Canada may be suffering from a mild recession, but the red-hot real estate market continues to shine. Canada Mortgage and Housing Corporation’s (CMHC) latest housing starts report has found new construction has outpaced predictions, and has actually doubled in Ontario month over month, as Toronto condo demand fuels new developments.
CMHC August housing starts were up an impressive 12 per cent. At a seasonally adjusted pace, 216,924 units were started, from the revised 193,253 in July – the highest level of increase, dating back almost two years to September 2012. It also beats economists median forecast of 190,500 units in a Bloomberg News survey.
Click here to view the best mortgage rates in your region>
Urban Demand Won’t Back Down
The numbers speak for themselves. Housing starts in Ontario’s city centres nearly doubled, up an impressive 89 per cent to 92,422 units in August. The majority of growth was seen in condos – multi-unit starts increased to 142,927 nationally, marking the highest level dating back to April 2012. That’s compared to a more modest 1.4 per cent increase in single family detached homes, as space is increasingly hard to come by.
What’s behind this surge in new construction? In a statement released by CMHC, Bob Dugan, the agency’s chief economist, said housing starts are “supported by strong condominium activity in Toronto”. This is in line with CMHC’s forecast of demand shifting “from new higher-priced single-detached homes towards lower-priced alternatives.”
A Boost From Cheap Borrowing
The housing start numbers for August is good news for builders. It helps reverse a trend of lower numbers in July. The low interest rate environment and continued strong demand for urban living are what’s behind the gain. With lenders lowering prime rate twice this year, homebuyers are taking advantage of the lower cost of financing.
Slowing Starts in the West
Meanwhile, the effects of oil’s slowdown in once energy-rich Alberta are becoming apparent. It’s not a big surprise, as 35,000 jobs have already been lost in the oil fields. It’s a sharp contrast to last year’s conditions, when Alberta suffered a labour shortage and real estate demand was high. It remains to be seen how the market will react to a prolonged downturn in oil.
Sean Cooper is a Financial Journalist and Personal Finance Expert, living in Toronto, Ontario. He offers Unbiased Fee-Only Financial Advice, specializing in pensions and the decumulation of financial wealth in retirement. Follow him on Twitter @SeanCooperWrite and read his blogs and request his writing services on his personal website: http://www.seancooperwriter.com/