Building on Starts

Calgary and Alberta seemed to have missed the memo on declining house starts in Canada.

Starts decreased across the country in March and April, but not in the Calgary area, where starts increased both months.

The Canada Mortgage and Housing Corporation (CMHC) reported 11,323 starts in the Calgary Census Metropolitan Area in April compared to 11,242 in March, a trend of sixmonth moving average of the monthly seasonally adjusted annual rates (SAAR) of total housing starts.

“The trend in both single-detached and multi-family starts was fairly stable in April, keeping the pace of total housing starts comparable to the previous month,” said Richard Cho, CMHC’s senior market analyst for Calgary. “The decline of active listings in the competing resale market along with gains in employment and migration has helped support demand for new homes.”

Meanwhile, ATB Chief Economist Todd Hirsch reported new home construction in Alberta reached 39,213 units in April, seasonally adjusted, compared to 34,900 in March. That makes it “one of the strongest months for housing construction in the last five years.”

“Alberta’s new April housing starts point to two economic realities in the province,” Hirsch said. “The first is that despite some moderation in the pace of overall economic growth, consumers are still confident in their jobs and financial situations.”

Hirsch said despite tightened mortgage rules in the summer of 2012, borrowing rates remain favourable. Also, construction activity is likely to remain a driver of the overall economy this year.

“Even if the pace of housing starts slows in the remaining eight months of the year, 2013 is almost certain to see home building far outpace the fiveyear average,” he said.

While Alberta’s economy is slowing, the province remains among Canadian leaders. After growing 3.9 per cent in 2012, Alberta should see a “more modest” economic increase of 2.5 per cent this year, BMO reported.

“The economy in northwestern Alberta is being fuelled by expansion and growth in the oil and gas services sector and also the oil and gas construction industry,” said Lynda Taylor, BMO’s district vice-president, Commercial Banking, Northern Alberta and NWT. “In particular, construction companies in the northwest are bidding on new work coming from major liquid gas players in the market. Meanwhile, the continuing population influx into Fort McMurray and the northeast has created real demand for additional services and amenities.”

BMO reported housing markets in Calgary and Edmonton are showing strength compared to slowdowns seen in the Vancouver and Toronto markets. Sales in Alberta’s two largest cities are up 3.4 per cent and 6.3 per cent year-over-year respectively in the first quarter of this year.

Last year’s positive growth, in part, can be attributed to a thriving housing construction market. The Canadian Home Builders Association (CHBA) found the value of construction in Calgary in 2012 was $5.7 billion. Of that, 19,300 jobs were directly created, while 9,200 jobs were indirectly created.

Provincially, Alberta’s new homebuilders and renovators completed $15.1 billion in construction directly creating jobs for 48,000 people.

“In a year when the Alberta government is struggling with lower resource prices, it is important to recognize that residential construction is a key driver of the economy,” said Jim Rivait, CEO of CHBA – Alberta.

According to Labour Force Survey, between April and May, Alberta’s unemployment rate decreased from 4.8 per cent to 4.4 per cent, while the national rate remained unchanged at 7.2 per cent. Gains of 19,000 in full-time positions in the province far offset the 4,200 job losses seen in part-time positions.

“Despite other indications of a somewhat softer economy in 2013, Alberta’s job market continues to surprise,” said Hirsch. “At 4.4 per cent, the unemployment rate is the second lowest in the country – only Saskatchewan’s four per cent is lower. If anything, the challenge will be a shortage of labour, not jobs.”

April 2013 Housing Starts – CMHC

About That Canadian Housing Meltdown – BMO

News – CHBA

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