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Housing market solid

Manitoba starts rebound; larger cities face bubble

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They may be worrying about it in some quarters of the country, but concern about a housing bubble is not even on the radar when it comes to the Manitoba market.

For all sorts of fundamental supply and demand reasons, Canada Mortgage and Housing Corp. is predicting a strong bounce back from the ragged 2009 housing start numbers in Manitoba in its third quarter Housing Market Outlook issued Tuesday.

CMHC forecasts 5,125 new starts in Manitoba in 2010, a 23 per cent increase from 2009; in 2011, it expects a slight pull back to 4,950 units.

Mike Moore, executive director of the Manitoba Home Builders Association, said the agency's vote of confidence is exciting.

"It would be absolutely fabulous to top 5,000," he said. "At the beginning of the year that was beyond our wildest expectations."

At that time, the provincial organization was shooting for 4,800 new home starts (including multi-family dwellings). But continuing strong demand and sales combined with a resilient provincial economy has kept home builders busy.

That's why a debate over whether Canada has a housing bubble that could crash the country's fragile economic recovery does not seem to apply in this province.

The Canadian Centre for Policy Alternatives raised the bubble spectre Tuesday, noting recent national data showing prices remain about 15 per cent higher than last year while sales peter out.

It warns there are bubbles hanging over six of Canada's hottest real-estate markets -- Vancouver, Edmonton, Calgary, Toronto, Ottawa and Montreal. It says those markets are in bubble territory for the first time in 30 years -- and a U.S.-style correction is still not out of the question if big housing price increases collide with a sharp gain in mortgage rates.

The centre's report says the steep rise in prices -- which sit at 4.7 to 11.3 times Canadians' annual income in many cities, much higher than historical levels of between three and four times income -- is an "accident waiting to happen."

It would take only a one to 1.25 per cent mortgage rate increase to cause a housing crash similar to the one the U.S. is grappling with, said David Macdonald, author of the report.

However, many economists have concluded Canada's once-overheating housing market, which began to cool in the second quarter of the year, has stopped just shy of a bubble.

And the C.D. Howe Institute dismissed the possibility in a report of its own Tuesday, concluding that Canada's cautious mortgage lending policies will protect against a housing crash similar to the one that's hammered the U.S.

Bubbles generally occur when housing prices rise faster than inflation, incomes and economic growth, until they reach unsustainable levels and a collapse in prices is triggered.

But at least as far as new housing starts in Manitoba are concerned, Moore said it is a return to more reasonable numbers from around 2005 with price increases and inventory in line with supply and demand.

"We are not worried about a bubble here," he said. "This is just a return to more proper numbers."

There has been plenty of volatility in the last few years, with housing starts getting up to 5,700 units in 2007, falling slightly in 2008 and then dramatically in 2009 as the world struggled with a recession. Moore said this year's forecast will not be too taxing for the industry.

"It's the right number for the market," he said. "Everyone is busy." If immigration and population growth forecasts for Manitoba continue to hold, demand will be strong, he added.

CMHC is forecasting average resale prices will increase by 8.5 per cent in Winnipeg this year to $225,000 and by 2.2 per cent in 2011.


-- with files from the news services

Housing starts, according to Canada Mortgage and Housing Corp. (forecast*):


Place 2007 2008 2009 2010* 2011*


Canada 228,343 211,056 149,081 184,900 176,900

Manitoba 5,738 5,537 4,174 5,125 4,950

Saskatchewan 6,007 6,828 3,866 4,725 4,900

Alberta 48,336 29,164 20,298 28,450 30,700

Republished from the Winnipeg Free Press print edition September 1, 2010 B6

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