The Canadian housing market started 2020 with so much momentum that one BMO economist said it may as well have been an Oscar-winning performance.
BMO Economics Director and Senior Economist Jennifer Lee wrote in a note published early this week that nationwide housing starts defied predictions of more muted results and jumped 8.8 percent in January.
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“And the Oscar for a country with consistently strong housing goes to…” Lee wrote before diving into regional numbers and singling out Ontario and Quebec for delivering particularly solid performances last month.
Housing starts measure how many homes began construction during a given period and are generally viewed as a key factor in determining market health.
While Lee was careful to note that decent January weather likely played a role in the significant jump in starts, homebuilders also were emboldened by economic strength bolstered by a rosy jobs report for Ontario.
With the province’s economy humming along nicely, Ontario’s largest city and economic engine has seen a major increase in home sales beginning in early spring 2019. This increase in demand for housing in Toronto has not been met with an influx of supply, leading to a tightening in the market. Homebuilders have likely picked up on this trend and are ramping up home construction accordingly to meet the renewed demand.
The Canada Mortgage and Housing Corporation (CMHC), which tracks housing starts data, said that Toronto saw a 51 percent increase in January over December on a seasonally adjusted basis.
“With recent data pointing to further tightening in demand-supply conditions in many resale markets, a solid pace of home building to start the year will be welcomed. Quebec and Ontario led the increase in January, which is not surprising as those provinces are home to some of the country’s tightest markets,” wrote RBC Senior Economist Josh Nye.
BMO’s Lee added that this strong pace for housing starts will likely continue. CMHC’s data on building permits for December showed their first rise since August, which bodes well for home construction for the near-term.