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Housing starts stable?

 15 April 2019     HGO Staff 

OTTAWA – According to its trend measure, housing starts totaled a preliminary 202,279 units on an annualised basis in March, the Canada Mortgage & Housing Corporation (CMHC) reported last week. When compared to the 202,039 units for February, the federal housing agency described this as stable.

But on an actual basis, starts fell drastically year-over-year even though they gained ground on seasonally adjusted basis.

The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts. It’s used as a complement to the monthly SAAR to account for considerable swings in the estimates, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.

Chart courtesy of the Canada Mortgage & Housing Corporation.“The national trend in housing starts was essentially unchanged in March, remaining near its historical average,” Bob Dugan, CMHCs chief economist said in a statement. “The trend has been very stable since the final quarter of 2018, following a period of steady declines from the historically elevated levels registered in recent years. Higher mortgage rates combined with still-favourable, but less stimulative economic conditions have contributed to moderation in demand for new homes in urban centres.”

The standalone monthly SAAR of housing starts for all areas in Canada was 192,527 units in March, up 15.8% from 166,290 units in February. The SAAR of urban starts – which CMHC defines as a town or city with more than 10,000 people – increased by 17.0% in March to 178,033 units. Multiple urban starts increased by 18.6% to 135,894 units in March while single-detached urban starts increased by 12.1% to 42,139 units.

Rural starts were estimated at a seasonally adjusted annual rate of 14,494 units.

However, starts of single-family homes were set a preliminary 2,544 units in March – down 31% from the 3,703 units in March 2018. For the first three months of the year, single family starts totalled 6,924 units, a decline of 33% from the 10,427 units started in the same period a year ago.

The decline was felt across the country and ranged from a decline of 9% in Quebec, to 46% in Atlantic Canada and 44% in Ontario.

Meanwhile, starts in the multi-unit segment of the market were tagged at a preliminary 10,312 units in March, down 3% from 10,577 units in March 2018. For the year-to-date, starts were set at 28,651 units – a 10% drop from the 31,698 units recorded for the comparable period.

However, its in this segment where the regional difference show as starts in Atlantic Canada and Quebec were up 45% and 12% respectively. But they were down across the rest of country, particularly Ontario where they fell 24%.

For the month of March, total starts were off 10% year-over-year at 12,856 units and off 16% for the year-to-date at 35,575 units. Starts were up 3% in Atlantic Canada and 10% in Quebec but down 29% in Ontario, 17% in the Prairies and 9% in British Columbia.

“As expected, homebuilding shook off February’s weather induced chill, with starts bouncing back nicely in March,” Rishi Sondhi of TD Economics said in a research note. “Still, the prior month’s soft print left housing starts at 187,300 annualised units for Q1 overall – the softest showing since 2015.

“Looking ahead, we expect the pace of homebuilding to pick up slightly in the near-term, buoyed by ultra-strong population growth, low rental vacancy rates in key markets and past gains in pre-construction sales,” he continued, adding he still expects homebuilding to trend lower through 2020.

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