Underscoring the superior performance of Alberta’s economy compared to the rest of the country this year, the CMHC released new home construction data for June on Wednesday.
Nationally, the pace of home starts last month came in at a far bigger-than-expected annualized clip of 198,185 – a number that could make queasy experts who are banking on a slowdown in starts, especially in overbuilt segments like Toronto condominiums.
But June’s unexpected boom was largely led by one province: Alberta, where the local job market – and population growth rate – is leaving the rest of the country in the dust.
“They need supply” of new homes, BMO economist Robert Kavcic said in a note Wednesday.
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Attracted by jobs in the province’s oil and gas sector, new arrivals from around Canada and elsewhere have pushed population growth in the province to a 32-year high of 3 per cent, Kavcic said.
Meanwhile, new construction activity declined considerably in Ontario (down 16 per cent), Quebec (-13.3 per cent) and British Columbia (-5 per cent), or provinces where worries about overbuilding have been highest.
“There should be little concern about widespread overbuilding,” Kavcic said.
Concerns remain
Still, TD Economics, which has been the loudest among the country’s big banks about the concerns over an inflating residential real estate market, said demographics and demand in Alberta weren’t the lone drivers of June’s higher pace of construction.
“Low interest rates are adding more fuel to the housing market’s tank. Builders are clearly responding to the low interest rate environment and continued strong price growth in the existing home market by keep construction activity elevated,” Admir Kolaj, an economic analyst at TD said.
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Kolaj said that nationally, “the market is still considered to be at least moderately overbuilt.
“Many of Canada’s biggest cities are already flush with condos for sale and still have a record number of units under construction, many of which will end up on the market once completed.”
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