Housing starts up 9% YTD
OTTAWA – On a seasonally adjusted basis, housing starts fell in September according to the Canada Mortgage & Housing Corporation (CMHC). They also fell according to its trend measure. But, on an actual basis they were up 2% for the month and 9% for the year-to-date, which suggests housing is still driving the economy forward.
In its report, CMHC pegged the trend – a six month moving average of the seasonally adjusted annual rate (SAAR) of housing starts – at 214,821 units in September, down from 220,573 units in August.
“Housing starts are trending lower in September after increasing for eight consecutive months,” CMHC chief economist Bob Dugan said in a statement. “Nevertheless, new home construction remains very strong as the seasonally adjusted number of starts was above 200,000 units for four straight months.”
CMHC uses the trend measure to complement the SAAR to account for the swings in monthly estimates, which are driven by the market’s multi-unit segment that can vary from one month to the next.
The standalone monthly SAAR of housing starts for all areas in Canada was 217,118 units in September, down from 225,918 units in August. The SAAR of urban starts decreased by 5.1% to 198,910 units while multiple urban starts decreased by 10.7% to 131,388 units in September. Single-detached urban starts increased by 8.2% to 67,522 units.
Rural starts were estimated at a seasonally adjusted annual rate of 18,208 units.
In his note, Michael Dolega, director of TD Economics, noted the SAAR for September actually beat expectations, which were forecast to fall to 210,000 units. In fact, September’s drop was driven almost exclusively by the decrease in the multi-unit segment in largest Canadian cities across the country such as Toronto and Vancouver.
The losses were also concentrated in Ontario, which experienced its worst month for housing starts since May while the pace picked up in Quebec, British Columbia and Atlantic Canada. In the Prairies, the pace was largely unchanged with gains in Alberta offset by losses in the other two provinces.
Actual starts of single family homes in urban areas – which CMHC defines as towns and cities with populations of 10,000 or more – were pegged at a preliminary 6,343 units in September, 6% gain over the 5,971 units started in September 2016. For the year-to-date, starts were measured at 47,901 units, advancing 9% from the 43,793 units for the first nine months last year.
Meanwhile, multi-unit starts – apartments, townhouses and other linked units built for either the rental or condominium market – were totaled at a preliminary 12,427 units for September, essentially unchanged from the 12,452 units for September 2016. For the year-to-date, the count was up 10% to 99,063 units, compared to 90,464 units for comparable period last year.
For September, total housing starts were counted at a preliminary 18,770 units, a 2% uptick over the 18,423 units began in September 2016. For the first nine months of 2017, starts totalled 146,966 units – 9% greater than the 134,257 units for same period a year ago.
“Today’s report is a bit of mixed bag with starts pulling back, but remaining above expectations and the decline concentrated in the volatile multifamily starts,” Dolega observed. “While starts in Toronto remain under close watch, given past regulatory changes, the overall market appears to be taking higher interest rates in stride and remains healthy.”
He also noted while Ontario had a weak September, starts for the third quarter were at their second highest level in more than five years. This suggests the market is adjusting well to the provincial government’s plan to cool the red-hot Ontario market after some initial uncertainty.
However, the bank still expects the trend to lower in the closing months of 2017 and to fall below 200,000 units on a seasonally adjusted basis in 2018, mostly as a result of rising interest rates which are expected to go up again later this year.