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Renovation Spending Increases while Housing Starts Decline

Home renovation spending in Canada has climbed steadily from $21 billion in 1999 to a projected $42 billion in 2006, says the latest Housing Market Outlook from Canada Mortgage and Housing Corp. (CMHC). "Record levels of existing home sales in recent years, the effects of a strong job market and robust housing starts will continue to support growth in renovation spending in 2006," said he CMHC report.

Across Canada, such acceleration "is expected to moderate in 2007 due to slower job growth and a decrease in new home construction and resale activity," it notes.
Housing starts will register another strong year in 2006, according the report. Starts will reach 227,900 units in 2006, before decreasing to 209,100 units next year. Although residential construction will ease, 2007 will mark the sixth consecutive year in which housing starts exceed 200,000 units.

“Housing starts this year will be stronger than previously forecast, mainly due to persistent strong demand in Alberta where starts will increase by 20 per cent in 2006,” said Bob Dugan, Chief Economist at CMHC. “Higher mortgage carrying costs, due to modest increases in mortgage rates and rising house prices, will temper housing demand in Canada in the latter part of this year and next.”

In 2006 new home construction in British Columbia entered its sixth consecutive year of growth. This is the longest up-swing since the 1985-1989 expansion and the most consecutive years of growth on record. A healthy economy, a strong labor market, confident consumers, and relatively low mortgage rates will result in 37,000 housing starts this year, a 6.7 per cent increase from last year. In 2007, housing starts in B.C. will decrease to 34,900 units.
In Alberta, robust growth in the resource sector is creating high paying jobs, which are attracting workers from other parts of the country and boosting population growth in the province. As a result, total housing starts are expected to reach 49,000 units this year, surpassing the previous record of 47,925 in 1978. The strong performance will continue into 2007, though starts will slip to 45,000 units as escalating ownership costs inhibit demand.
Despite persistent migratory outflows, housing starts in Saskatchewan will remain elevated thanks to strong activity in Regina and Saskatoon. Total housing starts are expected to increase 4.7 per cent to 3,600 units in 2006 and remain unchanged in 2007.

Buoyed by favorable demographic and economic conditions, housing starts in Manitoba will surpass 5,000 for the first time since 1988. Total housing starts are forecast to reach 5,150 units in 2006 and 5,100 units next year.

Less stimulative economic and demographic conditions suggest that Ontario home starts will moderate, but will remain above historical averages. Housing starts will decrease 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. 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.

Declining residential construction, a dip in sales of existing homes, weaker price growth and a more balanced rental market will be the hallmarks of Quebec’s housing market in 2006. Modest economic growth, rising mortgage carrying costs, and the erosion of pent up demand will cause demand for ownership housing to slow. Housing starts will drop by 11.6 per cent in 2006 to 45,000 units and will decrease to 40,000 units in 2007.

In New Brunswick, rising mortgage carrying costs and modest provincial economic growth will contribute to a slight decrease in new residential construction. Starts will decrease to 3,445 units and 3,120 units in 2006 and 2007, respectively.

Housing starts in Nova Scotia will reach 5,075 total units this year and 4,800 total units in 2007. However, softer demand for new rental and condo units could cause starts to be lower than forecast.

In P.E.I., housing starts are expected to decline slightly over the forecast period but remain strong in historic terms. Expect total starts to reach 725 units in both 2006 and 2007.
In Newfoundland and Labrador, housing starts will decline to 1,875 units this year and 1,850 units in 2007, as higher mortgage carrying costs and weaker employment growth dampen housing demand.

Posted on Sunday, August 20, 2006 at 12:00PM by Registered CommenterElaine in | CommentsPost a Comment

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