Home builders shift into overdrive

Magrath

Home builders shift into overdrive
8 S- _: u' E+ e% I7 e$ V1 RStarts up 30 per cent this year as condo construction takes off

. d; F# `) F) n& b& j7 l7 KRon Chalmers
3 k' s: T8 C* z! P3 S7 ~! k: i3 SThe Edmonton Journal

Friday, February 09, 2007

EDMONTON - Edmonton-area condo construction surged in January while rentals slumped.
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- U3 [/ W4 u/ {0 M) xTotal housing starts rose 30 per cent, with 487 multiple units being started -- up from only 144 in January 2006.

6 G3 w9 @* p( w2 s2 t"The multiple numbers move around a lot," explained Richard Goatcher, senior market analyst with Canada Mortgage and Housing Corp., which released the figures, Thursday.

. C7 N3 D+ a5 C6 g5 fWith each multiple project, several dozen units are started simultaneously, causing spikes in the numbers. Also, "last January was particularly weak for row houses and apartments," he added.
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But Goatcher sees a sustained shift toward more condos. "For an increasing number of people, moving here or starting a household, the multi-family market has an attractive price advantage," he said.
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"I think we'll continue to see strong demand for more affordable housing."

Despite that demand, the industry will be constrained, Goatcher said. "It's pretty much running at capacity. The challenge is to find sites and crews."

The strong January activity creates little relief for tenants, as those multiple-unit starts included 457 condominium apartments and townhouses, 26 duplexes -- and only four rental apartments.

"Rental construction has been quite anemic for over a year, despite tight vacancies and rising rents," Goatcher said.

Construction costs have inflated and home ownership demand has risen, but the ability of tenants to pay higher rents has not kept pace, he said. So developers earn more profit by building condos rather than rental apartments.

* h# y9 G) }# c# p* U! S! d"I'm not encouraged" by the outlook for affordable rentals, Goatcher said.

- e/ z1 c3 M; f3 P1 {, o0 j! P( n/ JHe noted that about 20 per cent of condo units are bought as investments, then rented -- but often at up to $1,500 per month, which is beyond the reach of most tenants.
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Edmonton-area single-family starts fell this January to 611 houses from 699 in January, 2006.

9 M& L- _' |6 |8 d7 P. y5 T"No surprise there," Goatcher said. "Last month's actvity still represented the second-best January performance on record, and last year's tally was aided by exceptionally mild winter weather."

0 i0 _% U3 h3 WProspective buyers of detached homes may find some relief in the next few months, Goatcher said. "We expect the resale inventory to improve, and a lot more single-family dwellings to be completed in the next three to six months."
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/ Q) K7 @" V% c5 @4 N* v  WHe expects higher supply to "create a more competitive environment," but not to depress prices "because the economy is so strong."
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7 q! z+ f6 N  D. T/ G$ DTotal housing starts this January rose from last January by 30 per cent in Edmonton and 32 per cent in Alberta, despite a 26-per-cent decline in Calgary that was more than offset by increases in Fort McMurray and Grande Prairie.
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Across Canada, starts rose in January by 12 per cent, reflecting "historically low mortgage rates, solid employment and income growth, and a high level of consumer confidence," said CMHC chief economist Bob Dugan.

+ K8 j3 ^5 B" X; L3 crchalmers@thejournal.canwest.com
© The Edmonton Journal 2007

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