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December 8, 2008 at 10:19 PM EST
The condo building boom has come to a crashing halt.
Overall housing starts tumbled 19 per cent in November, the slowest pace of residential construction activity since late 2001.
But the decline in the vital condominium sector, which accounts for 50 to 60 per cent of housing construction in Vancouver and roughly 50 per cent of new-home building activity in Toronto, was down an even steeper 29 per cent month over month.
Bank of Montreal economist Robert Kavcic said the report marked the second consecutive months of declines in the condo sector, with the pace of decline accelerating in November.
“The demand is starting to wane, with tighter credit conditions and more risk-aversion amongst buyers,†Mr. Kavcic said in an interview.
The housing starts fall was far steeper than had been expected, with the biggest drop in condominiums, according to Toronto-Dominion Bank economist Charmaine Buskas.
The slowdown in residential housing activity is nowhere near as dire as the slump in the United States, Ms. Buskas said, but the activity “coincides with our expectation that the Canadian housing market is unwinding.â€
Canada Mortgage and Housing Corp. reported the seasonally adjusted annual rate of housing starts was 172,000 units in November, down almost 19 per cent from 211,000 units in October.
Ms. Buskas added that the decline in residential construction activity in Canada “does have implications, not only for the number of construction workers … but also for all the other ancillary things that come off housing.â€
For example, plans to build 1,160 condominium units in a mixed residential-commercial development in Surrey, B.C., were quietly shelved last week – a decision that will eventually result in fewer construction jobs, 1,160 fewer fridges sold, 1,160 fewer carpets laid and 1,160 fewer kitchen counters installed.
“When you shelve a project of that magnitude, it's like tossing a stone into a still pool – the ripple effect is immediate and it's far-reaching,†said Peter Simpson, chief executive officer of the Greater Vancouver Home Builders' Association.
The cancellation of the building proposal means that six high-rise towers at the Semiahmoo shopping centre will find it tougher to get included in future housing starts numbers – a troubling sign for the industry and the broader economy.
Housing starts reflect the actual ground-breaking on new projects, after the units have been presold and the building permits have been obtained. But, because of tighter credit and weakening demand, fewer projects are making it to this stage.
In Surrey, Bosa Development had initially planned a large-scale development around the existing shopping centre on the site, but, in the end, decided not to proceed “because the uncertainty surrounding redevelopment made it very difficult for us to operate the existing shopping centre,†Richard Weir, vice-president of real estate acquisition at Surrey-based Bosa, said in an interview.
Mr. Simpson said other projects that were closer to putting shovels in the ground have also been put on hold as developers wait to see what happens with consumer demand for housing. The postponement or cancellation of current or future projects has created uncertainty in the residential construction sector, which accounts for 8.5 per cent of the provincial economic output in B.C, he added.
The CMHC's November housing starts statistics reflect the “new reality†in the home-building market, CMHC's chief economist Bob Dugan said in releasing the report.
The slowdown will not be immediately evident to Canadians in major urban centres, where the skylines are dotted with tower cranes and construction workers completing previously-commissioned projects, said Stephen Dupuis, chief executive officer of Toronto's Building Industry & Land Development Association.
“It's purely a presale market. When you get the sale, you go and get your building permit, and then you dig the hole.â€
There are enough projects in the works in Toronto to keep the industry busy through 2009, Mr. Dupuis said. If sales drop off significantly, there will be considerably less construction activity in 2010, said Mr. Dupuis, who added that he had not heard of any major projects being cancelled in Toronto because of credit problems.
“So far, everybody is getting their financing,†Mr. Dupuis added.
“It takes longer, no question … but there is not a single project that I'm aware of that has actually had to come off the market [in Toronto].â€
“Instead, the expectation going forward is for an orderly correction in Canadian housing activity consistent with the business cycle.â€
Mr. Dugan said the number of housing starts in November was “consistent with our forecast, which calls for more moderate activity of 212,000 units this year, and 178,000 units next year.â€
Pent-up demand has been satisfied, particularly in the condominium sector, he said.
Over all, housing starts in urban areas moderated in all regions of the country, with British Columbia and Ontario particularly hard hit.
Urban starts in November declined to 17,900 units in B.C., from 27,900 in October. In Ontario, urban starts fell to 54,700 units from 78,900 in October.
Urban starts in Prairie centres moderated to 23,500 from 26,900 and, in Quebec, urban housing starts slipped to 41,100 from 41,300 in October.
“Note that at the beginning of the new millennium, Canada posted strong housing start levels given a pent-up demand that existed then,†Mr. Dugan said.
“Over the last few years, this excess demand gradually decreased, and our forecast for 2008 and 2009 reflects this new reality, with housing start more aligned with long-run demographic demand,†Mr. Dugan said.
