Home construction is booming in the Prairies, and Alberta, after years of tepid housing starts, is leading the charge.
The rate of residential construction, especially condominiums, has lagged the oil boom in Alberta in the past few years. But blockbuster housing starts in March — they jumped 72% year over year — hint that residential construction is getting hot again.
The data were released by Canada Mortgage and Housing Corp. (CMHC), and showed that starts grew nationally by 5% to 215,600 from the previous month. Starts in Alberta jumped to their highest levels since March 2008.
Robert Kavcic, an economist at BMO Capital Markets, said the data show the Alberta housing market is finally picking up momentum again, something it lost following the province’s housing boom in 2006-2007.
“It looks like we’re at a point now where strong economic growth and stronger population trends are starting to finally tighten that market up a little bit,” he said. “We’re seeing more sustainable momentum in housing starts in Alberta.”
Growth in Alberta comes as the entire Prairies region is benefiting from an oil-fuelled economic boom, boosting housing along with it. Data from CMHC show Prairie provinces posted an annualized growth rate of 6.4% in urban housing starts in March.
Housing starts in Alberta have grown 53% in the first three months of the year, while next door neighbour Saskatchewan has registered growth of 34% in starts. Manitoba, meanwhile, saw a 41% jump in starts.
Home construction has soared in Alberta’s biggest cities, especially the condo segment. In Calgary, while single-detached-home starts increased 55% year-over-year, multi-unit starts were up a whopping 407%.
That’s good news for a market that suffered from a glut of supply following the 2008 financial crisis. Home construction went into frenzy mode in 2006 and 2007 as the province struggled to keep up with a flood of workers from other parts of Canada who worked in the oil sands. However, after oil prices crashed in 2008, many were laid off or moved back home, leaving fewer buyers for the surplus of homes built.
A jump in starts suggests that excess supply has been absorbed, and the province is starting to build again as it accommodates one of the fastest growing populations in Canada.
While the Prairies recorded strong growth in housing starts, it was Ontario and the blistering condo market in Toronto that added the biggest surprise to housing starts in March. Multiple unit starts in Ontario jumped by 50.4% to 85,200 on a seasonally adjusted annual basis — a number CMHC called “exceptional” and said could “not expected to be sustained.”
Leslie Preston, economist with TD Economics, said the jump in Ontario housing starts was probably due to a warm winter, which likely led to projects breaking ground sooner.
She said subsequent data for housing starts in Ontario, and particularly Toronto, would likely disappoint in the second quarter.
I think the risk of disappointment in construction in the second quarter is high
“If you expected a certain amount of building projects over the first half of the year, that has now likely been concentrated in the first quarter,” she said. “I think the risk of disappointment in construction in the second quarter is high.”
Economists say that despite the huge jump for Ontario in March, home construction growth will continue to be centered in the West this year, with the Prairies in particular seeing strong numbers.
“We’re anticipating continued growth in residential and real estate construction as a result of Western Canada’s economic strength,” said David Onyett-Jeffries, economist with the Royal Bank of Canada. “Looking at the Western provinces, we’re still seeing a pick up in housing start activity in Alberta, Saskatchewan, British Columbia and Manitoba.”
In contrast, Mr. Onyett-Jeffries said, housing starts in Ontario and Quebec should cool off this year.