Starts continue to climb
OTTAWA – Housing starts were up in June, according to the latest data published by the Canada Mortgage & Housing Corporation (CMHC). Gains were recorded on a seasonally adjusted basis and according to the trend measure. On an actual basis, starts were down for the month of June, but up 8% for the first half of 2017.
The federal housing agency said the trend measure reached 215,459 units in June, up slightly from the 214,570 units in May. The trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
“The trend in housing starts for Canada reached its highest level in almost five years,” CMHC chief economist Bob Dugan said in a statement. “So far this year, all regions are on pace to surpass construction levels from 2016 except for British Columbia, where starts have declined year-to-date after reaching near-record levels last summer.”
CMHC uses the trend measure to complement the monthly SAAR of housing starts to account for considerable swings often found 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 standalone monthly SAAR of housing starts for all areas in Canada was 212,695 units in June, up from 194,955 units in May. The SAAR of urban starts increased by 9.6% in June to 194,773 units. Multiple urban starts increased by 9.4% to 127,944 units in June and single-detached urban starts increased by 10.1% to 66,829 units.
Rural starts were estimated at a seasonally adjusted annual rate of 17,922 units.
However, actual starts paint a slightly different picture.
Starts of single family homes in urban areas – which CMHC defines as a community with a population of 10,000 or more – were tallied at a preliminary 6,948 units for the month of June, up 10% from the 6,289 units started in June 2016. For the year-to-date, single starts gained 11% at 29,284 units compared to 26,464 units for the comparable period last year.
Meanwhile, the multi-unit segment – which includes apartments, townhouses and other linked dwellings built for both the rental and condominium markets – saw starts for the month of June preliminarily pegged at 11,169 units, down 10% from the 12,360 units started in June 2016. For the first half of the year, multi-unit starts came in at 62,196 units, 7% greater than the 58,360 units for the January to June period last year.
For the month of June, total starts actually climbed 3% to 18,117 units, from 18,649 units recorded in June 2016. For the year-to-date, total starts were up 8% to 91,460 units, compared to 84,824 units for first half last year.
CMHC also reported actual starts for the month of June were up in every province across the country, except Ontario and British Columbia, where they fell 8% and 22% respectively.
For the first half of the year, actual starts were up everywhere across Canada, except B.C. and Newfoundland & Labrador, where starts fell 9% and 20% respectively. Starts were up 27% in Alberta, 14% in Quebec and 3% in Ontario.
In a note to clients, Dina Ignjatovic of TD Economics opined CMHC’s June report puts the pace of home building for the second quarter of 2017 at about 204,000 units – a decline of about 8% relative to the first quarter. “As such, homebuilding activity will detract from growth during the quarter,” he said, adding, “Having said that, the overall economy remains on track to expand by close to 3% during Q2.”
He also expressed some concern that the Bank of Canada’s hike in interest rates will slightly weaken the housing market at some point. “The impact of higher rates – be it now or later this year – will be most pronounced in regions where affordability is the lowest, such as Vancouver and Toronto,” he wrote.
Ignjatovic also noted that while the Greater Toronto Area is still adjusting to the Ontario Fair Housing Plan, it appears to be having the desired effect – that is, cooling the market and slowing both growth of both sales and prices. “While starts did pause in May, the rebound in June suggests that the impact on new home construction may not be as long-lasting. Indeed, while the province’s housing starts are unlikely to return to the highs seen early this year, we expect them to hold near current levels going forward,” he said. “For the country as a whole, homebuilding activity is expected slow modestly over the remainder of the year, but remain close to the 200K mark for the foreseeable future.”