Thursday, November 02, 2006

2007 Housing Starts Will Move Lower

Housing starts will register another strong year in 2006. Starts will reach 227,900 units in 2006, before decreasing to 210,900 units next year. Although residential construction will ease, 2007 will mark the sixth consecutive year in which housing starts exceed 200,000 units.

In 2007, starts will resume their downward trend when home ownership demand is dampened due to the continued erosion of the pent-up demand that built up during the 1990s and the rise in mortgage carrying costs.

Existing home sales of 481,400 units in 2006, as measured by the MLS, will be down slightly from the 2005 record, as declines in Ontario and BC.

While another decline is forecasted for 2007 to 460,100 units, the level of MLS sales will still be the third highest on record.

Between 2008 and 2010, the annual number of housing starts will decline gradually to reach 187,900 units, a level that is consistent with demographic fundamentals. Housing demand will be supported by relatively tight labor markets which will attract a steady inflow of immigrants throughout this period.

Rising new single-detached home prices, more choice in the resale market and land constraints are all factors that will dampen new construction activity in Ontario. Housing starts will decrease to 75,200 units in 2006 and to 69,100 units in 2007. Despite these declines, housing starts remain above historical averages.

Modest economic growth and the satisfaction of pent up demand that accumulated during the 1990s will cause housing demand to slow in Quebec. Housing starts will drop by 10 % in 2006 to 45,800 units and will decrease to 40,700 units in 2007.


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