March 4, 2010
Economy at a Glance
Multi-unit housing in Canada growing in significance compared to singles
Several interesting trends emerge from an analysis of Canada Mortgage and Housing Corp.’s (CMHC) 2009 provincial starts figures. They show up clearly in the accompanying graphs.
After a long history of trailing single-family starts nationally, multiple-unit starts finally caught up with singles in 2007 and then overtook them in 2008. In 2009, both markets declined – multiples more than singles – and the unit-starts levels of both were almost exactly the same.
Relative to singles, multiples have long been being particularly strong in Quebec and British Columbia. In the past couple of years, multiples exceeded single-family starts in Ontario as well. They equaled single-family starts in Alberta in 2008, but then fell back again in 2009.
Several factors account for the shift to multi-units
The rising tide of multi-family starts is due to a combination of several factors.
The population of the country as a whole is becoming more urban as opposed to rural. This alone promotes more multiples.
Also, the establishment of greenbelts around urban perimeters is making the availability of land tighter. High-rise structures are a more effective use of that scarce resource.
A side effect of the World War II baby-boom generation (born 1946 to 1966) is that the population is aging. Older couples are giving up their homes in the suburbs and moving closer to shopping, entertainment and health care services.
At the same time, children of the baby boomers are moving away from home to launch out on their own. The first home is often a rental unit in a high-rise structure. This pumps up the demand for smaller less expensive units to rent out.
Foreign investors are more inclined to purchase a high-rise unit in a downtown core since such a property is easier to protect from a distance. Also, maintenance and cleaning services are often readily available, especially if the residence is part of a tower that also includes hotel suites.
Regional comparisons
The graphs make clear the regions where housing starts plummeted the most in the recession. In 2009, Alberta starts sank 60% from their peak in 2006-2007, while starts in B.C. dropped by the same percentage between 2007 and 2009. At the same time, multi-unit starts in B.C. fell 67%.
Alberta and B.C. suffered on account of an excess of speculative building in 2006 and 2007 when the demand for energy and other commodities was fueling growth in the local economies.
Ontario housing starts stayed strong through 2008, thanks to a surge in multi-unit starts. However, the drop from 2008 to 2009 was by one-third, with multiples declining the most.
An interesting point about Manitoba and Saskatchewan: while 2009 starts registered big drops, they only fell back to 10-year averages.
Looking to the future, housing start prospects in both provinces are better than historically, since both interprovincial and international migrants are recognizing the income-earning potential from resource growth in those two provinces.
Housing starts in the Atlantic Region and in Quebec held up not too badly in 2009. Nor were there particularly dramatic shifts between the singles and multi-unit markets in both instances.
For more articles by Alex Carrick on the Canadian and U.S. economies, please see his market insights. Mr. Carrick also has an economics blog. His personal blog is at www.alexcarrick.com
Canada's all-time housing-start record occurred in 1976 at 273,000 units. Another strong year occurred in 1987 at 246,000 units.
The annual average over the latest 10 years (2000 to 2009) for total Canada was 201,300 units.
The Atlantic Region reached its all-time high housing-start level of 22,000 units in 1973. The annual average over the latest 10 years (2000 to 2009) for the Atlantic Region was 11,700 units.
The record high for Quebec was set in 1987 at 74,000 units. The annual average over the latest 10 years (2000 to 2009) for Quebec was 44,200 units.
Ontario's all-time high was 111,000 units in 1973. The province also topped 100,000 units in 1987. The annual average over the latest 10 years (2000 to 2009) for Ontario was 74,400 units.
Manitoba's all-time high was 12,000 units in 1978. The annual average over the latest 10 years (2000 to 2009) for Manitoba was 4,300.
Saskatchewan's record high was 13,000 units in 1976. The annual average over the latest 10 years (2000 to 2009) for Saskatchewan was 3,900 units.
Alberta's 48,300 units in 2007 was only slightly below its all-time record of 49,000 units in 2006. In 1978, Alberta achieved 48,000 units. The annual average over the latest 10 years (2000 to 2009) for Alberta was 35,400 units.
B.C.'s record high was 42,800 units in 1993. It also had figures over 40,000 units in 1992 and 1981. The annual average over the latest 10 years (2000 to 2009) for British Columbia was 27,300 units.
Data source: Canada Mortgage and Housing Corp. | Charts: Reed Construction Data - CanaData.
