New home construction expected to reach 3,300 units by end of year

After a relatively weak performance in 2009, home builders in the Winnipeg Census Metropolitan Area (CMA) are on pace to start construction on 3,300 homes by the end of 2010, according to the Housing Market Outlook report recently released by Canada Mortgage and Housing Corporation (CMHC).
CMHC said the new home projection for the end of the year would represent an increase of 62 per cent over the previous year. 
Despite the expected increase in home building, CMHC said average prices will moderate, remaining around four per cent in 2010 and 2011, which is projected to be the result of buyers becoming attracted to more modestly priced units.
As of August this year, the share of units below $375,000 was 70 per cent, an increase over August 2009’s 66 per cent.
The year-to-date average price for a new home in the Winnipeg CMA at the end of September stood at $370,261, which was an increase of just over one per cent over the corresponding period last year. This is in sharp contrast to one year earlier, when the average price gain was nearly five per cent.
To the end of September this year, total starts numbered 2,604, which was 73 per cent ahead of the pace established in September 2009.
CMHC said a significant portion of the projected increase will be multi-family construction — semi-detached units, rowhouses and apartments — which at the end of September this year was more than double the number of units started by September 2009.
According to the outlook, single-family housing starts have also experienced healthy gains, posting a year-to-date total of 1,479 units to the end of September, which was a 40 per cent increase over the same period last year.
“This elevated pace of construction will be a challenge to maintain,” according to the outlook, “and starts are expected to moderate in 2011.
“Factors supporting demand for new homes will persist in 2011, including a continued economic recovery which will result in steady employment gains. Population increases, particularly from immigration, will also be maintained.”
CMHC said a downside is that the increased in new homes will also raise carrying costs and soften demand.
Increased listings reported by WinnipegREALTORS® will increase competition from the resale market. WinnipegREALTORS® reported the current inventory of MLS® listings is nearly 10 per cent higher than in 2009.
As a result of these factors, CMHC said total starts in 2011 are expected to post a slight 1.5 per cent decrease in 2011.
Single-detached home starts are presently on pace to end 2010 with a total of 2,000 units, which would be 33 per cent ahead of the pace set in 2009.
“With the exception of January,” according to the outlook, “every month in 2010 has thus far seen a substantial year-over-year increase over the corresponding month of 2009.
“Meanwhile, the supply of single-detached homes, which includes complete and unabsorbed units and those under construction, has been climbing steadily to reach 1,123 units in September 2010, an increase of 22 per cent over September 22 over September 2009. Considering a 12-month moving average rate of absorption of approximately 140 units per month, this represents eight months of supply.”
CMHC said most of the current supply is in the construction phase, as building started in the summer.
“The inventory of complete and unabsorbed units has been rising, but at 204 units at the end of September 2010, is almost equal to the 199 units at the end of September 2008 and in line with the five-year average.”
According to the outlook, single-family construction will post a modest 2.5 per cent gain in 2011, reaching 2,050 units, which would be the best performance since 1999.
CMHC said multi-family construction in 2011 is expected to reach 1,200 units, which would be well above the five-year average of around 1,000 units.
“With several projects breaking ground in 2010, the total supply of multiple-family units has risen substantially,” according to the outlook. “Of the 1,300 units noted above 1,116 were under construction at the end of September 2010, up 36 per cent from one year ago.
“Meanwhile, the inventory of complete and unabsorbed units, which peaked at 428 units in May 2009, reached 134 units in September, 40 per cent lower than the previous year and nearing the five-year average of approximately 162 units.”