Canada Mortgage and Housing Corp. said starts fell 13 per cent in December, pulled lower largely by a 45 per cent drop in condo construction in Ontario. New home construction is a cornerstone of the economy, and a weaker market in 2011 is expected to be a drag on economic growth.
Canadian Economy: New housing market did the heavy lifting…now what?
January 12, 2011
Canada’s economic rebound has left a lot of the world green with envy as the global recovery struggles to find its footing.
But the recovery has largely been fueled by the housing market, especially new construction. And that fuel tank appears to be running low.
According to the Globe and Mail:
With a debt-to-disposable income ratio of 1.68, Canadian demand for homes is slowing. And developers are reacting. Housing starts in November reached 198,200 units but in December they dropped 13 per cent to 171,500 units.
Purchasing has been slowing for the past year. Resale sales are down 30 per cent from a year ago. And it’s no surprise. Remember a year ago? There was a flurry of purchasing activity as purchasers rushed to beat higher mortgage rates (which never really materialized despite a few incremental increases by the Bank of Canada).
The number of multiple-unit starts fell from 91,000 units in December 2009 to 85,000 in December 2010. And that’s expected to fall even further since the historical average is 75,000.
But Stephen Dupuis, President of BILD, notes that economists have been unnecessarily pessimistic about the Toronto market. They insist that interest rates will go up despite a lack of evidence.
Either way– the future of the housing market is anything but certain.
So you know how when you’re playing euchre you can usually depend on your partner for a trick? Well, Canada’s economy has been depending on the housing market for two tricks– maybe more. And that has to stop to ensure our recovery stays on track.