Saturday, April 08, 2006

Dip in Housing Starts Signals Slower Growth

Housing starts on an annual basis slipped to 240,900 in February from 248,100 in January and CMHC is predicting more moderation this year as prices and interest rates rise.

"Despite the modest decline, the rate of housing starts in February continued to be very strong," said Bob Dugan, chief economist at the federal housing agency's market analysis centre. "However, we expect activity to moderate over the course of 2006, as higher mortgage carrying costs due to rising house prices and modest mortgage rate increases contribute to a softening of demand for both existing and new housing."

The seasonally adjusted annual rate of urban starts fell 3.3 per cent to 208,300 units last month, with decreases in both single and multiple starts. Multiple starts eased by 2.0 per cent to 101,400 units and single starts fell back 4.6 per cent to 106,900 units.

The agency said a vibrant economy in Western Canada pushed starts higher in both British Columbia and the Prairies.

Urban starts on the Prairies rose 11.5 per cent to 45,400 units while in British Columbia they surged 22.6 per cent to 39,100 units. In the rest of the country, urban starts were down, with the sharpest declines in the Atlantic region (down 16.8 per cent to 10,900) and Ontario (off 15.1 per cent to 73,700 units).

Meanwhile, in another possible sign of a housing market cooldown, a recent survey by the Royal Bank suggests fewer Canadians are "very likely" to buy in the near future.

The Royal Bank survey of buying intentions over the next two years found the share of those people saying they were very likely to buy had dropped to 10 per cent — down from 13 per cent last year and at the lowest point in more than five years.

The percentage of those who plan to buy a home in the next six months also fell — to 8 per cent, down from 10 per cent last year.

Yet, overall intentions to buy a home within two years remained the same as in 2005 at 29 per cent, with 90 per cent of current homeowners saying they thought their home was a great investment.


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