Is the country’s housing market coming in for a soft landing?
According to the Canada Mortgage and Housing Corporation (CMHC), housing starts declined to an annualized rate of 192,235 in November, a three per cent drop from 198,161 in October. (Tweet this stat)
“The trend in housing starts has increased slightly since July, before stabilizing in November,” said CMHC deputy chief economist Mathieu Laberge. “Overall, housing starts have been following a trend similar to sales on the existing home market.”
The largest decline in starts occurred in Atlantic Canada and Ontario, which saw a 24.8 per cent and 16.6 per cent drop respectively. Meanwhile, starts rose in British Columbia by 12.5 per cent and in the Prairies by 9.1 per cent. Quebec saw a marginal increase of 0.8 per cent.
Canada’s banks weigh in
Responding to the latest CMHC data, TD Economics noted the six-month moving average of housing starts is now 10-per-cent lower than it was a year ago.
“Even with the monthly retrenchment, the pace of housing start activity remains greater than those supported by demographic fundamentals (estimated at 175,000 a year),” the bank said. “A softening over the longer term will be necessary as the Canadian new housing market is overbuilt in many large urban centres.”
Like TD, Royal Bank economist Laura Cooper used the data to look into the future.
“As we move into 2014, we continue to expect that activity in the new build sector will transition to a more moderate and sustainable path, thereby reflecting the restraining effect of housing affordability pressures,” Cooper said. “We anticipate that starts will clock in at a total of 188,000 this year, which would be well below the 215,000 overall pace in 2012 and would further decline to 180,000 in 2014.”
Bank of Montreal economist Robert Kavcic said that although starts are somewhat ahead of the amount needed to account for household formation, they’re still “comfortably below levels seen during the pre-recession period.”
“Canadian homebuilding activity might be a touch on the warm side, but builders still look pretty well behaved overall,” he added.
For all you visual learners, here is the CMHC data in graph-form.