Condo sales drive housing starts 29-year high

Despite September rise, housing agency still sees slowdown through 2008

Toronto Star Oct 10, 2007
Tony Wong, business reporter

The detached home has long been the dream of home ownership for many Canadians.

But higher interest rates and a steep rise in home prices over the last decade mean Canadians are increasingly turning to more affordable condominium housing.

Thanks to condo building, housing starts hit a 29-year high of 278,200 annualized units in September, up almost 20 per cent from August, according to figures released by the Canada Mortgage and Housing Corp. yesterday.

“The steaming hot condo market powered the volatile multiple units construction in all regions of the country,” BMO Nesbitt Burns economist Robert Hogue said yesterday.

In Toronto, sales of new condominiums have been particularly strong and are on track to beat the 2005 all-time record.

Starts hit 41,800 in September, up 29 per cent from August, according to the CMHC.

“Demand for condominium apartments in the Toronto area has been especially strong.

Record pre-construction sales experienced over the past two years have started to convert to increased starts,” said CMHC analyst Jason Mercer.

During the first half of the year, there was concern that housing starts were actually down, despite record condo sales.

On an unadjusted basis, starts are down by 12 per cent for the first three quarters of the year.

One issue is that builders were bogged down on earlier projects as they struggled to move labour from one site to the next, according to the CMHC.

“High new detached-home prices, a tight apartment resale market and a backlog of condominium apartment projects awaiting the start of construction explain the increase,” CMHC economist Ted Tsiakopoulos said.

The federal housing agency expects to see elevated levels of multiple starts for the rest of the year and into 2008.

But the CMHC still forecasts a gradual decrease in starts between now and the end of 2008.

New construction, meanwhile, isn’t the only driver of the real estate market.

The Toronto Real Estate Board last week reported 6,866 home sales, making it the second best September for sales and putting the area on track for a record year.

According to Royal LePage, the price of a standard two-storey property in the Toronto area has risen by 9 per cent to $523,320, while a standard condo is up 12.8 per cent to $287,039.