PAGE A2 – July 2010 – The Ottawa Construction News


Mixed signals for economy despite huge increase in Ottawa-area housing starts


STAFF WRITER – The Ottawa Construction News


May’s housing starts show that activity


in Ottawa’s residential construction sector has heated up significantly since last year, but what the numbers reflect is simply a market returning to normal, said John Her- bert, executive director of the Greater Ot- tawa Home Builders’ (GOHBA).


Association


When youu dig deeper into the numbers, you can get a decidedly mixed picture with signs on one hand that the Ottawa housing market will fare well in the months ahead, while renovators worry about their future with the imposition of the HST and a po- tentially declining economy.


The Canada Mortgage and Housing Corp. reports that Ottawa-area housing starts increased from 369 units in May 2009 to 709 units in May 2010. Starts in the first five months of 2010 were up 39 per cent from the first five months of last year, the CHMC says in a news release.


This is in sharp contrast to the country as a whole, as starts were down nationally. “The seasonally adjusted annual rate of urban starts decreased by 9.5 per cent to 165,200 units in May,” CMHC stated in a separate press release.


While the increase in activity in Ottawa might seem extraordinary, especially when contrasted with the rest of Canada, it shouldn’t be reported as such, Herbert said. “I think a lot of media have distorted


what’s gone on – we always like good news and it’s always good to see an increase, but to portray it as a fantastic increase is mis- leading because last year was really low,” he explained. “We were just barely starting to recover from the crash from September ‘08 when


sales plummeted, and as a consequence, starts plummeted.”


Herbert described the early months of 2009 as “dark days,” not only for the city, but the rest of the country as well. How- ever, last June marked a turnaround, he ex- plained.


“As it turned out, it was short-lived suf- fering, and the switch as turned back on, magically, in June of ’09, and sales took off and have been strong since.”


Because the “numbers were so low in early ‘09, it’s easy to show big increases.” Housing starts increased in all areas of Ottawa in May, the CMHC reported.


Ne-


pean reported the largest number in starts. Townhouse and single detached housing units predominated.


Almost all areas, with the exception of the Old City of Ottawa, showed growth year-to-date. Except for apartments, there was “solid growth” for all types of housing starts.


The fact that Herbert characterises the numbers as a rebound rather than a boom doesn’t mean he expected to see a recovery so quickly – or that he’s not grateful for it. “We’re surprised and thrilled,” he said, explaining that recessions in the industry are normally long-lasting. He compared the


effect they usually have to a massive ship: “there is a mass momentum. It takes a lot for it to slow down, change course, and get back to speed.” Normally, they last for years, and have long lasting effects — companies go bank- rupt, Herbert said.


“Based on experience, that was the ex- pectation. Everybody was surprised and re- lieved when sales came back.”


The reason Ottawa has fared so well, said Herbert, is because of the federal gov- ernment jobs located in the city. “What we think is happening is that, as always, Ottawa is insulated from reality,” he said.


“So what we’re seeing is a significant level of retirement. Baby boomers are retir- ing in increasing numbers, on large pen- sions. They are staying in their homes and new people are brought in from across the country to take over their positions.... so we are benefitting from their need to be accom- modated as well.”


Robert Merkley of Merkley supply echoed these observations. “We are in a sheltered area,” he said. “(Civil servants) have a good retirement with staying power and pensions, but generally live in houses below $400,000 (the HST threshold). “ Herbert added that there is data to sug- gest that more people will be needed to do the same number of jobs in the future, which will also benefit the housing indus- try.


A CMHC release focusing on the out- look for Ottawa’s housing market also touched on the growing public sector. It noted that in the first four months of 2010, the public administration sector had an in- crease of nearly four per cent compared to the first four months of last year. Still, Herbert doesn’t expect the boom to last very long, and the predictions of the CMHC are much the same.


CMHC expects the new home market to


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