Photo: James Bombales
Canadian home construction has been on a roll this year, with a massive 246,000 seasonally adjusted housing starts in June, and 206,300 in July. According to one economist, it’s the biggest boom in residential construction for the country in over a decade.
“The 3-month average is running at 216,000, and the 12-month average is at 222,000, both very strong by historical standards,” writes BMO senior economist Robert Kavcic, in a recent note. “In fact, the latter is now rivalling the 2003 to 2008 period, which was the most recent ‘boom’ in Canadian residential construction.”
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Kavcic notes that a 27-year high for population growth is likely behind the strength in starts, with Vancouver and Toronto markets leading the way.
As for whether the boom will continue, in a separate note RBC senior economist Josh Nye writes that downward pressures will likely bring housing starts back to earth in the near future.
“What has surprised us is the persistent strength in overall homebuilding,” he writes. “We continue to expect the factors that weighed on resales in 2018 — rising interest rates and more stringent mortgage qualifying rules — will also put downward pressure on new construction.”
Nye predicts that starts will remain above 200,000 in the near-term, before slowing down in the first half of 2019.
Kavcic notes that Ontario has seen a particularly large surge in supply, with the 12-month average now sitting at 80,000 units.
“[This is up] from 56,000 as recently as mid-2015,” he writes. “This comes in response to ramped up population inflows, and most is concentrated in condos as dictated by development policy.”