Starts trend up in April
OTTAWA – Housing starts continue to set an almost blistering pace, trending at an annual rate of 213,768 units in April, up from 210,702 units in March, according to the latest data from Canada Mortgage & Housing Corporation (CMHC).
The trend is a six-month moving averages of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
“New housing construction increased in Canada, with seasonally adjusted data exceeding 200,000 units for five months in a row,” CMHC chief economist Bob Dugan said in a statement. “The increase in the trend was mainly due to apartment construction in British Columbia and Québec, which was partly offset by a decline in Ontario’s multiple starts.”
The agency noted apartment construction continues to drive the residential market in Halifax as its aging population of baby boomers increasingly sell their homes and downsize by moving into rental units.
While the rate of housing starts was down in Quebec, starts for the first four months of the year are actually up about 30%, mainly due to apartment construction in Montreal and Quebec City. “As well, single-detached home starts have been strong so far in 2017, thanks in part to tightening resale market conditions,” the agency said.
Meanwhile, the trend in housing starts in Toronto remained stable in April, as slight increases in low-rise homes were offset by some declines in apartment starts. Overall, new home construction this year has been building momentum as both new single-detached and townhome starts trended higher to reach a nine-year high in April. Tight conditions in the resale market continue to cause demand to spill over into the new home market.
In London, April 2017 single-detached starts were much higher than in April 2016 and the ten year average for April. The gap between house prices in Toronto and London has widened significantly, making new single-detached homes in London that much more appealing to retirees from Toronto who wish to sell their home but not downsize.
In Winnipeg, a decrease in inventories in the new home market and balanced resale market conditions are allowing builders to increase production. Actual housing starts in April increased year-over-year for the fourth consecutive month, boosting year-to-date starts to their highest levels since 1987.
Housing starts in the Greater Vancouver Area trended higher for the first time in four months, led by multiple-family residential construction. “Builders are responding to demand in the market as eight in ten townhouses and all apartments were sold at completion during the last two months,” CMHC reported.
The standalone monthly SAAR of housing starts for all areas in Canada was 214,098 units in April, down from 252,305 units in March. The SAAR of urban starts decreased by 15.3% in April to 199,485 units. Multiple urban starts decreased by 16.7% to 134,314 units in April and single-detached urban starts decreased by 12.1%, to 65,171 units.
Rural starts were estimated at a seasonally adjusted annual rate of 14,613 units.
Actual urban starts – in towns and cities with a population greater than 10,000 – for the month of April were up 13% on a year-over-year basis, reaching a preliminary mark of 16,324 units, compared to 14,477 units for April 2016.
Single family homes accounted for 5,508 units, up 18% from 4,498 units in April last year.
In the multi-unit segment – which includes townhouses and apartments for both the rental and condominium markets – saw preliminary starts of 11,016 units. That’s up 10% over the 9,979 units started in April 2016.
For the year-to-date, starts are up 14% at a preliminary total of 57,101 units. Single starts gained 15% at 16, 542 units and multi-unit starts are up 13% at 40,559 units.
Picking up on the drop in the SAAR, Michael Dolega of TD Economics pointed out in his note that the pullback was to be expected “after a red-hot March.
“Still, the decline leaves housing starts on a solid course, with the April figure remaining above the six-month moving average and both singles and multiples well above their levels last year,” he continued, adding home building activity is moving to meet a pace that is supported by this country’s changing demographics.
“Ultimately, we expect housing starts in Canada to continue along this trajectory and settle closer to 200,000 later this year with Toronto’s market and its response to the new rules being the main risk to this outlook,” he opined. “The province vowed to speed up the time it takes for properties to get to market while slapping non-residents with a sales tax of 15% amongst a slew of other measures. We expect price growth will cool but don't foresee a significant impact on housing starts over the near-term. Nonetheless, the sheer number of the new measures and their potential interrelationships makes an exact rediction challenging.”