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Housing starts keep strong pace

Housing starts keep strong pace

Posted on: 11/10/2017 | Author: ATB Financial's Economics + Research Team

Alberta’s recovery is on track. Oil prices are moving higher, retail sales continue to grow and demand for new housing has kept its rapid pace.

In October, builders started construction on 29,535 new homes.This figure is adjusted for seasonality and is shown at an annualized rate (that is, it is the number of new homes that would be built in a full year if the same pace of activity was sustained for 12 months). While this pace is a little slower than previous months, the average annualized rate this year is 15 per cent above where it was last year.

Housing starts have continued to surprise throughout the year. They’ve done so for a few reasons. The first reason has to do with house prices. Throughout the last two years of recession, housing prices (both new and existing homes) barely moved. Now that the recession is behind us, buyers who were sitting on the sidelines may be hungry to jump into the market because they are more certain that prices are not going to fall.

The other reason has to do with mortgage rates. The Bank of Canada raised its key interest rate twice this year; once in July and once in September which has made borrowing a little more expensive. Recent Canadian economic data suggests that rates may rise one to two times next year. This has likely kept higher building rates throughout this year.

Housing starts in Alberta, graph

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