Posted by Moishe Alexander
After two years of sharp declines, and coming off from a decade of annual housing starts largely above demographic needs, new housing construction is set to stabilize in 2009. Amid emerging positive signs in both the economic and financial fronts, total residential construction in the Kingston Census Metropolitan Area (CMA) will rise by 5.2 per cent this year, with 707 new starts.
In addition to the boost to homeownership demand due to low interest rates, the prospects for increased spill-over demand from a recovering resale market will likely result in a faster year-over-year pace of starts during the first half of 2010. As a result, total starts next year will reach 690 units for a slight 2.4 per cent decrease, thus stabilizing construction activity at a pace more in line with household formation.
Coming off from a historically challenging economic environment, the short-term forecast for Kingston’s residential construction industry remains for the most part optimistic. The substantial monetary easing and fiscal stimulus measures in Canada’s Economic Action Plan will improve economic fundamentals. This will renew household’s appetite for big-ticket items in the face of low interest rates.
While spill-over demand from the resale into the new home market typically takes time to fully materialize, Kingston’s new home market looks ripe for a modest recovery. First, new listings for resale have declined substantially from last year, thus lowering supply competition. Second, the level of unabsorbed new home inventories has returned below the long-term average. Finally, the year- to-date pipeline of properties under construction is substantially lower than for the same period last year, which means that there are resources available for future projects.