Mortgage rates, high employment stimulate new home investment

Residential construction investment totalled $20.8 billion in the second quarter, up 8.5 per cent from the $19.2 billion invested in the second quarter of 2005, according to Statistics Canada. 

The Canadian government agency said this substantial growth was due to increases in all three components of residential construction — new homes, renovations and acquisition costs.

Within Manitoba, residential construction investment for the first quarter this year was up 10.7 per cent when compared to the second quarter of 2006. The total spent on residential construction during the second quarter this year was $455.1 million.

Since the start of 2006, Canadian residential construction investment has totalled $37.7 billion, up 9.2 per cent compared with the same period of 2005.

Statistics Canada cited mortgage rates that remained relatively advantageous, high employment and a robust housing market in Western Canada as factors that stimulated housing demand. 

Earlier this week, the charter banks announced they are lowering their long-term mortgage rates by up to 0.10 per cent. The RBC Royal Bank announced its rate for three-year mortgage is now 6.5 per cent and 6.75 per cent for a five-year mortgage.

Rising prices for new homes also contributed to the increase in the level of residential construction investment, according to Statistics Canada.

Expenditures on new home construction totalled $10.4 billion in the second quarter, up 9.8 per cent from the same quarter of 2005, reported Statistics Canada. The largest contribution to this growth (in dollars) came from increased spending on the construction of new single-family homes (up 8.9 per cent to $6.5 billion). Investment in new apartment/condominium construction also rose substantially (up 14.3 per cent to $2.3 billion).

According to Statistics Canada, spending on renovations to existing dwellings totalled $8.6 billion in the second quarter, up 8.1 per cent from the same quarter in 2005. Acquisition costs rose 3.4 per cent to $1.8 billion.

Statistics Canada reported that Alberta and British Columbia stood out sharply from the other provinces. Compared to the second quarter of 2005, investment expenditures in Alberta climbed 35.9 per cent to more than $3.1 billion. This growth was driven by strong demand for new single-family housing (up 46.3 per cent to $1.6 billion). 

In British Columbia, the 22.5 per cent increase was due to increased spending on new single-family housing but also to increased investment in apartments and condominiums.

Excluding Alberta and B.C. from the national total, the increase in residential construction investment between the second quarters of 2005 and 2006 was only 1.5 per cent instead of 8.5 per cent.

The steepest decline occurred in Quebec, where investment fell 3.1 per cent.