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Ontario Cools Down Slightly

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.

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