Toward the end of 2015, Canadian homebuilders signalled a possible slowdown in home construction in more than one way.
Compared to the month before, builders broke ground for fewer units in December, according to Canada Mortgage and Housing Corporation (CMHC). This slowdown followed a November when municipalities didn’t approve as many units for construction as they did in October, according to Statistics Canada.
In the final month of 2015, the seasonally adjusted annualized rate (SAAR) of housing starts equalled 172,965 units, an 18 per cent drop from November.
“A start is defined as the beginning of construction work on a building, usually when the concrete has been poured for the whole of the footing around the structure,” a CMHC spokesperson explains.
The SAAR of housing starts indicates how many units would enter the construction pipeline in a year if a given month’s level of activity persisted for 12 months. To keep track of housing starts, CMHC visits properties for which a building permit has been approved.
Because housing starts can fluctuate considerably from month to month, the Crown corporation also posts a trend measure that is “a six-month moving average of the monthly seasonally adjusted annual rates.”
The trend measure decline was less pronounced, as the 203,502 units registered in December represented a 2.3 per cent decrease from the month before. Both single-family and multi-family starts dragged last month’s trend measure down, said Bob Dugan, CMHC’s chief economist, in a statement.
Canada-wide, actual housing starts totalled 195,536 in 2015, up 3.3 per cent from the year before, when annual starts numbered 189,329.
“Starts increased in 2015 compared to 2014, largely driven by the condominium market in Toronto,” he explained. “Had the Toronto condominium starts remained stable in 2015, national starts would have declined on a year-over-year basis.”
In November, municipalities gave the go-ahead to the construction of 15,038 new homes a 24.3 per cent drop from October.
Statistics Canada, which tracks the paperwork, says the residential building permits issued in November were worth $4 billion, 17.8 per cent less than the value of October permits.
“The decline was mainly attributable to multi-family dwellings,” which fell 33.1 per cent to 9,450 units,” Statistics Canada said in a research note.
Permits for 5,588 new single-family homes were issued in November, a 2.5 per cent monthly decrease.
Because homebuilders need this paperwork to move forward with construction on a housing site, building permits provide an idea of future construction levels, and, ultimately, how many homes will be coming onto the market in the future.
Since January, multi-family projects have made up about two-thirds of all residential construction proposals that municipalities have approved.
“The high prices associated with the purchase of single-family dwellings in major Canadian cities have contributed to an increasing shift in housing demand toward multiple dwellings,” according to Statistics Canada.
