Ontario Cools Down Slightly
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By Perry J. Greenbaum
Ontario's housing market
has slowed slightly, Canada Mortgage and Housing Corporation reports in its
latest housing market analysis. Using seasonally adjusted figures, the federal
housing agency reports that housing starts in the province declined 8.3 per
cent from the first quarter - to 76,600 units. Home starts were down 12.2
per cent from the second quarter of 2005. "Both single-detached and multiple
family starts contributed to the second-quarter decline," says Ted Tsiakopoulos,
CHMC analyst for Ontario.
Nevertheless, there are some bright spots in the province. The urban centres
of London, St. Catharines and Greater Sudbury all registered increased activity
in the second quarter. When we look at year-to-year gains between 2005 and
2006, both London and Oshawa recorded double-digit growth in starts. Multi-unit
dwellings, chiefly apartment construction, greatly contributed to the strong
home construction numbers.
As for 2007, the housing agency forecasts that Ontario will face a further
downward trend in housing starts, decreasing to 77,000 units in 2006 and to
70,000 units in 2007. "The decrease in housing starts in Ontario in 2006
reflects weaker single starts due to rising new detached home prices,"
CHMC reports. "In 2007, the decrease in housing starts will reflect decreases
in both single and multiple units due to increased choice in the resale market
and a limited supply of land."
Even so, Ontario's economy still drives the market. That still represents
one-third of the housing starts nationally, estimated at 227,900 in 2006,
and 209,100 in 2007. New homes in Ontario, in general, are out of reach of
many first-time home buyers, which explains why the resale market of used
homes remains strong. For example, although resale activity in Canada's major
urban centres edged slightly down in July 2006, says the Ottawa-based Canadian
Real Estate Association, "activity for the first seven months of 2006
remained above levels posted for the same period in any other year on record.
Sales remain on track to set a new annual record in 2006."
The city of Windsor is a typical market. "The steady increase of single-detached
new homes, along with the large gap between new home and existing home prices,
will drive first-time buyers into the resale market," says Margot Stevenson,
market analyst for CMHC in Windsor.
To be sure, forecasts hold that the resale market of MLS-listed homes in Ontario
will hit 192,500 units in 2006, and then drop to 184,000 units in 2007. Even
that will eventually cool off.
Some
details
Single Starts: Demand for higher-priced single-family detached homes will
cool. Single-family home starts will fall to 37,500 in 2006, and to 32,500
in 2007.
Multiple Starts: There remains a healthy pool of first-time home buyers seeking
less expensive homes, suggesting that sales of condominiums will remain strong.
Thus, multiple starts will increase to 39,500 units in 2006, and then drop
to 37,500 units in 2007.
Ontario's market, by all accounts, has been a seller's market since 2000,
characterized by buyers out-numbering sellers, multiple offers and bidding
wars. In the past year, the industry has seen rising interest rates, slower
job growth and an increase in home listing, giving rise to what economists
call a balanced market - where supply meets demand.
Overall, the market for both new homes and resale homes remains strong, but
it is now on a downward trend. Some of the contributing factors are low birth
rates and a labour force that, in many cases, is moving westward to Alberta
where the job market is booming. HB
