CanaData’s latest housing starts forecasts are set out in the two tables below. The revised numbers are based on actual starts through July 2009 as measured by Canada Mortgage and Housing Corporation (CMHC). It is interesting to note that in its latest monthly press release on starts, CMHC records that its estimate of the long-term need for housing in Canada, based on current demographic trends, is 175,000 units per year.

One reason that this is so intriguing is that between 2002 and 2008, national housing starts averaged above 220,000 units per year. If CMHC is correct, then it is quite understandable that housing starts have dipped so dramatically this year.

CanaData expects this year’s volume of starts to be only 135,000 units. Still, if this is a floor level for Canada, it will be much better than what the U.S. has experienced in this recession. On a proportional population basis, Canadian housing starts would have to drop to 50,000 to 60,000 units to match the depressed level that the U.S. has seen. (story continued below)

Regional Outlooks

The Atlantic Region has weathered the recession in remarkably good shape − certainly better than it has many times in the past. Jobs have held relatively steady. Returning workers from other parts of the country have helped to maintain consumer spending levels. Non-residential construction projects in energy and minerals have provided boosts to the economies of Newfoundland and New Brunswick. As a result, housing starts will fall relatively modestly in 2009 and build slowly again in 2010 and 2011.

Québec’s economy has been supported in this recession by strong provincial government spending, particularly in the area of electric power generation. Most of the province’s manufacturing sector has suffered the same as everywhere else, with aluminum taking a particular beating, but aerospace has had some winning products along with its losers due to the decline in world air travel. Québec housing starts in 2009 are well down versus 2008, but they are not at a totally distressed level. The new housing price index for Montréal is actually +1.9% year over year in July and in Québec City, it is +6.8%. For Canada as a whole, new home prices are -3.3%, according to Statistics Canada.

Ontario is one of the provinces where the recession has hit hardest. The manufacturing sector has suffered knocks from Detroit Three auto problems, which are now being resolved, and from an appreciating Canadian dollar. Also, the Toronto housing market is overbuilt in condos. The inventory of finished but unsold multiple units is too high by a significant factor. Meanwhile, Ottawa has performed relatively okay on the homebuilding front. The presence of the federal government has provided economic stability and high-tech has come through the recession in a fashion that belies its “wild and crazy” past.

Over the past year-and-a-half, western Canada has been the victim of a fall-off in raw materials demand around the world. As China begins to flex and stretch again and as U.S. economic recovery takes hold later this year, the commodity-based economies of Manitoba, Saskatchewan and Alberta will experience a spring-like resurgence. Saskatchewan has an abundance of resources that are in universal demand, such as potash and uranium. The oil patch in Alberta will revive along with higher global oil prices.

The final market to consider is British Columbia. That province is eagerly anticipating its role on the world stage as host of the Winter Olympics early in 2010. Homebuilding in the province has been exceptionally weak of late, however, due to speculative overbuilding and price hikes several years ago. The present weak market is a period of necessary correction. Once U.S. housing starts show evidence of climbing again, this will provide a particular boost to B.C.’s large and important forestry sector.