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No housing crash in Canada

"In most eastern cities, builders continued to enjoy modest price gains."

 

JAY BRYAN, The Gazette

Published: 9 hours ago

The latest data out of Canada's housing market demonstrate two things clearly: it's going through a significant slowdown, but, just as important, it's not following the U.S. market down the drain.

 

The number of new homes started by Canadian builders in October was down, but only by three per cent, much less than expected by forecasters.

 

So far this year, notes economist Paul Ferley at the Royal Bank, average monthly starts are down by less than five per cent compared with the plunge of 30 per cent seen in the U.S.

 

Still, housing starts in Canada have been drifting down since they peaked at an annual rate of 277,000 two and a half years ago. The rate in October was 212,000.

 

Market analysts believe that pent-up demand for homes has been increasingly satisfied over the past few years.

 

As well, rising prices squeezed affordability for those looking for a first home.

 

Now most analysts believe the construction decline will accelerate in the coming year, as a slowing economy puts more pressure on would-be buyers.

 

Nevertheless, new-home prices as of September (these numbers take longer to compile), were holding up well, reflecting the same resilient demand that has kept home construction busy.

 

A survey by Statistics Canada finds that average new-home prices across Canada were up by 2.1 per cent in September from a year earlier, although there's a lot of variation among major cities.

 

The sharpest price changes were in cities with resource-based economies. In St. John's and Regina, where local booms have yet to peter out, prices were up by 23 per cent.

 

But in Alberta, where an oilsands investment frenzy has cooled recently, gains have ended. In Calgary, the average new home price was down by one per cent. In Edmonton, it fell by six per cent.

 

And after having soared higher than anywhere else in Canada, prices stalled in Vancouver (up 1.4 per cent) and Victoria (no change).

 

In most eastern cities, builders continued to enjoy modest price gains, with the average new home up by 4.8 per cent in Montreal, three per cent in Toronto, 6.1 per cent in Quebec City and 4.3 per cent in Ottawa-Gatineau.

 

There was a similar regional divide in housing starts, with British Columbia and Alberta down sharply from a year ago, while Atlantic Canada, Quebec and Ontario are up.

 

As a slowing economy squeezes prices, it's likely to be the highest-priced markets that will show the most substantial price losses, suggested Douglas Porter, deputy chief economist at the Bank of Montreal.

 

Canada's housing downturn is likely to be much milder than the one in the U.S. because it's fundamentally different, he said.

 

The U.S. housing collapse stemmed from a home-price bubble whose collapse is taking down the whole economy, but the key influence on Canada's generally healthy market is merely the predictable drag from a North American recession.

 

However, a few cities in Canada witnessed such big price gains that they're likely to sell off sharply, Porter said. When the latest resale prices for existing homes come out late this week, he expects to see continued drops in Canada's highest-priced cities: Vancouver, Calgary and Toronto.

 

In Quebec and Atlantic Canada, existing home prices have continued rising and should continue to hold up relatively well, he predicted, because their more modest growth remained tied to fundamentals like average incomes.

 

As of September, the average Montreal resale price was up by 4.4 per cent from a year earlier, while Halifax was ahead 10 per cent. By contrast, Toronto was down three per cent, Calgary was off six per cent and Vancouver had lost eight per cent.

 

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