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The housing boom may be over, but there's no bust in sight


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The housing boom may be over, but there's no bust in sight

Jay Bryan, Canwest News Service Published: Tuesday, August 12, 2008

 

With housing demand weaker, price gains have already slowed sharply.Reuters fileWith housing demand weaker, price gains have already slowed sharply.

 

Ever since last year, forecasters have been predicting that Canada's hot housing market was about to slow to a much more sedate pace. Well, it's happened.

 

Except that sedate is hardly the word for the 14% plunge in construction activity that turned up Monday in the housing starts data for July. To many, this sharp drop will be downright alarming, raising fears that the catastrophic housing meltdown in the U.S. has now spread across the border.

 

They can relax. Or at least most of them can.

 

Maybe a little nervousness is appropriate for those who bought near the market's peak in one of Canada's very high-flying centres of real-estate inflation -- places like Calgary, Edmonton, Vancouver and Victoria.

 

In these towns, warns BMO Capital Markets economist Sal Guatieri, soaring home prices so greatly outstripped income growth that it wouldn't be surprising if real-estate values had to drop significantly in order to restore affordability to the market.

 

But in most of Canada, what we're seeing looks like a normal return to earth after a six-year-long real-estate boom.

 

The frenetic construction and double-digit price gains of yesteryear couldn't last forever, so now we've entered the cooling-off phase. Economic forecasters think the outlook for most cities is for prices to stagnate, or maybe edge down a little, while the level of construction eases, but doesn't collapse.

 

If this doesn't seem to fit with the outlook foreshadowed by July's big drop in construction activity, that's simply because you're reading the numbers too literally. No one month's statistics mean very much, especially if you take them at face value.

 

When you look at a chart of housing starts over a period of many months, it looks like a mountain range, with soaring peaks and deep valleys. Most of this volatility is caused by builders of condominiums and other multiple-unit developments, where a few projects more or less can make the numbers skyrocket or plummet.

 

That's why analysts take the single-family starts more seriously. They're a lot less volatile and, thus, a better indicator of where the market is really heading. In July, single-family housing starts fell by just 7%.

 

As well, nearly all of July's decline was in Ontario -- "think Toronto condos," says BMO Capital Markets analyst Robert Kavcic. And exceptionally wet weather in Eastern Canada likely slowed construction, notes Millan Mulraine of TD Securities.

 

Outside of Toronto, most big cities saw only modest changes in total activity.

 

So what can we expect for the coming months? Continued slowing, most likely, but certainly no savage nationwide meltdown on the model of the U.S.

 

Royal Bank economist Paul Ferley notes that in 2007, Canadian housing construction remained little changed from the banner year of 2006, even as U.S. activity plummeted 26%. He thinks Canada's housing starts will drop by only about 5% this year, compared with a 30% plunge south of the border.

 

Mr. Ferley thinks that 2009 will finally bring a significant drop in Canadian activity, but nothing like the U.S. collapse, with starts down by about 15%.

 

The brake on construction is the slowdown in sales that started months ago, with sales figures in each month this year down from the comparable period in 2007, Mr. Guatieri noted.

 

It's quite likely that this will continue into next year, since the U.S. economic slowdown and the recent sharp decline in commodity prices are both beginning to bite in Canada, bringing declines in job creation.

 

With housing demand weaker, price gains have already slowed sharply.

 

With a 5.4% average gain over the past year, Montreal is doing a little better than the national average of 3.5%. Toronto is near average at 3.8%. The hardest-hit include mainly big Western cities, with Vancouver up 1.8%, Edmonton 1.6%, Calgary a mere 0.1% and Victoria down by 0.4%.

 

But even if the boom is over, there's no national bust in sight. Without the severe financial excesses and fraud that devastated the U.S. mortgage market, undermined that country's banking system and brought soaring numbers of home foreclosures, Canada simply doesn't have the conditions to trigger a housing collapse.

