Canadian Housing Starts Trend Increased in July
The trend in housing starts was 217,550 units in July 2017, compared to 215,175 units in June 2017, according to Canada Mortgage and Housing Corporation (CMHC). This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.
"In July, Canada's pace in housing construction ramped up for a seventh consecutive month," said Bob Dugan, CMHC's chief economist. "British Columbia and Alberta were the main contributors to the higher trend in housing starts. While BC's construction coincides with near-record low completed and unsold units in the past few months, Alberta's inventory of new unsold homes is ramping up, highlighting the need for managing inventories."
Total housing starts in the Toronto Census Metropolitan Area trended lower in July. Lower trending apartment and single-detached starts were mainly responsible for the decline. Overall, total housing starts were still trending close to the average level seen so far this year. Strong increases in semi-detached and town home starts pointed to affordability concerns driving demand for less expensive housing types.
Vancouver CMA housing starts were up slightly in July due to the construction of more townhomes and apartments getting underway. The largest increase in construction activity occurred in Burnaby, New Westminster and Coquitlam, as the relative affordability of more modestly priced townhomes and apartments in these communities supported consumer demand. The number of units under construction in the Vancouver CMA remains near record highs, and developers will be keeping an eye on market conditions as these projects are completed in the coming year.
After a slow start, the trend in new home construction this year has increased, moving closer in line with historical averages. Multiple starts in particular have been strong in recent months, including July, despite inventories sitting at near record highs. If the current pace of production does not ease, there is the possibility that inventories will stay elevated for an extended period of time.
July housing starts trended up on the back of strong multiple construction. Multiple starts this year have been driven by the rise in rental apartment starts, which to July reached about 1.5 times their level for 2016 as a whole. Builders are diversifying high-rise product as a substantial number of completed condominium apartment units remain unsold. In addition, an ageing rental stock, and robust rental demand are contributing to increased building activity for rental units.
With construction getting under way on several large rental projects at the same time, housing starts in the Gatineau area were up considerably in July. The rising demand, supported in part by stronger employment, will help residential construction stay on an upward trend over the coming months.
Single-detached starts in both the City of London and London CMA posted the highest levels for the month of July since 2007. The continued elevated number of single-detached starts is driven largely by demand spillover from the resale market, which has seen a dramatic increase in the sales of homes priced at $500,000 and over. Also, the price gap between single-detached homes in London and comparable homes in Toronto has continued to remain wide, making London an attractive destination for buyers from the Greater Toronto Area.
Housing starts in Greater Sudbury trended lower in July, due to a decline in both single detached and multiple starts. The trend dipped for the seventh consecutive month, reflecting declines in full-time employment and a healthy supply in the resale market.
Construction in both the singles and multiples markets in Halifax continues to show strength in July with year-over-year starts increasing by 15% and 31%, respectively. Year-to-date, the singles market has witnessed the strongest number of starts since 2013, while the multiples market continues to be a driver of residential construction, especially on the Halifax Peninsula and Mainland North regions.
CMHC uses the trend measure as a complement to the monthly SAAR of housing starts to account for considerable swings in monthly estimates and obtain a more complete picture of Canada's housing market. In some situations analyzing only SAAR data can be misleading, as they are largely driven by the multi-unit segment of the market which can vary significantly from one month to the next.
The standalone monthly SAAR of housing starts for all areas in Canada was 222,324 units in July, up from 212,948 units in June. The SAAR of urban starts increased by 5.5 per cent in July to 206,122 units. Multiple urban starts increased by 10.4 per cent to 141,950 units in July and single-detached urban starts decreased by 3.9 per cent, to 64,172 units.
Rural starts were estimated at a seasonally adjusted annual rate of 16,202 units.