Pace of construction in Ottawa still too high, according to CMHC

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Home builders need to further scale back construction to cool overheated markets in Ottawa and other centres, says Canada Mortgage and Housing Corp.

A quarterly market assessment released by the federal government’s housing watchdog Wednesday said rising vacancy rates and high inventories of new and unsold units are causing problems in Calgary, Saskatoon, Regina and Ottawa.

“As more centres are now showing problematic overbuilding conditions, inventory management is becoming more important.” said Bob Dugan, CMHC’s chief economist.

Still, the agency described the Ottawa market as only slightly overheated. In November, it warned that burgeoning condominium construction had pushed the market into a category of “moderate risk.”

In December, Ottawa builders started construction on 422 homes, a drop from 577 started in December 2014. Of that total, 236 were multiple-dwelling units, which includes condos. That’s down from 462 starts during the same month last year.

At the same time, builders increased construction of single-detached homes, which continue to be popular with buyers. CMHC said 186 single homes were started in December, compared with 115 in December 2014. It marked the second month that builders have increased the pace of construction of single homes.

Overall, new home construction dropped by 14 per cent in 2015, with 4,972 units started compared to 5,762 in 2014.

Still, with a booming market for resale homes, it seems the slowing construction pace hasn’t been enough.

According to the Ottawa Real Estate Board, 703 homes were sold in December through its Multiple Listing Service, a 10.3-per-cent jump over the 638 units sold during the same month last year.

The increase, coupled with a record-breaking month in September, offset a slow start to the year and led to total sales of 14,658 units for 2015. That was a 5.3-per-cent increase over the 13,919 homes sold in 2014.

On a more positive note, CMHC recognized that the prices of Ottawa homes have stabilized. In its last report, CMHC said Ottawa valuations were starting to climb too high. The agency reported Wednesday that prices have stabilized over the past three months.

According to the real estate board, the average price of a residential home in Ottawa in 2015 was $391,940, up 1.9 per cent over 2014.

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