Canadian housing starts surged more than 50k to 254k annualized units in March, or nearly 50k above expectations and the highest number in nearly a decade. The strong March number sent the 6-month moving average higher to 211k – the fastest pace since 2012.
Most of the uptick was related to the highly volatile multifamily units, which were 37k higher on the month. Single-family construction was largely flat, rising a mere 2k in March.
Looking across the country, the gains were broad based. British Columbia accounted for most of the March uptick, rising 17k to 44.7k, while Quebec (+12k to 53k) and the Prairies (up nearly 9k to 45.1k) were not far behind. Ontario also saw 5k more units being constructed, with the March tally at 88.8k. Atlantic Canada was the lone underperformer, down by 3k to 3.8k on weakness in Nova Scotia and Newfoundland & Labrador.
Toronto and Vancouver, the two most closely watched housing markets, saw the largest gains, up 17k (to 53k) and 12k (to 30k), respectively.
Key Implications
Despite some anticipated give back following two unusually warm months, March surprised to the upside, with builders breaking ground on the highest number of properties since 2007. This was particularly true on the multi-family segment, which accounted for most of the monthly gain.
The strength was particularly pronounced in Toronto and Vanouver, which have been the two hottest markets in recent quarters – despite some pullback in luxury segment sales in the latter market in recent months. The supply response in Toronto is particularly welcome, given the white hot pace of price growth and dearth of inventory on the market. The completion of these units should help take some steam out of Toronto’s home price growth, although this won’t happen overnight and is likely a story for next year and beyond.
The gains in the Prairies, while above expectations, corroborate a turning point for the region’s economies, which are slowly recovering from a two-year recession, particularly in Alberta and Saskatchewan, while the weakness in Atlantic Provinces, while partly-weather related, appears in line with slowing population and economic growth across this region.
All in all, this was a great report, but the lofty number is unlikely to last into the coming months as the effects of the warm winter likely manifest in a slower pace of homebuilding during spring and summer months. This is especially the case given the likely slowdown in the volatile multifamily segment, which should come back down to earth in the coming months. Ultimately, we expect starts will settle just below 200k during the remainder of the year.
