Photo: James Bombales
Economists tasked with giving a running commentary on the state of Canada’s housing market are beginning to sound like a collective broken record again.
Only a year ago, it was becoming incredibly difficult to tease out a bit of good news around the market’s prospects as 2018 wound down. After the twin peaks of 2016 and 2017 (the first half of the year, at least), the market was being worn down by stricter mortgage rules, rising interest rates and new regulations from provincial governments meant to cool runaway local markets. By the end of 2018, economists were uniformly predicting another tough year ahead for the market.
Now, as 2019 draws to a close, they’re singing a different tune entirely… and it’s sounding a whole lot better. This week brought another solid set of results for market activity, at least when viewing it broadly from a national lens.
Canadian housing starts — essentially, a measure of home construction activity across the country — continued on a strong track in November, cooling down only slightly from a shoot-the-lights-out third quarter.
“Not too shabby,” wrote TD economist Rishi Sondhi of the solid November results that only contained, as he put it, a handful of “modest caveats.”
“Alongside a probable pick up in November home sales (due out next week), the starts report is consistent with our call for residential investment to make an important contribution [to Canadian] economic growth again in the fourth quarter,” wrote Sondhi.
With healthy population growth and low interest rates that aren’t set to budge anytime soon, the data is all lining up and pointing to a satisfying end to 2019 for Canada’s housing market.
In an email to clients this week, Capital Economics also used glowing language to describe the current state of the housing market, characterizing it as “roaring back to life” in the back half of 2019.
BMO economist Robert Kavcic was slightly more subdued in his response to the Canadian housing starts data. But, after drilling into the provincial markets’ performance, he concluded that there was plenty of activity “in the pipeline to keep residential construction humming into 2020.”
“Canadian homebuilding activity looks rock solid heading into next year,” he wrote.
While it may be “rock solid” it likely isn’t hitting levels that would satisfy industry leaders and some economists who believe some Canadian housing markets concentrated in the Greater Toronto Area are chronically undersupplied, especially when it comes to low-rise homes.
This view, often voiced by the Toronto Real Estate Board (TREB) and Building Industry and Land Development Association (BILD), lines up with the most recent national data on housing starts, where multi-unit starts outpaced single-unit starts by about 3-to-1 according to BMO’s Kavcic.
