In a month full of grim real estate market data, home construction figures for April released late last week provided an encouraging boost while defying a bleaker consensus projection that had emerged among industry experts.
Housing starts across Canada rose 11 percent in April over the previous month, with particular strength observed in the urban multi-family starts (i.e. condo projects) which rose 35.7 percent over March. Housing starts measure how many homes began construction during a given period and are generally viewed as a key factor in determining market health.
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April’s housing starts data, released Friday by the Canada Mortgage and Housing Corporation (CMHC), excluded figures from Quebec since home construction was not permitted under the province’s service shutdown orders for most of the month. Residential construction was only allowed to resume on April 20th.
Regionally, strength was most pronounced in Ontario, where residential construction is deemed an essential service. Urban multi-family starts rose by 28,000 units in April to 93,600 units in the province.
Despite the huge disruptive effects of the COVID-19 pandemic felt across all areas of the real estate industry, TD Economist Rishi Sondhi noted that housing starts recorded in April were higher than the total reported in February, well before worries over the virus’s spread took hold.
“This was a surprisingly strong [housing starts] report, which trounced consensus expectations and bucked the extreme weakness seen in other indicators for April (for example, [Friday’s] above-consensus, though historically bad jobs report, and the massive monthly declines in home sales reported by local real estate boards),” Sondhi wrote in a briefing titled “Housing starts bring a dose of good news in April.”
Market experts have generally been confident that Canadian home construction will weather the pandemic without dramatic disruption observed in other sectors of the economy and even segments of the housing market.
“Overall, while there will be a temporary lull in activity, we judge housing starts will still average a solid 185k units in 2020 versus 209k last year. The impact on new housing supply shouldn’t be enough to severely distort the market,” wrote BMO Senior Economist Robert Kavcic earlier this month.
In late April, real estate consultancy Altus Group forecast 158,000 housing starts in Canada for 2020, with a bounce back in activity expected by July, though still a substantial decline from 2020’s total. Prior to the pandemic, the firm had been projecting 209,000 starts for the year.
After the stronger-than-expected showing for April, the firm may well choose to revise its projection for 2020 upward.