Canadian housing starts October

Photo: James Bombales

Canadian housing starts were down in October following a strong showing in September, with construction beginning on fewer new homes in urban areas in all regions of the country except Ontario.

Starts at the national level declined to an annualized rate of 192,900 units in October, down from 219,400 units in September, according to homebuilding data released today by the Canada Mortgage and Housing Corporation (CMHC).

While the six month housing starts trend tracked by the CMHC was up slightly in October compared to the previous month — leading the Crown corporation to call the numbers “stable” — market watchers believe pronounced declines are on the way in 2017 after robust growth this year.

“The new mortgage and tax regulations recently introduced by the federal government are expected to take some steam out of home sales, particularly in BC and Ontario which have accounted for the bulk of the gains so far this year,” writes TD economist Dina Ignjatovic in a note published today following the data release.

Ignjatovic believes impending home sales declines will impact homebuilding as well with “sizable declines” expected for Ontario and BC, Canada’s two hottest markets.

BMO senior economist Robert Kavcic called BC’s housing starts numbers the “big story” in the CMHC data release. BC starts dropped to 27,600 annualized units after logging record levels earlier in 2016. In a note published today, Kavcic describes BC’s October numbers as having moved back into the stable range seen between 2010 and mid-2015.

“We’ll see if this level of activity, particularly in Vancouver where starts fell to the lowest since 2011, holds in the months ahead in response to softening demand conditions,” says Kavcic.

Meanwhile in Ontario, starts moved up to an annualized rate of 84,400 units, well above September’s total and the 12-month average for the province.

Rather than focusing on volume, Kavcic zeroed in on unit composition in Ontario’s starts data. New supply is becoming denser still as more multi-unit projects begin construction relative to single-detached homes.

“There are currently nearly 6 condo, semi or townhouse units under construction for every single-detached home (and even the latter are a lot more densely packed than in the past),” Kavcic writes.

The BMO economist also pointed out that construction activity in Canada “remains a highly regional story.”

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