Fears have persisted over the past year that Canada’s housing boom is over – but new numbers suggest this theory may be bust. Sales look to be stabilizing after declining steadily in the aftermath of CMHC’s mortgage rule changes made last summer, and new data released by the Teranet National National Bank Composite Index show housing prices continue their ascent.
The index measures the rate of change in Canadian single family home prices in 11 of Canada’s largest markets and reports two per cent growth year-over-year and 1.1 per cent month-over-month nationwide. The data shows Albertan markets remain in hot demand, with 5.84 per cent gains year-over-year in Calgary and a 4.01 per cent increase in Edmonton. Quebec City led the nation in price growth at 6.52 per cent year-over-year, while Toronto remains stable with an increase of 3.87.
British Columbian markets continue to slow from once historical highs: Vancouver prices are down 3.24 per cent from 2012, and Victoria sales have decreased 4.08 per cent.
Stabilizing Summer Markets
Higher prices in hotter weather is nothing new – these increases mark a 15-year trend in rising housing prices during the summer months. However, the amortization-limiting changes introduced last July had introduced a lot of uncertainty to the market. As sales numbers slid, fears arose that prices – and homeowner equity – would follow suit.
There was also concern that a smaller number of qualified and interested buyers would lead to slowdowns in new housing, prompting developers to put projects on hold for fear of flooding supply. However, housing starts seem to be bucking the trend of negativity this month, with the latest CMHC numbers reporting a national increase to 200,178 units, up from 175,922 in April.
Urban demand leads the ongoing growth, with urban starts increasing 14.6 per cent from April, and multiple starts (condos), jumping 22.2 per cent.
New Employment Abounds
Another May surprise – a boom in jobs, with 95,000 created last month, driving Canada’s unemployment rate down to 7.1 per cent. It’s a great sign that the economy is on track to reaching capacity – and with 43,000 of these jobs created in the construction sector, it contradicts previous dire reports that widespread job loss would be the result of start slowdowns.
A few weeks ago, we covered a report released by CAAMP titled Changes in the Canadian Mortgage Market, which anticipated that starts production would drop 25 – 30 per cent by 2015 as a result of declining sales, and would eventually lead to 150,000 job losses in related industries.
While we can’t predict whether construction will remain as powerful an economic engine in the long term, the industry appears set for short term growth, as Statistics Canada reports that $7-billion in building permits were issued in Canadian cities in April. Looks like the cranes crowding urban skylines won’t be vanishing any time soon.