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Starts up in January

 9 February 2018      

OTTAWA – It might be the middle of winter, but housing starts continued to fuel the overall economy in January recording only a slight dip in the Canada Mortgage & Housing Corporation’s (CMHC) trend measure while actual units were up on a year-over-year basis.

The trend in housing starts was 224,865 units in January 2018, compared to 226,346 units in December 2017. This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

“The national trend in housing starts held steady for a third consecutive month in January, remaining near the 10-year high set in December,” CMHC chief economist Bob Dugan said in a statement. “This reflects higher starts of multi-unit dwellings in urban centres in recent months, which has offset lower starts of single-detached homes.”

Chart courtesy of the Canada Mortgage & Housing Corporation.The federal housing agency noted starts in the Greater Vancouver Area virtually doubled on a year-over-year basis for the month, driven by the start of multi-family units for both the rental and condominium markets.

Meanwhile, for the second month in a row, housing starts in the Greater Toronto Area trended slightly lower. “An increase in apartment starts partially offset the decline in single-detached housing starts,” CMHC said, adding, “Increased supply in the resale market has resulted in less demand for new single-detached homes. Meanwhile new condominiums remain in high demand as home buyers flock to relatively lower priced homes, and investors seek to capitalise on low vacancy rates and increasing rents.”

CMHC uses the trend measure as a complement to its seasonally adjusted annual rate (SAAR) of housing starts to account for the considerable swings in monthly estimates, which are largely 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 216,210 units in January, essentially unchanged from 216,275 units in December. The SAAR of urban starts increased slightly by 0.2% in January to 198,400 units. Multiple urban starts essentially held steady at 134,685 units in January while single-detached urban starts increased by 0.6% to 63,715 units.

Actual starts of single family homes were preliminarily pegged at 3,456 units in January – a 3% gain over the 3,355 units started in January 2017.

Multi-units starts – whether for the condominium or rental markets – were estimated at 9,477 units for the month, a 5% uptick from 8,988 units for the opening month last year.

Total units started were numbered at 12,933 units for January, up 5% over last January’s 12,343 units.

In his research note, Rishi Sondhi of TD Economics noted that despite the storms and colder-than-normal temperatures in many parts of the country, housing starts stayed above 200,000 annual unit mark for the eighth straight month in January.

“The solid beginning to the year is likely to give way to some softening in the pace of homebuilding later this year, in-line with softer permit issuance in recent months. In particular, tighter mortgage lending rules and higher mortgage rates are likely to weigh on housing demand and dampen new home construction,” he said. “Still, the longer-term fundamentals remain sturdy. The economy remains on a solid footing and the federal government plans to raise the number of immigrants in the coming years. This should boost population growth, and provide support to housing demand going forward.”

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