Starts climb for third straight month in August: CMHC
OTTAWA – Housing starts climbed on both a month-over-month and year-over-year basis for the third consecutive month in August, according to data released by Canada Mortgage & Housing Corporation (CMHC). Its trend measure pegged starts at 219,447 units in August, up slightly from 217,339 units in July. Starts were also up on a seasonally adjusted basis. Actual starts were also up.
“Canada’s trend in housing starts was above the 200,000 unit mark for the eighth consecutive month,” said Bob Dugan, CMHC’s chief economist. “Demand for new homes remains strong, consistent with consumer confidence which reached its highest level in ten years.”
This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts. It is used to complement the SAAR data as it can often be misleading as it is largely driven by the multi-unit segment which can vary significantly from month to month.
The standalone monthly SAAR of housing starts for all areas in Canada was 223,232 units in August, up from 221,974 units in July. The SAAR of urban starts increased by 0.8% to 207,524 units while multiple urban starts increased by 2.7% to 145,618 units. This masks a lot of volatility in provincial multiple starts. Single-detached urban starts decreased by 3.2% to 61,906 units.
Rural starts were estimated at a seasonally adjusted annual rate of 15,708 units.
CMHC also reported at actual starts of single family homes in urban areas – defined as areas with populations of 10,000 or more – were up 8% in August to 5,789 units. The biggest upticks were in Alberta (45%) and Quebec (15%) while starts in Ontario and British Columbia were down slightly from August 2016.
For the year-to-date, single starts were pegged at 41,588 units – a 10% gain over the 37,821 units for the comparable eight-month period of 2016. Starts in Alberta jumped 31% while Ontario’s advanced 5% while those in B.C. slid 1% during the period.
Meanwhile, multi-unit starts – apartments, townhouses and other linked homes for either the condominium or rental market – were up 31% in August to a preliminary 11,961 units. The biggest gains were made in Ontario (50%) and Alberta (33%).
For the year-to-date, multi-unit starts totalled 86,395 units – an 11% gain over last year. The gains were largest in Alberta (39%), Quebec (21%) and Ontario (7%) while B.C. starts fell 4%.
Total starts for the month of August were set a preliminary 17,750 units, a 22% uptick over August 2016. The biggest gains were recorded in Ontario (27%) and Alberta (33%).
For the year-to-date, total starts were pegged at 127,983 units – up 10% over the comparable period. Starts were up in almost every region of the country but slid 3% in B.C.
“This was a good report that suggests that the Canadian housing market remains quite strong after the wobble it suffered in the second quarter and the uncertainty of regulatory changes in Ontario and rising interest rates,” Michael Dolega, director and senior economist at TD Economics said in a note, adding the trend measure touched the fastest pace since late 2012.
He also pointed out that much of the weakness seen in the second quarter was driven by Ontario, which was adjusting to the provincial government’s Fair Housing Plan that was designed “to remove some froth from the market.” A strong robust economy is motivating builders to ramp up production to compensate for that slowdown.
“All in all, we expect Canadian housing starts to remain relatively healthy in the coming months, but begin to trend lower as the effects of rising interest rates (another Bank of Canada hike likely later this year) and potential new regulation gradually take a bite out of demand,” Dolega concluded. ‘Ultimately, starts should hold near the current levels in the next month or two, but trend towards the 200,000 level into early 2018 and fall below that threshold the year after.”