New residential construction activity waned in Quebec last month, even as national housing starts rose more than expected in July, fuelled by appetites for new condos in cities like Toronto and Vancouver.
Quebec urban housing starts dropped 7.8 per cent in July, compared to the same period in 2010, because of declining demand for single detached homes and condos, the Canada Mortgage and Housing Corp. said Tuesday.
“Housing demand in Quebec continues to shift toward housing types such as semidetached and row homes,” noted Francis Cortellino, senior market analyst at CMHC.
In Montreal, new condo starts dropped 14 per cent between July 2010 – when multiresidential construction was unusually high – and last month.
“There’s a drop but it’s still a very active market,” said David L’heureux, senior market analyst at CMHC.
“A large number of projects were still started.”
Nationally, CMHC said the annual rate of housing starts on a seasonally adjusted basis was 205,100 in July, up 4.3 per cent from June. That beat the median forecast of 194,500 provided by economists polled by Bloomberg.
David Onyett-jeffries, economist with rbc economics Research, said the surge in housing starts was driven at least partially by people wanting to take advantage of low interest rates before the Bank of Canada decides to hike its benchmark rate.
“We are, however, not assuming that this advancing of activity will continue going forward as we view starts currently at levels well above that warranted by the underlying fundamentals,” he said in a research note.
HOUSING Building to moderate
Indeed, the trend toward more moderate levels of activity in Quebec is expected to spread nationally.
In Toronto, housing starts rose 13 per cent last month.
“Condo starts this year have already exceeded the total for all of 2010,” said Shaun Hildebrand, CMHC’s senior market analyst for the GTA.
And in British Columbia, starts rose 33 per cent, year over year, largely because of new condo construction, even as sales in Vancouver’s blistering resale market slumped 21 per cent between June and July.
Mathieu Laberge, deputy chief economist at CMHC’s market analysis centre, said he isn’t worried about units eventually sitting empty in Toronto and Vancouver, as the new construction market tends to lag by housing resales.
Laberge says he’s expecting new construction to moderate “during the second half of 2011” in Canada’s hottest real estate markets.
“There is no fear of over-construction,” he said.
Indeed, as of June, the absorption rate – an indicator of how long it takes for a new home to be purchased or rented when completed – remained stable in Montreal, Vancouver and Toronto, the CMHC said.
While numbers for July are not yet available, 1,265 Montreal-area condos were empty in June, with around 650 units being filled each month, L’Heureux said.
L’Heureux couldn’t say whether developers were having to significantly drop their prices to sell these remaining units.