The Canada Mortgage and Housing Corporation (CMHC) released a new report on Canada housing starts in February 2011, leaving mixed impressions. New home construction has accelerated its pace in Canada generally, but British Columbia (BC) housing starts went down due to concerns over the Harmonized Sales Tax (HST). The controversial tax will go to referendum this year, so many people are postponing their buying or renovation decisions in hope that the HST may be cancelled. The lack of consumer confidence prevents builders from expanding their activities.
Home construction across Canada was better than anticipated in February, but expectations remain modest because tighter mortgage rules and higher lending rates are expected to hit the market in the following months. CIBC World Markets economist Krishen Rangasamy explained: “We continue to expect a softening in overall housing starts, particularly with the anticipated higher interest rates and a slower second half of the year keeping home prices under wraps.”
According to the numbers given by CMHC, the overall housing starts rose by 6.5 per cent in February 2011 at a seasonally adjusted annual rate (SAAR) of 181,900 units, which is a considerable jump from the SAAR of 170,600 units recorded in January 2011. The CMHC show the increased construction activity in the multi-family starts segment in Ontario and the Prairies behind the bigger growth in February 2011.
BC housing starts were down 5.9 per cent in February 2011, with a SAAR of 24,100 units and considerable differences throughout the area. Metro Vancouver new home construction starts continued to show solid growth, increasing by 23 per cent from the beginning of 2011. As CMHC’s regional economist, Carol Frketich, stated for the Vancouver Sun: “That reflects a stronger resale market in [Metro Vancouver]. Also, Vancouver has had stronger job creation than the rest of the province.” 2,850 housing starts were recorded in Metro Vancouver in February 2011, up from 2,319 in a year-over-year comparison.
Building permits moderated unexpectedly in January 2011, falling by 5.1 per cent to $5.4 billion. Weaker residential and non-residential activity are both blamed for the downturn.