Petramala.

The biggest gains in May came in urban single-unit starts, which rose 5.4 per cent, while multiples dipped 0.8 per cent and rural starts fell by 3.8 per cent.

There was also a significant regional disparity in the data, with a huge leap in the Atlantic provinces (82.3 per cent), and more modest increases in Quebec and British Columbia.

Tempering the gains was a 15.7 per cent pullback in the Prairies and a mostly flat reading in Ontario.

The overall increase helped elevate the six-month moving average for the seasonally adjusted annual pace to 184,438 starts, as compared with 183,872 in April.

For the past two months, however, starts have averaged almost 198,000, which represents a 13 per cent increase from the first three months of the year and well about what is considered as the underlying rate of household formation in the country.

While the market has slowed somewhat from the torrid pace it set a few years back, most analysts believe there is more retrenching ahead as the economy recovers and interest rates start heading higher.

Still, the last month or so has seen mortgage rates declining rather than rising, as banks seek to attract a bigger share of what is perceived to be a shrinking pool of buyers.

Both Scotiabank and the Bank of Montreal recently made news by dropping their five-year fixed rate offerings below three per cent.

In past years, the federal government had expressed concern at such low borrowing costs, even intervening in one celebrated occasion, but Finance Minister Joe Oliver has signalled that Ottawa does not intend to weigh in.

With files from The Canadian Press.