Posted by: Daryl & Wendy Ashby | November 29, 2011

2012 Looks Good

Slower economic growth in 2012 will mean a slowdown in housing starts next year as well, according to a report released Tuesday by Altus Group. Alberta, will buck the trend, however, as increasing investment in oilsands is expected to fuel employment and housing starts alike.

“With interest rates no longer expected to increase over the next year, home buying intentions have improved modestly,” the Altus Group says in its October housing forecast.

“However, deteriorating economic conditions internationally are affecting the outlook for Canada’s economy and leading to lower forecasts of GDP growth in 2012, which will act as a constraint on housing demand.”

While housing starts will slow down in 2012, the market is nowhere near to crashing, says Peter Norman, chief economist for Altus Group.

“We’re talking about basically ratcheting down the level of new housing construction from something like 190,000 units to the mid-180,000s, maybe a bit lower as you go forward,” says Norman. “That’s not in my mind a tremendous fundamental shift, that’s not a housing crash, that’s not the bottom falling out, there’s nothing alarmist about this.”

The housing market has been relatively stable in terms of new housing starts, existing home sales, home prices and affordability, says Norman.

“Nonetheless, 2012 brings a lot of risk factors.

We’re already starting to see steam coming out of some markets in terms of the resale market, we think that the mortgage rules are going to be having an effect,” he said, referring to the federal government’s tightening of borrowing restrictions. “But I think the most important thing is that economic uncertainty and a slowdown in the economy, is going to be kind of the trigger that moves us down to a lower level of new housing construction.”

“In Atlantic Canada, although Newfoundland continues to fire on all cylinders, sharply deteriorating job levels in Nova Scotia and New Brunswick have led to much weaker migration and already weakening conditions in the housing sector,” Norman said.

Cities such as Montreal, Regina and Saskatoon have high inventories of new homes, which will limit starts there, while prospective buyers in British Columbia may put off purchases until the transition rules for the removal of that province’s harmonized sales tax on housing are announced.

“In Manitoba, despite some market softening, strong levels of migration will continue to fuel housing demand,” the report says

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