December 8, 2008 at 10:19 PM EST
The condo building boom has come to a crashing halt.
Overall housing starts tumbled 19 per cent in November, the slowest pace of residential construction activity since late 2001.
But the decline in the vital condominium sector, which accounts for 50 to 60 per cent of housing construction in Vancouver and roughly 50 per cent of new-home building activity in Toronto, was down an even steeper 29 per cent month over month.
Bank of Montreal economist Robert Kavcic said the report marked the second consecutive months of declines in the condo sector, with the pace of decline accelerating in November.
“The demand is starting to wane, with tighter credit conditions and more risk-aversion amongst buyers,†Mr. Kavcic said in an interview.
The housing starts fall was far steeper than had been expected, with the biggest drop in condominiums, according to Toronto-Dominion Bank economist Charmaine Buskas.
The slowdown in residential housing activity is nowhere near as dire as the slump in the United States, Ms. Buskas said, but the activity “coincides with our expectation that the Canadian housing market is unwinding.â€
Canada Mortgage and Housing Corp. reported the seasonally adjusted annual rate of housing starts was 172,000 units in November, down almost 19 per cent from 211,000 units in October.
Ms. Buskas added that the decline in residential construction activity in Canada “does have implications, not only for the number of construction workers … but also for all the other ancillary things that come off housing.â€
For example, plans to build 1,160 condominium units in a mixed residential-commercial development in Surrey, B.C., were quietly shelved last week – a decision that will eventually result in fewer construction jobs, 1,160 fewer fridges sold, 1,160 fewer carpets laid and 1,160 fewer kitchen counters installed.
“When you shelve a project of that magnitude, it's like tossing a stone into a still pool – the ripple effect is immediate and it's far-reaching,†said Peter Simpson, chief executive officer of the Greater Vancouver Home Builders' Association.
The cancellation of the building proposal means that six high-rise towers at the Semiahmoo shopping centre will find it tougher to get included in future housing starts numbers – a troubling sign for the industry and the broader economy.
Housing starts reflect the actual ground-breaking on new projects, after the units have been presold and the building permits have been obtained. But, because of tighter credit and weakening demand, fewer projects are making it to this stage.
In Surrey, Bosa Development had initially planned a large-scale development around the existing shopping centre on the site, but, in the end, decided not to proceed “because the uncertainty surrounding redevelopment made it very difficult for us to operate the existing shopping centre,†Richard Weir, vice-president of real estate acquisition at Surrey-based Bosa, said in an interview.
Mr. Simpson said other projects that were closer to putting shovels in the ground have also been put on hold as developers wait to see what happens with consumer demand for housing. The postponement or cancellation of current or future projects has created uncertainty in the residential construction sector, which accounts for 8.5 per cent of the provincial economic output in B.C, he added.
The CMHC's November housing starts statistics reflect the “new reality†in the home-building market, CMHC's chief economist Bob Dugan said in releasing the report.
The slowdown will not be immediately evident to Canadians in major urban centres, where the skylines are dotted with tower cranes and construction workers completing previously-commissioned projects, said Stephen Dupuis, chief executive officer of Toronto's Building Industry & Land Development Association.
“It's purely a presale market. When you get the sale, you go and get your building permit, and then you dig the hole.â€
There are enough projects in the works in Toronto to keep the industry busy through 2009, Mr. Dupuis said. If sales drop off significantly, there will be considerably less construction activity in 2010, said Mr. Dupuis, who added that he had not heard of any major projects being cancelled in Toronto because of credit problems.
“So far, everybody is getting their financing,†Mr. Dupuis added.
“It takes longer, no question … but there is not a single project that I'm aware of that has actually had to come off the market [in Toronto].â€
“Instead, the expectation going forward is for an orderly correction in Canadian housing activity consistent with the business cycle.â€
Mr. Dugan said the number of housing starts in November was “consistent with our forecast, which calls for more moderate activity of 212,000 units this year, and 178,000 units next year.â€
Pent-up demand has been satisfied, particularly in the condominium sector, he said.
Over all, housing starts in urban areas moderated in all regions of the country, with British Columbia and Ontario particularly hard hit.
Urban starts in November declined to 17,900 units in B.C., from 27,900 in October. In Ontario, urban starts fell to 54,700 units from 78,900 in October.
Urban starts in Prairie centres moderated to 23,500 from 26,900 and, in Quebec, urban housing starts slipped to 41,100 from 41,300 in October.
“Note that at the beginning of the new millennium, Canada posted strong housing start levels given a pent-up demand that existed then,†Mr. Dugan said.
“Over the last few years, this excess demand gradually decreased, and our forecast for 2008 and 2009 reflects this new reality, with housing start more aligned with long-run demographic demand,†Mr. Dugan said.
