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Starts climb in October

 13 November 2017     HGO Staff 

OTTAWA – Housing starts continued to climb in October, driven mainly by upticks in the multi-unit segment. The trend measure was 216,770 units in October, according to the latest report from the Canada Mortgage & Housing Corporation (CMHC), up slightly from the prior month’s 215,153 units. Starts were also up on both an actual and seasonally adjusted basis.

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

“The trend in housing starts essentially held steady in October following a decrease in September,” CMHC chief economist Bob Dugan said in a statement. “Nevertheless, new home construction remains very strong in 2017, as the seasonally adjusted number of starts has been above 200,000 units in nine of ten months so far this year.”

Canada’s housing market continues to be highly regional in nature.

Chart courtesy of the Canada Mortgage & Housing Corporation.For example, after four years of declining construction activity, population growth has helped push New Brunswick’s housing starts up 28% year-to-date. Starts have been strong across the province, with much of the activity concentrated in the Moncton area, where multi-unit starts have been particularly strong, up 49% year-to-date.

Montréal saw the highest level of residential construction ever recorded for the month of October, with close to 3,500 housing units started – half of them on the Island of Montréal. As seen elsewhere, condominium and rental housing construction has driven this growth. Lower inventories of completed and unsold condominiums and the lower vacancy rates in newer rental buildings seem to have prompted developers to ramp up construction projects this year.

Low-rise housing starts trended higher in Ottawa last month, supported by improved employment and earnings this year. This increase was just enough to offset the effect of the sharp decline in apartment starts this month. For the year-to-date, housing starts were 27% higher than in 2016 – driven by a doubling in apartment starts following three years of declining high-rise construction as the number of completed and unsold condominiums has trended down considerably since peaking in mid-2016.

Meanwhile, total housing starts in Toronto trended lower in October, with the most pronounced declines occurring in single-detached home and apartment starts.

While labour market conditions and housing demand in Calgary improved this year, the trend has been slowing over the last couple of months as listings in the competing resale market combined with elevated inventories in the new home market have climbed. Despite the decline, total actual housing starts to the end of October were still up 24% compared to the same period a year earlier.

Starts trended higher in Vancouver last month, with seasonally adjusted monthly starts reaching a 12-month high. The increase was primarily driven by a significant uptick in condominium apartment starts in Burnaby, Coquitlam and Surrey, where the demand is strong for more affordable multi-family dwellings. Year-to-date starts remain below 2016 levels, mostly due to fewer projects getting underway in the City of Vancouver and on the North Shore this year.

The standalone monthly SAAR of housing starts for all areas in Canada was 222,771 units in October, up from 219,293 units in September. The SAAR of urban starts increased by 2.5% to 205,935 units. Multiple urban starts increased by 12.5% to 149,593 units in October. Single-detached urban starts decreased by 17.1% to 56,342 units.

Actual starts of single family homes in all of Canada’s urban centres – which CMHC defines as towns with populations greater than 10,000 – 5,144 units in October, an 11% decline from the 5,752 units started in October 2016. However, for the year-to-date, single family starts totalled 53,069 units – a 7% uptick from the comparable period’s 49,545 units.

Actual starts of multi-family units – where apartments, townhouses or some other form of linked housing whether for the rental or condominium markets – were preliminarily set at 12,945 for October, leaping 32% from the 9,829 units for the same month last year. For the year-to-date, multi-unit starts totalled 112,016 units, a 10% gain from the 100,298 units for the first ten months of 2016.

Total starts for the month were set at 18,089 units, up 16% from October 2016. For the year-to-date, CMHC said starts totalled 165,085 units – up 10% from the comparable period.

In his note to clients, Dina Ignjatovic of TD Economics said recent interest rate hikes plus the strong possibility of another coming in early 2018 combined with new government regulations governing mortgages could drag down demand and lead to declines in new home construction.

“Indeed, we expect starts to gradually trend down toward the 190k mark over the next year, roughly consistent with demographic demand,” he said.

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