Stronger year predicted for industry
By Marty Hope
Calgary Herald
January 16, 2010
With 2009's housing figures now tucked safely and thankfully into the vault, builders can look forward to a stronger 2010.
Yes, 2009 is gone, but it won't be soon forgotten. Many lessons were learned and relearned by builders and buyers.
Stepping up to the podium in November as part of Canada Mortgage and Housing Corp.'s annual Housing Outlook Conference, Richard Cho announced that after a lean 2009, the industry could look forward to better times.
With suggestions that he might have undershot the market, Cho, CMHC's senior Calgary market analyst, said at the time that construction starts in 2009 for detached housing would reach 4,200.
But on the strength of a resurgent second half, the year closed out with 4,775 being started -- nearly 400 more than were tallied in 2008.
"It was a pretty impressive year considering that by the end of the first quarter, year-over-year starts were down about 48 per cent," he says now.
In the first six months of last year, 1,549 detached homes were started -- but in the second six-month period, buyers returned to the market in droves and the pace of construction more than doubled to 3,226 homes.
The year was capped off by a December in which 559 detached starts were counted by CMHC -- the strongest since 2006.
"Builders have had more opportunities to increase production as supply levels were near their bottom," says Cho.
Low interest rates were a key to the dramatic turnaround. But so, too, were price reductions and incentives, a return of consumer confidence, and the fact that resale inventories declined as the year moved along.
As part of his November address, Cho also presented his predictions for 2010, calling for foundations holes to be dug for 4,900 single-detached homes.
But in his gut, the market analyst now feels more bullish than that estimate.
"I'm being conservative with that number, considering the strong end to 2009," he says, "I think we'll do a bit higher than 4,900 because rates will stay low despite some increases."
He hasn't finalized his calculations for this year, but will be ready to release his first call for 2010 in early February. "There will be an upward adjustment," he says.
Cho also had some good news for the multi-family housing sector, which closed out 2009 with a brutal December.
There were only construction starts for 98 units in that month, nearly half of which were duplexes.
But his initial forecast calls for 1,800 unit starts this year, up from 1,543 in 2009. The 2009 number, by the way, was off 78 per cent from 2008.
"I might move that number a little bit, but there is still a lot of supply in the system to get rid of," says Cho.
With the downturn in the economy, builders and developers cancelled or postponed plans for new projects in favour of completing what they already had underway.
"Heightened apartment inventories continue to impact new apartment projects from starting," says Cho.
While there is a noticeable decline in highrise construction, there are several smaller projects underway in various parts of the city.
In terms of total housing construction starts of all kinds, there were 6,318 in 2009 in Calgary, down nearly 45 per cent from the previous year.
Builders in Edmonton fared better last year, at least in terms of starts of single-detached homes -- 3,897, up from 2,613 in 2008.
The provincial capital's multi-family housing sector also didn't take the hit Calgary absorbed, registering a decline of less than 40 per cent.
Looking at the province as a whole, there were 12,256 detached starts in 2009 -- an increase of almost six per cent from 2008.
There was a 60-per-cent decline in multifamily housing construction and a 30-percent slide in total starts.
But during the conference, regional economist Lai Sing Louie of CMHC predicted that 2010 will be the start of five years of growth.
Consumers are not the only ones feeling better about themselves and the economy.
Canadian companies, too, are getting the itch to get moving again.
The Bank of Canada says that corporate confidence grew in the fourth quarter of last year as lending conditions eased to "pre-crisis" levels -- which, in turn, prompted some firms to show a willingness to move ahead with investment plans and hiring.
"The Bank of Canada's survey reinforces the point that credit conditions are gradually returning to normal," says Doug Porter, deputy chief economist at BMO Capital Markets.
By Marty Hope
Calgary Herald
January 16, 2010
With 2009's housing figures now tucked safely and thankfully into the vault, builders can look forward to a stronger 2010.
Yes, 2009 is gone, but it won't be soon forgotten. Many lessons were learned and relearned by builders and buyers.
Stepping up to the podium in November as part of Canada Mortgage and Housing Corp.'s annual Housing Outlook Conference, Richard Cho announced that after a lean 2009, the industry could look forward to better times.
With suggestions that he might have undershot the market, Cho, CMHC's senior Calgary market analyst, said at the time that construction starts in 2009 for detached housing would reach 4,200.
But on the strength of a resurgent second half, the year closed out with 4,775 being started -- nearly 400 more than were tallied in 2008.
"It was a pretty impressive year considering that by the end of the first quarter, year-over-year starts were down about 48 per cent," he says now.
In the first six months of last year, 1,549 detached homes were started -- but in the second six-month period, buyers returned to the market in droves and the pace of construction more than doubled to 3,226 homes.
The year was capped off by a December in which 559 detached starts were counted by CMHC -- the strongest since 2006.
"Builders have had more opportunities to increase production as supply levels were near their bottom," says Cho.
Low interest rates were a key to the dramatic turnaround. But so, too, were price reductions and incentives, a return of consumer confidence, and the fact that resale inventories declined as the year moved along.
As part of his November address, Cho also presented his predictions for 2010, calling for foundations holes to be dug for 4,900 single-detached homes.
But in his gut, the market analyst now feels more bullish than that estimate.
"I'm being conservative with that number, considering the strong end to 2009," he says, "I think we'll do a bit higher than 4,900 because rates will stay low despite some increases."
He hasn't finalized his calculations for this year, but will be ready to release his first call for 2010 in early February. "There will be an upward adjustment," he says.
Cho also had some good news for the multi-family housing sector, which closed out 2009 with a brutal December.
There were only construction starts for 98 units in that month, nearly half of which were duplexes.
But his initial forecast calls for 1,800 unit starts this year, up from 1,543 in 2009. The 2009 number, by the way, was off 78 per cent from 2008.
"I might move that number a little bit, but there is still a lot of supply in the system to get rid of," says Cho.
With the downturn in the economy, builders and developers cancelled or postponed plans for new projects in favour of completing what they already had underway.
"Heightened apartment inventories continue to impact new apartment projects from starting," says Cho.
While there is a noticeable decline in highrise construction, there are several smaller projects underway in various parts of the city.
In terms of total housing construction starts of all kinds, there were 6,318 in 2009 in Calgary, down nearly 45 per cent from the previous year.
Builders in Edmonton fared better last year, at least in terms of starts of single-detached homes -- 3,897, up from 2,613 in 2008.
The provincial capital's multi-family housing sector also didn't take the hit Calgary absorbed, registering a decline of less than 40 per cent.
Looking at the province as a whole, there were 12,256 detached starts in 2009 -- an increase of almost six per cent from 2008.
There was a 60-per-cent decline in multifamily housing construction and a 30-percent slide in total starts.
But during the conference, regional economist Lai Sing Louie of CMHC predicted that 2010 will be the start of five years of growth.
Consumers are not the only ones feeling better about themselves and the economy.
Canadian companies, too, are getting the itch to get moving again.
The Bank of Canada says that corporate confidence grew in the fourth quarter of last year as lending conditions eased to "pre-crisis" levels -- which, in turn, prompted some firms to show a willingness to move ahead with investment plans and hiring.
"The Bank of Canada's survey reinforces the point that credit conditions are gradually returning to normal," says Doug Porter, deputy chief economist at BMO Capital Markets.
