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Sizzling Alberta sets the pace in construction of new homes
SCOTT ROBERTS
00:00 EDT Tuesday, August 15, 2006
The number of new homes built in Canada will hover near record highs this year, largely due to a red-hot Alberta housing market that continues to surpass expectations, Canada Mortgage and Housing Corp. said yesterday.
Across the country, construction of new homes is expected to reach 227,900 units this year, the second highest level since 1988, according to third-quarter forecasts by CMHC.
It's a surprising forecast given what the national housing agency predicted earlier this year. In January, it said that just 208,700 new homes would be built in 2006, increasing that projection to 222,200 in May.
"Canada's having a really strong year in the housing market; stronger than we expected earlier in the year," CMHC chief economist Bob Dugan said. "Most of the surprise for us has been in Western Canada, particularly in Alberta. That's where most of our revisions tended to be."
In Alberta alone, new housing starts are expected to reach a record high of 49,000 units in 2006, eclipsing the previous record of 47,925 units in 1978. The surge is due to an energy boom that's attracting workers and resulting in new homes.
Mr. Dugan said it has just as much to do with Alberta's ability to keep up with the demand for new houses. "The information we were getting last year from the home builders was that they couldn't find enough people to build these homes and they were telling us that the maximum number of units they could build in a year was somewhere around 42,000 units," he said.
"That certainly had an impact on what we thought was possible. Obviously, they've found sources for these workers since, and have been able to increase their production."
There's a constant influx of trades workers to the province, according to an industry spokesman.
Home builders are placing advertisements in newspapers across the country trying to bring workers to Alberta as the industry struggles to keep up with demand, said Grant Ainsley, executive officer of the Alberta branch of the Canadian Home Builders Association.
"We're running on absolute capacity," Mr. Ainsley said. "The industry is trying to keep up with demand, but I don't think we're there yet. A lot of builders are saying they can only build a certain number of homes and only sell a certain number of homes. They just can't keep up."
Such is the case for Calgary-based Heartland Homes, which builds between 220 and 250 homes each year.
John Olson, senior vice-president of housing at Heartland, said the company cannot expand its operations because of land and labour constraints. As a result, he said, many customers in Alberta's major cities are waiting in line for homes for months.
"There's been a very strong demand and with it there's been people waiting to purchase," Mr. Olson said. "What is new is that a lot of our buyers have only been living in Alberta for less than five years. They're coming to the province and they're ready to step up and purchase homes."
The West is hot, the East is not -- that's how analysts are describing Canada's housing market.
"There's certainly an East versus West story. Starts are really going to slow in Ontario and eastward, and will strengthen in Manitoba and westward. The only exception is in Nova Scotia, where starts will increase this year."
The boom in new home construction is likely temporary. CMHC expects housing starts to fall to 209,100 next year, which would be the sixth straight year that more than 200,000 new homes are built in Canada, but the lowest level since 2002.
"The decrease in 2007 will be widespread," Mr. Dugan said. "All provinces in the country are going to have lower starts. One of the key factors is that we have fairly strong growth in house prices and you put that together with a slight increase in mortgage rates and that's going to take some of the demand away."
Existing home sales will remain strong throughout 2006, with 481,700 units expected to sell. That's a slight decrease from last year's record high.
The price of an existing home in Canada is forecast to increase 12 per cent this year, although that will be fuelled largely by soaring prices in Western Canada. House prices are expected to shoot up 28 per cent in Alberta, 18 per cent in B.C. and 12 per cent in Manitoba, CMHC said.
"That really is a Western Canada phenomenon. In almost every other province in the country we see price growth weakening compared to last year. The pace of growth is slowing as markets are becoming more balanced," Mr. Dugan said.
An East versus West story
Nova Scotia is the only province east of Manitoba with a home-building sector. The table shows the percentage change from 2005 figures to projected 2006 figures.
HOT ALTA. MAN. B.C. N.S. SASK
HOUSING STARTS 2.0 8.9 6.7 6.3 4.7
RESIDENTIAL RESALE PRICE 27.7 12.4 17.9 5.2 7.5
NOT NFLD. PEI N.B. QUE. ONT.
HOUSING STARTS -24.9 -15.9 -13 -11.6 -2.3
RESIDENTIAL RESALE PRICE 0.9 4.9 5.4 6.7 6.6
SOURCE: CMHC
© The Globe and Mail
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