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Overall housing starts continue to climb in February

 9 March 2018     HGO Staff 

OTTAWA – New housing construction was of two minds in February as starts of single family homes fell across the country while multi-unit starts jumped on both the actual and seasonally basis. But, according to the trend measure favoured by Canada Mortgage & Housing Corporation (CMHC) they were pronounced stable for the second month of 2018.

The federal housing watchdog reported the trend in housing starts was pegged at 225,276 units for February 2018, compared to 224,572 units in January. The trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

“The national trend in housing starts has been very stable since November 2017, masking offsetting trends for multi-unit and single-detached dwellings,” CMHC chief economist Bob Dugan said in a statement. “Multi-unit starts have trended higher in recent months in most major urban centres while single-detached starts have trended lower.”

CMHC uses the trend measure as a complement to the monthly SAAR of housing starts as it is largely driven by the multi-unit segment, which can vary significantly from one month to the next.

Chart courtesy of the Canada Mortgage & Housing Corporation.The standalone monthly SAAR of housing starts for all areas in Canada was 229,737 units in February, up from 215,260 units in January. The SAAR of urban starts increased by 7.1% in February to 211,211 units. Multiple urban starts increased by 15% to 154,535 units in February while single-detached urban starts decreased by 9.8% to 56,676 units.

Rural starts were estimated at a seasonally adjusted annual rate of 18,526 units.

Actual starts of single family homes in urban areas – which CMHC defines as towns with a population of 10,000 or more – were set at a preliminary 3,108 units for February, a decline of 19% over the 3,847 units started in February 2017. They declined in all four of Canada’s largest markets: British Columbia, Alberta, Ontario and Quebec.

For the year-to-date, single starts numbered 6,562 units – down 9% from the 7,202 units started during the first two months of last year.

Meanwhile, starts in the multi-unit segment – which includes both apartments and townhouses for both the rental and condominium market – were up 35% for the month at 11,415 units. For February 2017, they were 8,460 units.

For the first two months of 2018, segment starts were set at a preliminary 20,892 units – up 20% from 17,448 units during the same period last year.

Total starts totalled 14,523 units in February, up 18% over the 12,307 units last year. They were up in all four of the major market, led by Ontario where they leaped ahead 49% year-over-year. For the year-to-date, total starts were 27,454 units for an 11% gain over last year’s 24,650 units.

“Homebuilding continues to defy expectations,” Rishi Sondhi of TD Economics said in his research note. “Starts are being boosted by a relatively firm economic backdrop, healthy population growth and past gains in pre-construction sales in Toronto. However, February’s increase was driven by the volatile multi-unit sector, leaving some scope for reversal in March.”

He believes the drop will happen given the jump in Ontario’s starts are substantially higher than demographic fundamentals would suggest. He also noted the level of starts in the first quarter of 2018 sit below the pace set in the fourth quarter of 2017.

“Alongside the plunge in resales to begin the year, residential investment looks to have declined by nearly double-digit rate and is expected to subtract sharply from first quarter growth,” Sondhi said. “While the pace of starts has held up so far this year, we maintain that cooling demand in the face of restrictive policy measures and higher rates will ultimately slow starts going forward.”

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