January 2006 Housing Starts

[Mike in TO]

If anyone is interested Janaury 2006 was a very strong month for housing activity in the Toronto CMA. Unseasonably warm weather contributed the the extra activity.

Multi-family homes increased in market share as compared to last January (mainly due to land supply shortages and declining affordability in the single family home market).

Condominium apartment construction had the greatest annual increase with foundations laid for 730 units last month vs 246 in January 2005 and townhomes increased by 34%.

Overall in Jan 2006 there were:
2,033 Single Family Homes Started (1,856 Jan 2005)
2,376 Multi-Family Homes Started (1,401 Jan 2005)
4,409 Total Homes Started (3,257 Jan 2005)

With condo sales hitting an all time record in 2005 it is expected that housing starts for condos will hit a new all time record high in 2006.

 

[EnviroTO]

With November's numbers I thought we were hitting the peak but January's numbers paint a different picture.

 

[Crazy Canuck07]

Wow, 730 compared to 246, that's a huge jump.

 

[TdotTrickyRicky]

Interesting. Although it pretty well follows the formula. Housing starts and sales accelerate into a period of deccelerating house price increases until the peak. The condo and townhouse phenomenon taking more and more of the housing market share is however new and a trend that is likely here to stay because of lack of land availability and an erosion of housing affordability. A couple of banks came out with a report that housing affordability increased slightly last year. Rubbish in terms of single-family houses in my opinion because it is contrary to what we are seeing on the ground.

 

[Observer Walt]

Good news certainly, although you can't read too much into one month's figures, particularly for condos. A start on one building will skew the numbers.

In the resale real estate market, the Toronto Real Estate Board reported 4,587 sales in January, the second-best January ever, and above 4,153 for January last year. There is no sign of the "bubble" that doomsayers were predicting for most of the past 2 - 3 years.

 

[DarnDirtyApe]

A little off topic, but I thought I should address this:

There is no sign of the "bubble"

The number of sales really doesn't tells us much about whether prices are too high. It just means that lots of people are buying and selling homes, and I would infer that at least some proportion of this is speculation due to the assumption that past price increases will continue.

If you want to see if prices are unsustainable, you need to look at things like median price/household income ratio and future interest rates. Incomes have not matched the increases in housing prices, so it has really been low interest rates that fuelled the increases of the past few years. Long-term mortgage rates are still very low, but I think you will find that a few percentage points increase would have an adverse effect on housing prices since many buyers will be unable to afford the increased financing costs.

 

[EnviroTO]

Oops. I just realized that those are construction start numbers you quoted. Any sales numbers for December or January? November showed a decline in sales from the previous year and I am wondering what happened in the following months. I am not surprised the construction numbers are up because early in 2005 the sales were up but it looked like sales might be peaking in October and November.

 

[Observer Walt]

Darn Dirty: You are right of course that affordability can change as economic conditions change. The Royal Bank has tracked affordability for many years. Their most recent survey results can be found at www.rbc.com/newsroom/20051222affordability.html

In a nutshell, affordability remains good at present.

Interest rates have been gradually climbing for the past year, but with the excessively strong Canadian dollar, this may not continue.

Overall, conditions for the housing market remain good.

 

[Sir Novelty Fashion]

Mike: Thanks, that's really interesting.

What organisation is the source for those figures?

 

[Mike in TO]

CMHC