Here’s an interesting fact for you: currently, Toronto is seeing more new home construction than any other city in North America. Need that put in perspective? Toronto currently has 158 new construction projects that include condos and skyscrapers; together New York, Chicago, and Miami only have 94 combined. Yowza. It’s no wonder Torontonians are always complaining about all the construction work being done. But they don’t have to live with it too much longer; or at least, not as much of it. The Conference Board of Canada met yesterday, and they believe that housing construction is going to go down over the next year, in response to reduced homebuyer demand.
According to the Conference Board 190,000 units will be built during 2012 and 2013, compared with the 193,950 units that were built in 2011. The Board gave many reasons for the downturn in their report, one being that consumers simply aren’t as confident in the economy as they once were. That lack of confidence comes at an interesting time, as Canadians got through the recession without feeling the repercussions that so many other nations did; but we’ve also got record-high debt levels, which would explain the deleveraging and consumers’ worry that interest rates are going to be raised on much of that debt, such as their Toronto mortgages.
While the Board stated that they too, don’t think the Bank of Canada’s overnight rate will see any major changes during the next 12 – 18 months, they too stated that the low rates wouldn’t be around forever, and pointed towards the fact that Canadians are starting to realize this. The Board stated along with their report that, “This is occurring at a time when Canadians’ debt load is high and confidence is low. As a result, new construction is expected to be moderate and spending on [home] renovations and repairs will be limited this year and into next year.”
The Board also touched on what type of housing will be the most popular among Canadians in the coming months, pointing to the huge overstock of condos that many cities (mainly Toronto and Vancouver) have been seeing lately. That will cool down too, as builders and developers try to get rid of their surplus, and buyers start looking at single-family homes again. The report suggested that, “In the short term, increase will come from the single-family market, but over the medium term the multiples segment has more potential.”
And the Board is also very clear that this downturn in the market is going to be short-lived, so there’s no need to worry about a housing crisis. The Board also foresees 2014 as being a much better year for all sectors of the housing market, with over 200,000 units being built that year.
The slight cooling off period is in line with the falling real estate prices that experts across the country expect to see in the coming months; but the downturn is not one of such that is going to cause any real concern. All it really means is that, for a few months anyway, Canada will be a little quieter without as much home construction going on. And maybe Torontonians will get the peace and quiet they’ve been looking for – at least when it comes to construction sites.
