Three Increases
Among the six largest cities in the country according to population, Vancouver (+11%) was the leader in year-over-year housing start percentage increase in 2007. Earlier large price increases for single-family dwellings caused that market to decline (-25%) in the city, while multiple-family starts (+26%) more than made up the difference.

Ottawa (+6%) was in second place, with a combination of both a single-family increase (+10%) and a multi-unit gain (+2%). Ottawa has been benefitting from both strong hiring by the public sector and a modest comeback by information services.

Montréal (+2%) was the only other top-six city to record an increase in total housing starts in 2007, both in singles (+3%) and multiples (+1%). The recovery in Montreal’s economy happened late in the cycle and is now threatened by problems in the financial sector and manufacturing.

Three Decreases
Going forward, the financial sector, hurt by the U.S. subprime mortgage mess, and manufacturing, hampered by the high Canadian dollar, will act as significant drags on the housing market in Toronto (-10%), where total starts have already weakened versus earlier in the cycle. Toronto multi-unit starts adjusted downward (-19%) in 2007, whereas singles continued to climb (+5%). Any weakness in condo construction (especially at the high-price end) is not immediately apparent from even a casual stroll through certain areas of the city, for example Yorkville and Yonge-Bloor.

In Alberta, the correction in Calgary (-21%) was much shaper than in Edmonton (-1%). Edmonton was a mix of weak singles (-15%) but strong multiples (+22%). Calgary experienced declines in both markets (-26% for singles and -13% for multiples).

A number of factors have slowed the demographic shift into Alberta’s two major cities from the rest of the country, including improved job prospects in some other provinces and delays in Tar Sands work as a result of the new royalty regime. However, an extended period of $100 US per barrel oil will cause energy sector expansion to heat up again.

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