The Ottawa Citizen - Friday, August 10, 2007

Housing OK despite dip in construction, CMHC says

Ottawa starts fall far short of strong July 2006

Kristin Goff, The Ottawa Citizen

A steep slide in housing construction in Ottawa last month is not a sign of serious trouble for the housing sector, according to a new report from Canada Mortgage and Housing Corp.

CMHC's latest report showed housing-construction starts in Ottawa fell 26 per cent to 672 residential units in July from an exceptionally high 908 in July 2006.  There were two large downtown condominium projects started in the month last year making it the busiest July in a decade. 

Last month's construction pace was a return to more "normal levels," said David Lan, a housing analyst for CMHC who said there were reasons to be optimistic about the region's economic strength. 

Although construction of condominium, townhouse and other "multi-family" housing slid steeply, construction of single-family homes jumped nearly 21 per cent to 321 detached houses in July.

That suggests a strong economy and an active housing market where new-home buyers are still confident in buying more expensive detached houses, Mr. Lan said.  Those seeking more affordable housing may be turning to the resale market, where there appears to be an ample supply of listings, he said yesterday.

Sales of existing houses jumped 18 per cent to a record 1,456 in July, largely due to sales of lower-priced housing, the Ottawa Real Estate Board reported earlier this week.  It is predicting resale activity will reach a new high this year.

Nationally, housing starts for July were down 4.3 per cent to $215,600 from $225,300 in June.  Analysts had been looking for about $224,000 seasonally adjusted starts.

"Housing starts in July continued their gradual decreasing trend as both multiple and single-detached starts declined," said Bob Dugan, chief economist at CMHC's market-analysis centre.

"The lower level of housing starts this month is consistent with our forecast of a gradual easing in the pace of new home construction in 2007 caused by rising prices and slightly higher mortgage rates," he added.

Seasonally adjusted urban starts were down 5.7 per cent in July from June, with both singles and multiples declining.  Ontario was the only region to see an increase in urban starts. 

Actual starts in rural and urban areas were down about 4.8 per cent in the first seven months of the year, compared to the same period in 2006, CMHC said. CMHC's report for Ottawa showed construction in January through July amounted to 3,250 units, down 1.4 per cent because of a decline in multi-family construction. pushed total housing starts up 62 per cent to 329 in July.  New-housing construction was up 15 per cent to 1,464 in the January through-July period, CMHC reported.

A separate report by Statistics Canada showed new-housing prices, driven largely by western provinces, increased by 7.8 per cent in June, compared to a year earlier.  On a monthly basis, prices in June were up 0.7 per cent from May, based on the agency's new housing price index. 

In Ottawa-Gatineau, the index showed a 0.1 per-cent monthly increase in June and a 2.1-per cent-increase over 12 months.