Unsold houses to slow down builders
Thursday, 20 November 2014
Drop seen in Regina construction
With more than 400 unsold new housing units on the market, Regina's housing construction activity is expected to slow by 25 per cent in 2014, followed by an 8.5 per cent reduction in 2015 and a 2.3 per cent decline in 2016, according to the Canada Mortgage and Housing Corp. (CMHC) fall housing market forecast.
Total housing starts in the Regina area are on pace to reach 2,350 units in 2014, with 2,150 and 2,100 starts projected for 2015 and 2016 respectively, CMHC said Thursday.
"We're seeing a moderation in housing starts in Regina," said Goodson Mwale, CMHC's senior market analyst for Saskatchewan, noting that both 2013 and 2012 were "very strong years" for housing construction in the Regina area, with 3,122 and 3,093 total starts respectively.
But builders got ahead of themselves, resulting in a backlog of 146 unsold single-family homes and 273 condo units by the end of September, forcing them to slow down the pace of construction in 2014. "This year, we're definitely seeing a pullback in terms of the number of starts, particularly in the single-detached sector," Mwale said.
Single-detached housing starts are expected to decline to 750 in 2014, down 40 per cent from 1,246 singlefamily dwellings started in 2013, and fall further to 725 starts in 2015.
As a result, new home prices are also expected to moderate, with Statistics Canada's new home price index (NHPI) projected to rise 1.8 per cent compared with 2.9 per cent in 2013, with similar increases in 2015 and 2016. The average new home price is forecast to increase modestly to $509,000 in 2014, before rising to $517,000 in 2015 and $522,500 in 2016, CMHC said.
Multi-family dwellings, which consist of semi-detached units, row houses, and apartments, are projected to reach 1,600 units in 2014, down 15 per cent from 1,876 in 2013, falling to 1,425 in 2015 and 1,400 in 2016.
"Rising inventory, a slower employment expansion, and lower net migration are contributing to fewer multifamily starts in Regina this year," Mwale said. "These factors will reduce housing starts further over the next two years."
By contrast, Saskatoon will see housing starts rise 10.7 per cent to 3,300 in 2014, before declining to 3,125 in 2015 and 3,050 in 2016.
Stu Niebergall, president and CEO of the Regina Region Home Builders' Association, said the CMHC forecast seems reasonable and agreed that the unsold inventory of new housing units is holding the Regina market back somewhat. "I think it's pretty close to the mark," he said.
Niebergall noted most of the unsold housing units are multi-family dwellings, either semi-detached or apartment-style units. "On the single-detached side, that inventory ... isn't going to be a challenge for the market to turn over," Niebergall said. "The market can absorb that."
He added that Regina still has a "reasonably healthy market." "We're at very low risk of seeing a big housing price correction. But I don't think we'll see price escalation for quite a period of time."
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