What slowing construction means for investors

By the end of 2014, the rate of housing starts is expected to fall to 150,000 units, with CAAMP attributing the drop to recent moves by the federal government to slow housing activity.  

In April, the seasonally-adjusted rate had fallen to about 175,000, marking a 15 per cent decrease from the 2011/12 average. The report also warns that this slowdown in construction may cause a further deceleration of mortgage credit growth.

“Until now, housing has played a major role in the recovery from the 2008/09 recession,” said the report’s author, economist Will Dunning. “That economic driver is disappearing as we see housing-related jobs dry up and consumer confidence erode at a time when the national recovery is struggling to pick up steam."

CAAMP estimates that the Greater Toronto Area will see housing starts begin to slow to a rate of 2,000 units per month by late 2014, almost 50 per cent less compared to 2011 and 2012. Vancouver will also suffer a drop in builds to an average of 5,000, down from 18,447. Neither  Quebec nor the Capital Region will be spared declines.

Calgary and Edmonton, on the other hand, will continue to enjoy building booms, with CAAMP predicting modest increases of roughly 100 housing starts per month

Today’s interest rates also suggest that now is the time to buy if new construction is the investment sweet spot of a landlord. The report, in fact, highlights an average interest rate for mortgages originated during 2012/2013 at 3.22 per cent. Still, fixed mortgages remain the most popular.

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