Tony Wong – Toronto Star

During the worst December in recent memory, when the recession had firmly bludgeoned consumer confidence, Brian Johnston sold a mere eight homes. Those aren’t stellar numbers for a company that typically sells 70 to 80 homes a month.

“That was truly desperate times,” says the president of Toronto-based Monarch Corporation, Canada’s oldest home building firm.

“It was a tough time for the entire industry.”

In January, the company laid off staff and prepared for the worst. With a substantial investment of 15 lowrise and eight highrise housing projects across Ontario, the stakes were high.

But over the last few months, the rejuvenating impact of low interest rates and a tighter-than-expected resale market started to lift the new home market.

In June, Monarch sold 160 homes, double what they would normally sell in an average month.

“I’m really surprised at the strength of this rebound,” says Johnston, a former president of the Ontario Home Builders’ Association. “It looks like we’re back in business.”

Still, while sales have spiked higher than expected, the new home industry finds itself in what looks like a fragile recovery.

Housing starts in the Toronto area dropped by a steeper than expected 17.8% in July compared to a month earlier, according to figures released yesterday by the Canada Mortgage and Housing Corporation. Year-to-date starts are down by 42% from last year.

Analysts blamed soggy weather and labour problems, including a civic strike, which made it difficult for contractors to complete work.

“Many condominium apartment projects in the city of Toronto faced construction delays as a result of labour disruptions, weighing heavily on the number of highrise starts,” said Shaun Hildebrand, CMHC’s senior market analyst.

The seasonally adjusted annual rate of starts dipped to 19,800 in July compared with 24,100 in June, according to the federal agency.

Starts, however, tend to be a lagging indicator. After a buyer has purchased a home it can take months, and sometimes years in the case of highrise developments, before a concrete foundation is poured and the unit is registered by the CMHC as a housing start.

“It’s still safe to say that Canada’s housing market is on the mend,” says BMO Capital Markets economist Robert Kavcic. “The setback in Canadian residential construction activity is likely a temporary bump on the road to recovery.”

Starts are expected to rise in the second half as low inventory and tight resale listings have sent some buyers into the new home market.

The Toronto Real Estate Board reported a 28% increase in home sales in July.

Monarch started to slow down development significantly last year as the markets matured. While that helped keep the company afloat, the rebound is now causing builders like Johnston to scramble to keep up with demand.

“This is playing havoc with our forecasting. One day we’re laying off staff, the next day we’re trying to figure out how we’re going to build all these homes,” he says.

Location is still key. Sites in Toronto are experiencing good demand, while projects outside the city are not moving as quickly.

“Despite a reduction in the headline starts total, underlying trends point to a recovery for new home construction in the Greater Toronto Area,” said the CMHC.

Nationally, starts fell by 4.1% to 132,200 annualized units in July from 137,800 a month earlier. The market consensus was for 145,000 units – still far below demographic demand estimated at about 175,000 units per year, according to the CMHC.

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Contact Laurin Jeffrey for more information  –  416-388-1960

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