October 16, 2013
Apartment construction expected to decrease
A market shift that saw almost equal amounts of housing starts for single family dwellings and apartments in 2012 should start to return to normal, the CanaData 2013 conference heard recently.
“So far, this year, we’re starting to see that shift back a little, not because we’re producing more single family homes but because we’re seeing apartment construction waning modestly,” said Peter Norman, chief economist at Altus Group Consulting.
He expects more of the same for 2014, though with single family units strengthening and apartment construction returning to slightly more normal levels.
New housing construction has moved from more than 200,000 units in the early 2000s to the 180,000 to 190,000-unit range recently.
He expects that there will be a surge in single family ownership in the next few years.
Canada had the highest net migration impact on the population between 2006 and 2011 and buyer demand starts to kick in about a decade after a surge in immigration, he explained.
“In the next five years or so we’re going to see more of that migration influence heading into ownership and demand in particular.”
It may be a surprise to some that there was not rampant overbuilding in Ontario, he noted.
“Ontario is not the spot where we saw that overbuilding, at least from a statistical standpoint. In fact we delivered units in Ontario during that five-year period that just about exactly matched how our population and household formation was growing,” he said, referring to the period of 2006-2011.
Alberta, Norman noted, was where there was the biggest gap in terms of building and household formation.
“In Alberta we’ve seen massive shifts in migration where it was very strong in 2006, and then we saw some out-migration and now we’re starting to see the migration picking up again. It’s the confluence of a lot of those factors that have perhaps come to play here. Also in B.C. you see evidence of the gap as well and to a lesser extent in the rest of the country,” he said.
In speaking to builders for its pulse survey, Altus Group has been getting negative messages over the last few years that building has been ramping down.
“It is probably reflecting what we’re seeing in highrise condominium sales and at least partial withdrawal of investors from highrise condominium sales in Vancouver and Toronto in the last several months. It’s not all strong and steady on all fronts, the builders are giving us some messages of caution,” said Norman.
About one-third of condominium product nationally serves the rental market, regardless of age of the stock.
From the period of 2006-2011, there were just under 250,000 newly built condos.
“We had a fairly strong growth in rental households but also a shifting of rental households from the existing stock into condos,” said Norman.
In areas such as Toronto, almost 80 per cent of renters live in condominiums.
“If you go on a building by building basis, there should be more completions, there could be as many as 20,000 to 30,000 per year, people have said to me. That raises larger concerns about whether we have a large enough rental market to absorb that,” said Norman of the national market.
“I do want to emphasize the importance the sector has played in terms of rental stock and that’s what gives me some confidence in terms of the ability to absorb those units.”
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