Job losses diminish area housing activityHigh unemployment will keep a lid on London-area home construction and real estate sales next year, a new forecast says. Hank Daniszewski |
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 [ 2009-11-06 ] |
CMHC analyst David Lan says the hot market in home construction and real estate won't return soon to the London area because of high unemployment that will persist into 2010.
The area market has lost 20,000 jobs since the labour market peaked in 2007, with about half the losses coming from the manufacturing sector.
"High unemployment will persist well until next year and will be a drag on the resale market," said Lan in an interview.
London's unemployment was 11.2% last month, the second-highest of any major urban centre in Canada.
Lan said another drag on new starts is competition from a big supply of homes less than five years old on the resale market, a carry-over from several boom years in construction before the recession.
Most of the activity will be in high-end luxury condos and apartments appealing to empty nesters. Overall vacancy rates are expected to climb from 4.2% to 5% next year. Apartment construction is expected to be stable, with about 850 starts by the end of this year and 800 in 2010.
The real estate market is expected to cool down, with an estimated 7,500 sales this year and 7,200 in 2010, down from 8,620 in 2008.
Lan said the decline marks a return
Average resale home prices will increase modestly from $213,500 by the end of this year to $217,000 in 2010.
Mortgage rates are expected to increase by less than 1% next year.
The report said London house prices will continue to be more affordable than most other major urban centres and the city will draw buyers from the rest of Ontario. The London area has gained from migration within Ontario in recent years, with most of the new arrivals coming from the Toronto area.
Across Ontario, CMHC regional analyst Ted Tsiakopoulos said Ontario's export-dependent economy will continue to be soft in 2010 as debt-laden American consumers cut back on spending and a high Canadian loonie cuts into competitiveness for manufacturers.
He said domestic demand rather than exports will lead a modest recovery next year.
hank.daniszewski@sunmedia
NEW HOME STARTS
2007: 3,141
2008: 2,385
2009: (estimate) 1,840
2010: (forecast) 1,890
EXISTING HOME SALES
2007: 9,378
2008: 8,620
2009: (estimate) 7,500
2010: (forecast) 7,200
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