Canada's housing market faces supply shortage: Economist
Canadian housing starts surged to the highest level in more than a year in June, led by construction of multiple-family dwellings such as condos and row houses.
In another sign of recovery for the nation’s real estate market, builders started work on an annualized 245,657 units last month, a jump of 25 per cent from May, Canada Mortgage and Housing Corp. said Tuesday -- easily topping the median forecast of 208,600 units in a Bloomberg survey. Multiple unit starts rose 31 per cent on the month to 189,200, CMHC said.
Gains were “evenly spread out across the country,” Jocelyn Paquet, an economist at National Bank Financial in Montreal, wrote in a note to clients, adding all 10 provinces registered increases, something that hasn’t happened since 1996.
The report is in line with other recent data that suggests the nation’s housing sector is stabilizing from a recent slump, easing concern that more expensive markets like Toronto and Vancouver were poised for a major correction. On a quarterly basis, starts rose 20 per cent in the April to June period, rebounding from a 14 per cent decline in the first three months of 2019, meaning residential construction should provide a positive contribution to second-quarter growth, Paquet said.
The increase in national housing starts was “primarily due to higher trending row and apartment starts in urban areas,“ Bob Dugan, CMHC’s chief economist, said in a statement. Home building was 36 per cent higher in Ontario, and up 12 per cent each in British Columbia and Quebec, the agency reported. It surged 43 per cent in Alberta.
“Robust population growth, strong labour markets, and past gains in pre-construction sales” are supporting starts, according to Rishi Sondhi, an economist at Toronto-Dominion Bank. He said, however, that starts are moving gradually lower on a “trend basis,” with the 6-month average well down from its late 2017 peak.
“We anticipate some further moderation, as starts move closer to a more fundamentally supported level of around 200k,” Sondhi said in a note.
In a separate release Tuesday, Statistics Canada reported residential building permits fell 17 per cent in May. More housing data is in the offing, with Statistics Canada’s New Housing Price Index for May out Thursday and Canadian Real Estate Association data on existing home sales due Monday.
--With assistance from Chris Middleton.