Toronto area housing starts fall

Sales of new homes in the Toronto area remain healthy, but that isn’t being reflected in current housing starts, according to Canada Mortgage and Housing Corp. Starts edged down in August to a seasonally adjusted and annualized 32,000 from 35,100 in July, the federal housing agency reported yesterday.

One problem has been that developers are having trouble getting work crews, which are too busy with single detached housing to work on condominiums.

“While pre-construction sales of condominium apartments remained at record levels over the past year, condominium apartment starts have been lower,” said CMHC senior market analyst Jason Mercer.

“The answer to this conundrum lies with the fact that builders have completed fewer condominium projects this year and have not been able to shift as many resources to new projects.”

The current slowdown could cause capacity problems in the future, said Brian Johnston, who heads the Ontario Home Builders’ Association and is president of Monarch Corp., one of the largest Canadian builders.

“Right now you’ve got a situation where the pipeline is filled and you’ve got a potential blockage,” said Johnston.

Everyone from builders to architects and city hall staff is probably running flat out to deal with demand, said Johnston.

With the record number of condominium sales in the last year, the worry if problems continue is about the potential for a record number of delays down the road for condominium purchasers taking possession.

As of the end of July, sales of new condos in the Toronto area hit 13,365, compared with 10,722 at the same time last year. CMHC is expecting this to be a record year, with 18,000 condo sales.

Nevertheless, condo starts were off 48 per cent in the first eight months of the year, compared with a year earlier.

“We are a little surprised that this is still continuing, but obviously the system is experiencing some capacity issues,” said Johnston.

While the Toronto area experienced a drop, housing starts across Canada rose to 226,500 seasonally adjusted and annualized units in August from 215,600 in July. Much of the increase came in condominiums, up 10 per cent from the prior month.

CMHC has said condos are selling so well because they provide a choice for some would-be homeowners priced out of the single detached home market.

“While detached home construction weakens next year, a stronger apartment sector will support new construction activity in the back half of this year and into 2008,” said CMHC economist Ted Tsiakopoulos.

In a separate report released yesterday, Statistics Canada said the pace of growth in prices for new homes across the country slowed for the eleventh-straight month in July. Selling prices were up 7.7 per cent from a year earlier. In June, the year over year growth was 7.8 per cent.

That’s probably small consolation to some would-be purchasers across Canada, including those in Saskatoon, where housing prices posed a record increase of 51.4 per cent year over year.

Regina’s increase was 23 per cent.

Price increases for new homes in Toronto and Oshawa were much more moderate, up by about the rate of inflation, or 2.3 per cent.

Source: Canada Mortgage and Housing Corp.