Tight Resale Market Fuels Surge in Home Construction

  • 11/10/16
  • |          Waterloo

WATERLOO REGION — The tight real estate market is helping to fuel a surge in construction of single-detached homes.

Builders started work on 159 singled-detached homes in Waterloo Region last month, up from 100 in the same month a year ago, the Canada Mortgage and Housing Corp. reported Tuesday.

It said single-detached starts are trending at the highest level in more than six years.

“Job and wage growth, in-migration and a very tight resale market have translated into strong demand for new homes,” Erica McLerie, a senior market analyst with the federal agency, said in a news release.

Through the first 10 months of the year, builders have poured foundations for 1,175 single-detached homes in the Kitchener-Cambridge-Waterloo census metropolitan area, up from 803 for the same period a year ago.

The total number of housing starts for the first 10 months of the year, including apartments, townhouses and semi-detached homes, came in at 3,063, up from 2,636 in the same period last year.

Last month’s housing starts totalled 262, up from 192 in October 2015.

The housing corporation said starts in the region were trending at a seasonally adjusted annual rate of 4,415 units in October, up from 4,206 in September.

Nationally, the pace of housing starts slowed in most regions of the country in October, with an especially big drop in British Columbia.

The housing corporation says the seasonally adjusted annual rate fell to 192,928 units in October, down from 219,363 units in September.

In B.C., the annual pace of urban starts fell nearly 45 per cent to 25,517 in October, compared with 46,294 in September.

BMO economist Robert Kavcic said the drop could be the first sign that home builders are responding to softening demand in the province.

Real estate sales in the region have been falling sharply in recent months. In Vancouver, home sales plunged 38.8 per cent in October compared with a year ago, according to the Real Estate Board of Greater Vancouver.

Builders may also be putting off new projects as they wait to see what impact new government policies will have on demand, said Robyn Adamache, the housing corporation’s principal market analyst for Vancouver.

In August, the B.C. government implemented a 15-per-cent tax on foreigners buying homes in Metro Vancouver, while the federal government moved last month to tighten rules for mortgage lenders and foreign buyers in an effort to stabilize hot housing markets such as Toronto and Vancouver.

While the drop in housing starts in British Columbia was particularly sharp, the pace slowed in most other regions of the country, as well, with Quebec, the Prairies and Atlantic Canada all seeing declines.

Ontario was an exception, with the annual pace of urban housing starts climbing 20 per cent to 81,360 last month, up from 67,798 previously.

TD economist Dina Ignjatovic said she expects starts to decline considerably in Ontario and B.C. next year, following strong growth through most of 2016.

“The new mortgage and tax regulations recently introduced by the federal government are expected to take some steam out of home sales, particularly in B.C. and Ontario which have accounted for the bulk of the gains so far this year,” Ignjatovic said in a note.

“This should filter through to homebuilding activity as well.”

Meanwhile, Statistics Canada reported Tuesday that Canadian municipalities issued $6.9 billion worth of building permits in September, down 7.0 per cent from August.

It said the decrease was due in large part to a drop in plans for construction for non-residential buildings.

The value of non-residential building permits fell 22.3 per cent to $2.2 billion in September as all three non-residential components — commercial, institutional and industrial — moved lower.

The value of permits in the residential sector gained 2.6 per cent to total $4.6 billion in September, boosted by multi-family dwellings.

Municipalities in the Kitchener-Cambridge-Waterloo census metropolitan area issued permits worth $99.4 million in September, down from $117.7 million in August. The local figures are seasonally adjusted.

With files from The Canadian Press

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