Chief Economist, CanaData
The housing market in Canada has been stronger in the second half of 2009 than was widely anticipated. That has been particularly true for residential resales.
The first quarter of 2009 was nearly disastrous for the existing home market, but all of that turned around in late spring and early summer. Record low mortgage rates have done the trick.
Potential homebuyers know that they are not likely to ever see interest rates this low again.
As for new home construction, it is worth remembering that an existing home sale is often a prelude to a new home purchase.
There have been other factors that have contributed to recent resale strength as well.
The home renovation tax credit extending through February of next year is an incentive to spruce up one’s property and then, perhaps, put it on the market.
Also, Canadian labour markets have held up better than in the U.S.
The service sector in particular has experienced little in the way of job losses.
The November labour report showed an overall increase in employment in Canada of 79,000 jobs.
There has been only one really bad labour market report in the past four months, in October, and that was partly an adjustment after strong August and September numbers.
The improving labour market overall, the Bank of Canada’s commitment to keep its trend-setting overnight rate at 0.25% until next summer, and the end to the recession are all serving to raise consumer confidence levels.
Add to the foregoing that foreign investors are seeing this country as well-positioned to benefit from the recovery. Foreign investment money is being attracted to Canadian stocks, commodities and to commercial and residential real estate.
The net effect is to raise the prospects for new home construction. CanaData has somewhat revised upward its housing starts forecasts for next year. The latest figures are set out in the accompanying tables.
It is remarkable the degree to which housing starts in the largest cities in Canada dominate their provincial residential markets. In Quebec, Montreal usually accounts for almost 50% of total starts in the province.
Toronto housing starts are usually slightly more than half of the total in Ontario. Calgary and Edmonton each account for about one-third of Alberta’s total.
Finally, Vancouver starts traditionally make up between 55% and 60% of total starts in British Columbia.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His lifestyle blog is at www.alexcarrick.com