Building apace

The government mapped out its aspirations this week with the Throne Speech and Budget. Canada Mortgage and Housing Corp. also stepped up with its take on the likely direction of the housing market. This week's housing outlook from CMHC said housing starts in the Toronto Census Metropolitan Area are expected to reach 33,700 in 2010, a 29.9% rise from last year.

Construction of single-detached homes in Toronto is expected to hit 10,800 in 2010, a rise of 32.8% from 2009. Construction of multiples will likely climb to 22,900 in 2010, a 28.5% rise compared to last year.

"Because of the time lag between a housing sale and a start, 2010 will look pretty good, in terms of housing starts, because of the recovering housing demand in the second half of 2009," says Shaun Hildebrand, CMHC's senior market analyst for the GTA. "A lot of the sales activity that we saw in the second half of 2009, and which will continue through the first half of 2010, will work its way into the construction market throughout the course of 2010."

The rise in starts seems more impressive as it comes on the heels of a 38.5% decline in numbers between 2009 and 2008.

Looking into 2011, CMHC expects total housing starts in Toronto to ease 10.1% to 30,300. CMHC forecasters say that construction of single-family homes will fall 25.9% in 2011 from this year and that construction of multiples will ease a more modest 2.6% from 2010 to 2011.

CMHC cites declining demand for housing for the expected drop in starts into 2011.

"Demand for home buying is expected to come off a bit in the second half of the year," Mr. Hildebrand says. "The combination of higher prices and interest rates and tighter mortgage underwriting standards, introduced a couple of weeks ago, will require higher savings for down payments and therefore less activity amongst first-time buyers."

CMHC predicts home sales in Toronto will rise to 91,500 in 2010, a 2.5% gain on last year. The average price of these homes is expected to rise to $429,030, which would be an 8.3% rise on the average price in 2009.

"It's important to understand that the sharp recovery occurring in the second part of 2009 means that most of the growth has already occurred," Mr. Hildebrand says. "Sales will be up 2.5% and prices 8.3% mainly because we'll be comparing the fully recovered market in 2010 to a market last year that was quite weak in the early part."

Forecasters are looking for a 9.3% fall in sales from 2010 to 2011, when they anticipate 83,000 homes will sell. However, the average price in 2011 is expected to hold up at $439,755.

"As more supply comes on the market and demand starts to show some moderation, there's going to be less price pressures and this could really bring prices down a bit in the last part of the year," Mr. Hildebrand says. "But a balanced market for 2011 will see price growth around the rate of inflation, which is a good sign."

The value of building permits for Toronto CMA-- which indicate an intention to build rather than actual construction -- was $1.2-billion in January this year, according to Statistics Canada figures released this week. This number is an 18.3% rise on the previous month and 27.1% up on January last year.

StatCan stated that the largest gains in building-permit value for municipalities came in Toronto and Montreal. Building permits in Toronto showed gains in all areas except institutional permits, while the Montreal increase was driven by gains in the residential sector.

Across the country, the value of building permits issued by municipalities fell 4.9% month-over-month to reach $5.7-billion in January. The numbers were, however, a 32.7% gain from the gloomy days of January 2009.

Also showing post-slump enthusiasm, in February, resale buyers in the GTA purchased a hefty 77% more homes than in the same month the year before. The average price was up 19% to $431,509. And there will be more activity on the streets, with 24% more listings posted than in February 2009.

(prepared by Helen Morris/National Post)