Garry Marr, Financial Post 

The Canadian housing market’s surprising turnaround is spreading to new home construction as developers scramble to respond to a supply shortage that has sent pricing soaring for existing homes.

But any increase in construction on the new home side will likely not surface fast enough to feed the demand for housing that continues to be spurred on by record low interest rates.

Canada Mortgage and Housing Corp. said Monday there were 157,300 units constructed last month on a seasonally adjusted annualized basis, a 5.4% increase from a month earlier. Annualized starts at dropped as low as 118,500 in April.

“There is not a lot of inventory around,” said Gary Friend, president of the Canadian Home Builders’ Association, adding his industry has been careful not to speculate. “We have to watch our Ps and Qs, as we try to meet this demand.”

Any increase in supply would be welcomed as a shortage of new listings has lead to a spike in prices. The Canadian Real Estate Association said last month existing home prices across the country were up 13.6% in September from a year ago as a supply problem was evident in almost every city.

The shortage has yet to ease despite the suggestion higher prices would coax homeowners to sell. This month the Toronto Real Estate Board reported sale prices in October were up 20% from a year ago.

“The existing homes market is in short supply so we’ve gone from a buyer’s market to seller’s market. The way it gets linked is you get some spillover into the new homes market and that’s starting to happen,” said Bob Dugan, chief economist with CMHC.

The agency has already upped its forecast for new home construction for 2010 from 150,300 to 164,900. Even at that level though, construction is still well off the 211,000 new starts recorded in 2008.

Paul Ferley, assistant chief economist with the Royal Bank of Canada, said “at the margins” new home construction could help ease the housing crunch. “Builders are aware and will contribute where they can to advance construction activity but no they can’t turn on a dime.”

A universal life contract is a financial instrument that allows you to combine the benefits of life insurance and investment, once your insurance needs have been clearly established.

Who Can Benefit From Such A Product?

1. Anyone who makes the maximum contribution to an RSP and is looking for an additional tax-sheltered vehicle where investments can grow.
2. Anyone who has fixed-income securities in a taxable account and wants to shelter the earnings on these investments from taxes.
3. Anyone who has taxable assets and wishes to minimize taxes payable by his or her estate.
4. Anyone whose investments are held by his or her own company.
5. Anyone who wants to build retirement capital other than in an RSP.
6. Anyone who does not expect to spend all of his or her savings, and wishes to maximize their value when they are passed on.
7. Anyone whose estate is likely to be heavily taxed.

The Principle

1. Each policy is unique: you determine how you will use the insurance and investment options, depending on your own personal needs.
2. Minimum premium: the minimum amount required to cover the cost of the life insurance and related charges; the premium and administrative charges are guaranteed for life.
3. Maximum premium: the maximum you may invest in your policy. This limit is determined by your age, gender and health and the amount of life insurance coverage you opt for.
4. Choose from many investment options: your returns can be based on ordinary term deposits or on various indexes, including the SM (Canadian bonds), TSE 100 (Canadian stocks), S&P 500 (US stocks) or MS (international stocks).
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What Happens During Your Lifetime?

At the moment you choose, you may borrow money from a financial institution, leaving your universal life policy as collateral. There will be no capital or interest payments to make, or income taxes to pay. Upon your death, the institution will repay itself from your policy, leaving the balance to your heirs.

What Happens When You Die?

Your heirs receive, absolutely tax free:

1. The death benefit provided by your life insurance contract, plus
2. The funds accumulated under the investment component of the contract.