The Canada Mortgage and Housing Corporation released December 2008 housing starts data for the Vancouver Census Metro Area this morning and here is the data
. Starts are continuing to moderate although developers started construction on 1108 housing units during the month which is still a very brisk level of activity.
I am looking for starts to moderate quite a bit more during 2009 with several months having less than 1000 units started. This will be a far cry from the past few years level of activity.
We are in a real estate down cycle, it will take a few years to bottom out. If sales remain sluggish, new building start up will likely drop below 1,000. Home prices are still too high. If prices are back to the 2003 or 2004 level, more buyers can afford to buy. For now, home buyers can afford to wait for the market to rebalance - not happening anytime soon.
It's interesting that starts are still happening even in the face of cancellations. Those who haven't paid a lot for the land can afford to build, even in this market.
I just thought of a potentially interesting scenario: Those who are over extended in expenses selling their property and downsizing into smaller/cheaper places.
So perhaps the condo-market may absorb those downsizing from SFH or "luxury condos" to more modest digs.
If that happens, then perhaps only the far upper end of the market will collapse in price, and the middle/low-end of the market will reduce at a smaller percentage.
Or do you think I'm out to lunch on this?
You're out to lunch.
There is too much market linkage between large and small properties in both directions (upsizing, downsizing) for there to be a big difference in market movements.
In particular, if the high end collapses and the low end doesn't, that removes the incentive to downsize in the first place.
Now that's not to say that all market segments will see exactly the same price declines. We are already seeing a bigger decline in West Van and Van West Side, but that is because those markets were the most out of whack with fundamentals (rents, incomes). You will also see hyped-up condo developments like W take a huge hit when reality comes calling.
But no, I don't see a big difference in % decline between big SFH/small SFH/condo GVRD-wide. Condos probably bigger overall IMHO.
"Condos probably bigger overall IMHO." I agree, I went to two "just opened" condo developments yesterday and I cannot believe the trash that is being sold. These units which went for the 300 to 400 G range will be on the market in 2010 with some of them selling for under 100 grand that I have not even a little bit of doubt about. Stuff built in the last three years has half the quality of earlier properties. It's junk! How about unheated common areas or worse undersized heating units that cannot maintain heat in recreation and lobby areas when it is only 10 Celsius even though they run 24 hrs a day because....there is no insulation? How about NO light switches in storage and utility rooms? (Yes you cannot turn the lights off!)How about security systems running on extension cords? These opened last fall!
There was price compression between condos and detached, more than the long term trend normally warrants, so yes condos will likely fall more, but probably only by 10% or so.
According to Canada Mortgage and Housing Corporation (CMHC), Vancouver housing starts moved lower in 2008, with six per cent fewer foundations poured compared to 2007. A total of 19,591 new homes were started in 2008. Single detached home starts declined 14 per cent, while multiple unit starts dipped by three per cent."Builders are taking their cue from a slowing resale housing market and reducing new home construction," said Robyn Adamache, senior market analyst with CMHC. "Home building will continue to moderate in 2009 as developers look for existing inventories of new and resale homes to be absorbed before starting new projects."Home starts in Abbotsford outpaced 2007 levels by 18 per cent, to reach a total of 1,285 units. While single detached starts declined by almost one-third, multiple unit starts increase 65 per cent to 927 units.As Canada's national housing agency, CMHC draws on more than 60 years of experience to help Canadians access a variety of quality, environmentally sustainable, and affordable homes - homes that will continue to create vibrant and healthy communities and cities across the country....Condominiums Toronto
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