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HOUSING: Construction starts slowing down on reduced migration and rising mortgage costs
        (AlbertaIndex, August 19, Tuesday) --- It’s not looking good on the Western housing front, especially in Alberta.
         Alberta’s housing starts will likely be lower than 2007 levels while the resale home will cost slightly more after two straight years of double-digit gains, according to Canada Mortgage and Housing Corporation’s (CMHC) third quarter Housing Market Outlook, Canada Edition report.

       
Existing home sales are seen falling by 20 per cent this year, the sharpest decline since 1982, on account of weaker migration and rising mortgage costs.

While Alberta continues to experience very low unemployment and overall prosperity, it is facing a drop in net migrants between now and the end of 2008 due in part to the increased house prices in Alberta and improved labour market conditions in other provinces, said CHMC.

The report said: “These factors will combine to reduce housing starts to 32,750 in 2008 and 29,000 in 2009, from 48,336 units in 2007. Following exceptional 30.7 per cent and 24.8 per cent gains in 2006 and 2007 respectively, growth in the average Multiple Listing Service (MLS) price is expected to slow to 1.1 per cent in 2008 and 2.8 per cent in 2009.”

For the country, new home construction will begin to slow in 2008, but will remain high by historical standards.

CHMC predicts that higher mortgage carrying costs will be a catalyst for the decrease in residential construction to 215,475 units in 2008, from 228,343 in 2007. As a result, seven of the 10 provinces will register a lower number of housing starts in 2008 than in 2007.

“Strong economic fundamentals such as continuing high employment levels, rising incomes and low mortgage rates will provide a solid foundation for healthy housing markets this year,” said Bob Dugan, Chief Economist for CMHC. “Increased competition from the existing home market, coupled with the elimination of the pent-up demand that built up during the 1990s, will exert downward pressure on housing starts, which will decline to 194,000 units in 2009 from 215,000 in 2008.”

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