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Starts climb in June

 11 July 2018     HGO Staff 

OTTAWA – Driven primarily by a surge in the multi-unit segment in and around the Greater Toronto Area, housing starts climbed by all three measures used the Canada Mortgage & Housing Corporation (CMHC). The trend measure was 222,041 units in June, up from 216,701 units in May.

The trend measure is a six-month moving average of the monthly seasonally adjusted annual rate (SAAR) of housing starts and is used as its complement to account for the swings in monthly the estimates. CMHC believes in some situations analysing only the SAAR data can be misleading, as it is largely driven by the multi-unit segment which can vary significantly from one month to the next.

“The national trend in housing starts increased in June, reflecting a jump in the SAAR of multi-unit dwellings in urban centres in June to a historical high,” CMHC chief economist Bob Dugan said in a statement. “Notably, the national inventory of newly completed and unabsorbed multi-unit dwellings has remained below its 10-year historical average so far in 2018, indicating that demand for this type of unit has absorbed increased supply.”

Chart courtesy of the Canada Mortgage & Housing Corporation.The standalone monthly SAAR of housing starts for all areas in Canada was 248,138 units in June, up from 193,902 units in May. The SAAR of urban starts increased by 29.9% in June to 228,844 units. Multiple urban starts increased by 46.4% to 172,845 units in June while single-detached urban starts decreased by 3.5% to 55,999 units.

Rural starts were estimated at a seasonally adjusted annual rate of 19,294 units.

Actual starts of single family homes continues to drop. For the month of June, CMHC set its preliminary count at 5,860 units nationally, a decline of 16% from the 6,952 units started in June 2017. For the first half of the year, single starts totalled 26,229 units – a 10% drop from 29,288 units for the comparable period last year.

In the multi-unit segment – which includes apartments, townhouse and other linked housing whether for the rental or condominium market – starts were set at a preliminary 15,093 units, a 35% climb from June 2017’s count of 11,208. For the year-to-date, CMHC counted 68,804 multi-unit starts, up 11% from 62,130 units for the January to June period last year.

Total housing starts were pegged at a preliminary 20,953 units for the month of June – up 15% from the 18,160 units started in June 2017. For the first half of the year, starts totalled 95,033 units, advancing 4% over the 91,418 units for the same period last year.

Regionally, CMHC noted housing starts climbed in the first half across all five regions of the country, except the Prairies where they fell 12%. They climbed 6% both in Ontario and Atlantic Canada and jumped 18% in Quebec. In British Columbia, starts advanced a more modest 3%.

In his research note, Omar Abdelrahman of TD Economics noted June gave housing its first increase after three consecutive months of declines and called CMHC’s report something of a surprise.

“While this rebound is not surprising, its magnitude is more pronounced than expected,” he opined. “Nevertheless, it is important to note that the increases were concentrated in one segment and were mostly within the Ontario region.”

However, he noted a recent report reported a decline in the number of building permits issued and that should result in a pull-back in housing starts during the remaining six months of 2018, which he expects produce starts below the 200,000 unit mark.

“Going forward, starts should ease into the remaining part of the year in light of rising interest rates, macro-prudential regulations, and affordability in the Toronto and Vancouver markets weighing on demand,” Abdelrahman said.

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