New property builds to increase in Canada but economist question if the demand will be there

The number of new properties being built in Canada is likely to rise at the end of this year and into 2010 but the days of construction frenzy are over.

Canada’s national housing agency, the Canada Mortgage and Housing Corporation believes housing starts will hit 141,900, of which 68,400 will be single-family detached homes and 73,500 multiple-housing units, such as condos.

The increase in building is due to increased demand due to a better economic outlook and less uncertainty about employments, said CMHC chief economist Bob Dugan.

‘In the second half of 2009 and in 2010, we expect housing markets across Canada to strengthen,’ he said in releasing the agency’s third-quarter outlook.

CMHC says improving activity on the resale market and lower inventory levels in both the new- and existing-home markets should prompt builders to increase residential construction.

Overall the agency predicts residential starts to reach 150,300 in 2010 but that is still well down on the 211,056 housing starts recorded in 2008, of which 93,202 were single-family and 117,854 were multiple-housing units. Annual housing starts have surpassed the 200,000 mark every year since 2002.

However not everyone agrees with the prediction. According to some economists the figures are optomistic. ‘I think those number are a bit on the high side,’ said CIBC World Markets economist Benjamin Tal.

He said 140,000 units in 2010 would be more realistic and he does not envisage housing starts reaching 200,000 annually again for quite some time as the demand will not be there.

Scotiabank economist Adrienne Warren also sees a slow recovery in new home building due to oversupply in some major markets, particularly in the condominium sector. Warren also added that the CMHC forecast is yet another sign Canada’s real estate market is on the rebound, and performing better than previously thought. ‘It reaffirms that the market is far exceeding expectations across the board,’ Warren said.


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