Housing starts lagging

Jim McLeod July 20, 2011

Housing starts were down sharply in most major Alberta cities in the first half of 2011, including Red Deer where residential construction plummeted 36 per cent over last year.

Canada Mortgage and Housing Corp. released its six-month housing start tallies this week and it’s clear the housing market has not fully recovered from the downturn. Among the 27 municipalities surveyed, housing starts are down 18.6 per cent overall — 10,042, compared with 12,339 in the first six months of 2010.

Single-family housing took the biggest hit: the 6,117 starts this year are down 27 per cent from a year earlier when 8,459 were recorded. Multi-family housing starts actually increased slightly — 3,925, up from 3,880.

Red Deer saw sharp drops in both single-family and multi-family housing starts. Single-family starts were down 27 per cent to 158 from 217. Multi-family starts were down 50 per cent to 70 from 140.

Across Central Alberta, the City of Lacombe has also seen a big drop in residential building — down nearly 48 per cent from a year ago. Much of that can be attributed to a 64 per cent drop in single-family housing starts — to 28 from 78.

Meanwhile, Sylvan Lake’s housing construction market remains buoyant with total starts up 12.1 per cent. Seventy-two out of the 74 housing starts were single-family detached homes, which were up 9.1 per cent over 2010 when 66 were built.

Other Central Alberta urban municipalities are not included in the survey, which focuses on centres with a population of 10,000 or more.

In rural municipalities — where residential starts are typically much lower — building activity varies widely.

Lacombe County has seen a 60 per cent jump in starts, to 24 from 15. At the other end of the scale, Mountain View County saw a 20.8 per cent drop — 19 starts compared with 24.

Clearwater County held steady with 12 new starts, the same as the year before. Red Deer County was down 10.3 per cent, to 26 starts from 29.

All of the rural municipality starts were for single-family homes.

Régine Durand, CHMC market analyst, said lagging housing starts are evidence that the market is adapting to economic conditions.

In 2010, the Alberta house building market bounced back with just over 27,000 starts, a 23 per cent jump from 2009. That enthusiasm has left the market with a surplus of newly built, unsold homes.

“I think the market is just adapting to that supply,” said Durand from Calgary.

In Red Deer the surplus is being keenly felt in the multi-family housing market where 59 unsold properties were up for grabs in June, compared with 19 the same month last year. The single-family detached situation is better. Thirty-three were available last month, down from 56 a year ago.

The single-family detached market has also been cooling off as a result of the growing price gap between new homes and previously owned proeprties. That price differential climbed to $111,000 this year, up $30,000 from a year earlier, which is discouraging buyers.

Also whittling away at housing demand is a weak job market, which means there are fewer house buyers in position to take the plunge.

However, there are some encouraging signs. Statistics Canada says 1,300 new jobs have been created in Red Deer this year.

“But it’s not enough,” Durand said. “It’s not enough to really raise housing demand for this year.”

Similar factors are in play across the province.

“Essentially all the markets across Alberta are slowing down and we are forecasting slower construction across the province this year compared to last year. Really, that’s the inventory factor.”

“Builders are waiting. They are focusing more on completing those units under construction. But by next year we are forecasting growth throughout the province.”

As inventory is cleared out, housing starts are expected to rebound and CMHC is predicting 13 per cent growth for Red Deer. Slower price growth in houses will also help.

Economic forecasts are also positive with more investment and oil exports predicted.

Source: Red Deer Advocate

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