Canadian Funding Corp pleased that builders see hopeful signs
Wednesday, June 17th, 2009Housing construction makes gains in May after hitting 13-year low
When Toronto-based developer Murray Koebel put his housing project on the market last summer, he didn’t expect it would coincide with the stock market crash.
There was barely a nibble for seven months at his Vista Homes project in Pickering. So the Vista Homes president responded, like many other developers, by slashing prices by up to $30,000 on some of the units in his development, comprised of 45 single, detached homes and townhouses.
“Those were difficult times,” Koebel said.
But since February, he has sold 18 homes, or about 40 per cent of the development. That compares with the one or two he had sold in the six months prior. “Things really started to pick up in the spring, when people saw that it wasn’t as bad as they thought,” he said.
As a result, Koebel expects to break ground this summer and is cautiously looking around at future projects, a decided turnaround from a few months earlier.
The figures seem to bear him out: The market, while still slow with a recovery not yet on the horizon, shows signs of improvement. Canadian housing construction bounced back in May after dropping to a 13-year low in April, according to figures released by the Canada Mortgage and Housing Corp. yesterday, with seasonally adjusted housing starts hitting 128,400 in May, up from 117,600 in the month prior.
“With the Canadian economy poised to begin the recovery process by this fall, the worst of the residential construction recession might be behind us,” said BMO Capital Markets economist Robert Kavcic.
Starts also rebounded strongly in the Toronto-area market, up by 35 per cent in May to 22,000 units. Most of that was due to the volatile multiple family segment, which includes condominiums and apartment buildings. “After plunging precipitously since late 2007, and appearing to be in free fall in recent months, this rebound may be an indication the sector is perhaps stabilizing,” TD Securities analyst Millan Mulraine said.
The Ontario Home Builders’ Association said yesterday that builders, including Koebel, were seeing “signs of hope” and reporting increased traffic in their sales offices and model homes.
Activity is expected to pick up slightly in the second half of the year.
“Tighter resale markets in recent months, improving credit conditions and a backlog of sales awaiting construction are all factors that will boost activity,” said Ted Tsiakopoulos, regional economist for the CMHC.
Despite the positive figures, starts are still down 42 per cent in year-to-date figures compared with last year, at both the national and Toronto-area levels.
Analysts say the overall drop in starts to date is not necessarily a bad thing, since there has been massive overbuilding in some Canadian cities, particularly in the condominium sector, where more than 35,000 units in the Toronto area alone are already under construction and expected to be largely completed this year and next.
BMO expects the rate of starts to remain below long-term trends because there is too much supply already on the market.
“A sharp rebound is unlikely in this sector thanks to about six years of overbuilding – housing starts will likely remain below the rate of household formation through 2010,” Kavcic said.
One thing that should keep construction workers busy is the renovation industry, which reported $21.3 billion spent by consumers last year, up by $1.6 billion from 2007, according to a separate report by the CMHC.
Toronto Star
http://www.yourhome.ca/homes/article/647566
The report brought by Moishe Alexander, CFC CEO