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Good news for Montreal. Let's hope it stays that way for a while. I think it's safe to say we pretty much all expected that there would be some kind of slowdown. As long as the slowdown doesn't turn into a bust(which I doubt it will in Montreal) we should be fine! Calgary, Vancouver and Edmonton should worry more about a Bust!

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La construction ralentit mais ne s'écrase pas

15 août 2008 - 09h28

LaPresseAffaires.com

Michel Munger

 

La SCHL estime que les conditions moins favorables à l'achat d'une maison n'empêcheront la demande de demeurer élevée au Québec.

 

Les marteaux se font déjà moins nombreux pour la construction de maisons neuves et il faut s'attendre à ce que cette tendance se maintienne pour l'ensemble de 2008.

 

C'est ce qui ressort des prévisions que publie la Société canadienne d'hypothèques et de logement ce matin sur les mises en chantier d'habitations.

 

La SCHL prévoit qu'au Québec, les mises en chantier reculeront de 4% à 46 613 en 2008. Le recul devrait être de 1,9% à 45 750 en 2009.

 

La diminution est toutefois moins grande qu'à l'échelle nationale. L'organisme fédéral s'attend à une baisse de 6% à 215 475 cette année et à une détérioration de 10% à 194 100 l'année prochaine.

 

C'est un véritable écrasement qui est attendu en Alberta. Les mises en chantier devraient chuter de 48% à 32 750 en 2008 et de 11,5% en 2009.

 

L'Ontario prend la direction inverse avec une hausse prévue de 11,6% cette année, mais elle connaîtra un recul de 14,5% l'année suivante.

 

En tenant compte des chiffres précédents, l'Alberta a un impact décisif quant à la baisse prévue au niveau pancanadien. Comment expliquer la hausse ontarienne et la moyenne nationale positive avant les chiffres albertains en 2008 ?

 

«Le marché de l'habitation promet d'être actif cette année, car il prendra appui sur de solides facteurs économiques fondamentaux, comme les niveaux d'emploi toujours élevés, la progression du revenu et les bas taux hypothécaires», dit Bob Dugan, économiste en chef à la SCHL.

 

La SCHL estime que les conditions moins favorables à l'achat d'une maison n'empêcheront la demande de demeurer élevée au Québec, notamment parce que la population s'accroît.

 

«L'économie provinciale se développera grâce aux dépenses intérieures et aux investissements, tandis que la récente expansion de l'emploi et la hausse du revenu disponible continueront d'alimenter la demande, indique Bertrand Recher, économiste principal à la SCHL. Aussi, la valeur élevée du dollar canadien a stimulé les investissements privés.»

 

«À court terme, ajoute le spécialiste, les travaux d'infrastructures du gouvernement et les réductions d'impôt seront d'importants facteurs de croissance économique.»

 

L'organisme fait aussi des prévisions économiques pour mettre en contexte celles sur les mises en chantier.

 

Les perspectives sont moroses pour les exportations québécoises. Le taux de change, la concurrence étrangère et le repli de la demande internationale sapent l'expansion. La SCHL prédit une croissance de 0,9% pour le PIB cette année et de moins de 2% en 2009. L'emploi devrait monter de 1%.

 

Par contre, les taux hypothécaires relativement faibles et le vieillissement de la population contribueront à soutenir la demande.

 

Précisant ses prévisions sur chacun des secteurs, la SCHL s'attend à ce que les maisons individuelles neuves perdent un peu la faveur des acheteurs. L'offre de logements existants ainsi qu'une petite migration vers les logements collectifs et les condos se feraient sentir.

 

Du côté de la revente, l'organisme s'attend à une baisse mais à un marché robuste au sein duquel la demande pour les condos jouera un rôle important.

 

Ainsi, la revente devrait baisser de 5,8% à 75 900 cette année et remonter de 1,7% en 2009. Les prix moyens, eux, s'accroîtront encore. La hausse prévue est de 4,8% à 218 086 $ en 2008 et de 2,7% à 224 000 $ en 2009.

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