Construction of new homes has cooled to a one-year low, led by a pause in condos and apartments, in what one Canadian home builder described as a "lull" in the sector.
That's not to say the domestic market is in for the same kind of slowdown seen in the United States. It's more that the fiery pace of construction in recent years is ebbing, economists said.
Signs are already in the offing.
Housing starts fell 2.4 per cent in September, Canada Mortgage and Housing Corp. said yesterday, countering economists' expectations for a gain. High-rise construction fell to a two-year low, although single starts rose for the second month in a row.
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Brian Johnston, president of Monarch Corp., Canada's oldest home builder, said the market in the Greater Toronto Area is levelling off. "My sense is that we're into a bit of a lull," said Mr. Johnston, who is also the new president of the Ontario Homebuilders Association.
He expects the market to soften by around 5 per cent next year as the economy slows and the labour market cools. He expects demand for condos will outweigh that of single units, however.
It's a big contrast to the "train wreck" in the U.S. market that has seen a surge in speculators, Mr. Johnston said. In Toronto, he estimates less than 1 per cent of buyers of his new homes are speculators.
Across the country, housing starts fell to a 13-month low of 211,300 units in September, on a seasonally adjusted annual basis, from 216,600 units in August.
Canada's housing market has cooled, somewhat, as mortgage rates have climbed and house prices have posted double-digit gains in most regions. CMHC expects the housing market to soften further next year, although it expects high-rise construction to gain in market share as buyers choose more affordable dwellings.
"When we go into 2007, we think there will be a more pronounced decline in single starts than in multiples," said Bob Dugan, chief economist at CMHC.
Economists had expected a rebound in starts last month. Nonetheless, several said the weakness in condominium construction doesn't mean the real estate market is headed for a hard landing.
"Canada's housing market is nowhere near a U.S.-style downturn," said Marc Lévesque, chief strategist at TD Securities Inc.
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