Housing starts: The condo market still has lots of air to lose

’If you mention overbuilding in Canada, you’re talking about condos’
The CN Tower is reflected on an end table in the dining room of the Ritz Carlton residents model suite in Toronto May 1, 2012. By the end of this summer Toronto will have four projects, as Four Seasons, Ritz Carlton, Trump and Shangri-La open massive towers in a city where a red-hot market for all types of housing has brought rising concern about a real estate bubble. The granite-and-glass towers, including two of Canada’s tallest residential buildings, are opening in quick succession, adding hundreds of hotel rooms and more than a thousand condominiums just as Canadian housing hype hits a fever pitch. Picture taken May 1, 2012. REUTERS/ Mike Cassese (CANADA - Tags: REAL ESTATE BUSINESS)
(Mike Cassese/Reuters)

New construction projects of both single houses and multi-unit homes fell in November for the third consecutive month, the Canada Mortgage and Housing Corporation said on Monday. The seasonally adjusted annual rate of housing starts was 196,125 units last month, a 3.6 per cent decline from a downwardly revised 203,487 units in October. That was below the 201,200 forecast given by analysts polled by Reuters and well under the high of over 250,000 units the market hit in April of this year.

At 58,600 units, construction of single homes hit the lowest level in 16 years excluding the recession period from Dec. 2008 to July 2009. There were fewer new projects underway in the condo market as well, but the decline there was more modest. Multi-family homes fell 3.2 per cent to 115,700. “This simply highlights the oft-repeated point that if you mention overbuilding in Canada, you’re talking about condos,” noted economist Robert Kavcic at BMO.

The Bank of Canada recently singled out the condominium market as the Achille’s heel of Canada’s housing market. “A specific concern,” the BoC wrote in its December Financial System Review, is that the total number of condo units under construction “is now well above its historical average relative to the population.”

Across the country, Ontario and B.C. were leading the downward trend said Mathieu Laberge, deputy chief economist at CMHC. In urban areas, housing fell by 14.3 per cent in Ontario, 16.5 per cent in B.C. and 45.6 per cent in Atlantic Canada. “The drop in starts in Atlantic Canada was primarily due to a decrease in multi-unit housing construction in Halifax, following higher than normal activity in October,” Laberge said. Urban starts were up 15.4 per cent in Quebec and 16.1 per cent in the Prairies.