canadian housing starts slow Photo: Jerzy Kociatkiewicz/Flickr

Signs of a slowdown in Canadian residential construction appeared again in today’s report from the Canada Mortgage and Housing Corporation’s (CMHC) on housing starts across the country for January.

The standalone monthly SAAR (seasonally adjusted annual rate) for housing starts was 180,248 units in January, down from 187,144 units in December 2013. The overall SAAR of urban starts decreased by 2.7 per cent in January to 163,158 units while multi-unit urban starts fell by six per cent to 102,289.

The CMHC’s six-month trend for housing starts fell to 191,456 units for January, down from 194,518 in December. The trend is a six-month moving average of the monthly seasonally adjusted annual rates.

“The trend in housing starts decreased slightly in January, while the inventory of newly completed and unabsorbed units saw a modest downward trend in the last half of 2013,” said Mathieu Laberge, Deputy Chief Economist at CMHC. “This is consistent with our expectation that builders will continue to gradually adjust activity in order to manage their levels of inventory.”

In a commentary published today, TD Bank economist Connor McDonald called the six-month moving average “robust,” but noted that the residential construction slowdown is “consistent with the wider theme of domestic fatigue.”

McDonald said that gradual interest rate increases through 2015 and Canadian economic underperformance will “take some steam out of the demand for Canadian housing.”

“Overall, the recent cooling of housing starts supports our view for a soft landing of the Canadian housing market in 2014 and 2015,” he concluded.

Regional housing starts in Ontario and the Prairie provinces increased in January, after being impacted by harsh weather conditions in December. Quebec, BC and Atlantic Canada logged sharp declines in starts.

The latest CMHC monthly housing starts report follows the corporation’s Q1 2014 Housing Outlook, released late last week. In last week’s report, the CMHC predicted that the gradual increase in mortgage rates as well as a slow down in demand among first-time buyers will keep construction in check through 2014 and 2015.

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