Builders start pull-back on housing construction

The Conference Board of Canada predicted that housing starts will moderate over the next two years, with the first uptick in housing starts not occurring again until early 2014.

“The industry is coming in for a soft landing,” said Maxim Armstrong, a senior economist with the board. “Slow growth, still-weak consumer confidence and high household debt loads are slowing demand for new homes. In addition, a large number of previously-built condominiums and other multiple units remain unsold, limiting activity in this segment of the market.”

Specifically, the think-tank predicted about 190,000 new units nationally in the next two years, followed by 200,000 units in 2014.

In 2012, profits are expected to be strong, at $3.4 billion nationally, as residential builder costs are seeing slower growth compared to previous years. But in the following years, rising labour costs will eventually stunt profit growth for residential builders, said the report.

But while there softening of the market should occur smoothly on a national scale, Armstrong cautioned that there could be some specific metropolitan markets that will see sharper declines in the coming years in starts. While he didn’t name specific cities, the condo markets in Toronto, Vancouver and Montreal have been cited by some economists recently for their concerns over building pace.

“While there may be concerns about over-heating in some segments in a few cities, the overall outlook for the housing market in Canada remains solid,” Armstrong said.

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