What higher rates and stress tests mean for Canadian real estate in 2019
The annual pace of housing starts dropped in December, but remain at an "elevated" level when compared with historical averages, Canada Mortgage and Housing Corp. said Wednesday.
The national housing agency reported the seasonally adjusted annual rate of housing starts in Canada was 213,419 units in December, down from 224,349 in November.
The result beat analysts expectations of an annual rate of 205,000, according to projections by Thomson Reuters Eikon.
"Total annual housing starts in 2018 were lower than in 2017, as lower single-detached starts more than offset a slight increase in multi-family starts this year," said Bob Dugan, CMHC's chief economist in a statement Wednesday.
"Nonetheless, total housing starts remain elevated when compared to historical averages."
CMHC said preliminary figures, which are subject to revision, show that there were a total of 214,020 housing starts in 2018 versus 219,763 in 2017. It had previously predicted that housing starts would range between 192,200 to 203,000 for 2018.
CIBC said the mild winter temperatures made conditions more conducive for homebuilding in December, but noted that housing starts will likely be affected by rising interest rates and tighter mortgage rules.
"But the recent momentum combined with the decent readings on building permits suggest that housing construction could hold up in the near-term," said CIBC senior economist Royce Mendes in a statement.
Nathan Janzen, senior economist at Royal Bank, agreed that housing starts will likely ease up in 2019 and follow the downward trajectory of home sales. He anticipates housing starts to hover around the 194,000 mark this year.
"That would still be a relatively strong pace of building activity historically and labour markets in Canada still look quite solid," he wrote in a report
"Lower oil prices, though, are having an impact on growth in oil-producing regions and questions have emerged about the durability of the global economic expansion. At the same time, slower housing markets and slower growth in household debt has arguably removed some of the urgency for the Bank of Canada to hike interest rates in the very near-term."
On Wednesday, the Bank of Canada left its trend-setting interest rate unchanged at 1.75 per cent amid a dimmer economic outlook in the coming months due to a plunging oil price and a slowing housing market.
CMHC reported that the annual pace of urban starts dropped by 5.8 per cent to 194,594 units in December as the annual rate of multiple-unit projects such as condominiums, apartments and townhouses fell 6.8 per cent to 144,728 units.
The pace of single-detached urban starts fell by 2.5 per cent to 49,866 units.
Rural starts were estimated at a seasonally adjusted annual rate of 18,825 units.