Foundations were poured for a more-than-expected 227,700 units (annualized rate) in January, up from 184,700 in December, according to figures released yesterday by the Canada Mortgage and Housing Corp.
Just about all of that increase was due to volatile segment of multi-unit construction (up 64 per cent) compared to a decrease in single-unit starts (such as detached homes) representing a 4.8 per cent dip.
“While this likely reflects an ongoing shift towards multiples in the face of growing land constraints in densely populated areas of the country, it is bound to make starts quite bumpy going forward,” said BMO Capital Markets Economist Robert Hogue in an economic note.
In Toronto, where there has been a record sale of condominiums, the increase in overall starts has been even more dramatic, up 95 per cent in January to a seasonally adjusted and annualized pace of 38,300, compared to 19,600 in December. While some of that had to do with bad weather, builders also had trouble shifting resources from low-rise to high-rise projects last year.
But with that structural shift out of the way, 2008 promises to be a vertigo-inducing year on construction sites.
“There is a significant backlog of high-rise condo sales in the Greater Toronto Area that should start construction in the coming months,” said Ontario Home Builders president Mark Basciano.
Toronto-area housing starts are expected to hit 41,600 this year compared to 33,293 in 2007, largely due to record condo sales in the last three years. Toronto has more ongoing condo projects than any other city in North America.
This will buck the national trend. The CMHC is forecasting that starts across Canada will actually decline overall in 2008.
“Housing starts are expected to decrease in 2008 mainly due to recent increases in house prices, which will push mortgage carrying costs higher for home buyers,” said Bob Dugan, chief economist at CMHC.
Still, the Canadian housing market is in much better shape than the beleaguered U.S. market.
“Despite some global financial instability with regards to the U.S. housing market, Canada continues to experience robust employment levels, ongoing income gains and low mortgage rates,” said Dugan.
Peter Hall, deputy chief economist at Export Development Canada, estimates that it will be at least mid-2009 before U.S. housing markets begin “a meaningful rebound.”
Hall estimates there are more than seven million surplus units on the market.
“There is no clear indication that the U.S. market has hit bottom,” he said in an economic note this week.