Oversupply of condos weighs on market
TORONTO – New home construction in Canada is expected to slow mildly over the next two years, the Conference Board of Canada said on Tuesday, in another sign of a cooling housing market.
The independent research organization’s latest report forecast housing starts will be 190,000 units in 2012 and 2013. There were 194,000 starts last year, according to Canadian Real Estate Association data.
Starts were seen rebounding to 200,000 units in 2014.
“The industry is coming in for a soft landing,” the Conference Board’s senior economist, Maxim Armstrong, said in a statement. “Slow job growth, still-weak consumer confidence and high household debt loads are slowing demand for new homes.”
Employment data last week showed the economy unexpectedly lost 2,800 jobs in February despite signs of a healthy domestic economy.
The slowdown in construction reflects an oversupply of condos in some markets where demand remains tilted toward single-family homes, the report said.
The forecast was in line with recent reports by CREA and the Bank of Nova Scotia that anticipated home sales would be flat over the next two years.
In a Reuters survey last month, 10 of 14 economists and strategists expected home prices to stall, with a mere 0.1-per-cent rise this year, and the same in 2013.
However, data last week by the Canada Mortgage and Housing Corp. showed housing starts rose in February from the previous month as a significant increase in multiple-unit construction in Quebec boosted the national number.
Despite the cooling in starts, industry profits are forecast to climb more than 21 per cent this year to $3.4 billion as building costs decline, the board said.
“While there may be concerns about overheating in some segments in a few cities, the overall outlook for the housing market in Canada remains solid,” Armstrong said.