Highlights:
- Housing starts came in a bit stronger than expected in January, holding steady at December’s revised 216k annualized pace.
- Both single and multi-unit starts were little changed from the previous month.
- The six-month trend in starts edged up to a decade high of 227k
- Housing starts remained volatile in Ontario, rebounding strongly in January after a sizeable dip in December. That offset declines in BC, Quebec and Atlantic Canada to start the year.
Our Take:
Canadian homebuilders didn’t seem to be impacted by a cold January as starts held up at a relatively strong 216k annualized pace. That follows decade-high housing starts last quarter and in 2017 as a whole. We doubt last year’s 220k pace can be sustained but the underlying trend in homebuilding is clearly stronger than some household formation data would indicate. New construction has been solid despite slower home sales last year, though a pullback in single unit construction in Ontario relative to a year ago does seem to reflect softness in that segment of the resale market.
We expect housing starts will slow below a 200k pace this year, though yesterday’s reported pickup in permit issuance in December indicates homebuilding could remain above that pace in the first quarter. That said, we do expect some payback in terms of residential investment following what looked like a strong Q4/17. Activity late last year was bolstered not only by solid housing starts but also by a surge in resales as homebuyers rushed into the market ahead of a regulatory change that took effect in January.
