That housing market crash everyone's been worrying about? Looking less likely.
Housing starts up slightly. Fears of a Canadian real estate crash, which were widespread in the media just a few months ago, seem to be easing.
By Steve Payne
Canada Mortgage and Housing Corp. reported last week that the pace of housing starts crept up slightly last month from February.
But Statistics Canada has released a report on building permits that showed future building intentions for residential construction fell 7.2 per cent in February to $3.6 billion.
So the new housing industry is stuttering and slowing.
Many high profile economists seem to like this. There were fears that Canadian house prices were overpriced by as much as 25 per cent. There were fears that Vancouver and Toronto were significantly “overbuilt.” A slowdown in building permits, with only a very slight increase in actual housing starts, makes it less likely that there, in fact, will be an “overbuilt” situation and a dramatic price correction.
“The slowdown suggests we are not crashing, people are not panicking, especially condo builders,” said Benjamin Tal, a senior economist with CIBC World Markets.
“All the indicators we are seeing as of today, in the resale market and in the housing start market, suggest this is a market that is slowing softly. We should be in the neighbourhood of 170,000 to 180,000 in housing starts and we should be getting there.”
Canada’s housing market, which had been among the world’s hottest following the recession, began to slow at about this time last year and braked sharply after Finance Minister Jim Flaherty tightened mortgage rules in July. The policy move, which made it more difficult for first-time buyers to enter the market, was widely praised at the time as necessary to avoid a U.S.-light housing crash that would be crippling to the economy.