Canadian housing starts edged higher in June, up 28% m/m from May’s downwardly revised 194k to 248k (annualized). This represents the first increase after three consecutive months of declines.
The multi-family segment led the rebound, up 55.5k to 179k units, and was accompanied by a modest decline in single-detached starts to (-1k to 69k)
This month’s increases were concentrated in Ontario, with the province’s starts moving up 92.6% m/m to 101k units. Six other provinces posted increases in starts, including Quebec (+17k to 51k), Nova Scotia (+2k to 5.5k), and New Brunswick (+1k to 2.6k). On the other hand, declines were recorded in British Columbia (-6k to 34k), Alberta (-10k to 24.9k), and Saskatchewan (-1k to 2.5k).
Starts were up 138% in Toronto (+32k to 55.7k), pushed by increases in the multi-family sector (+34.5k to 49k). Montreal also recorded increases in activity (+12k to 32k), whereas Vancouver’s market activity fell by 9.5k to 17k.
Key Implications
Today’s release is a surprise on the upside, especially in the Toronto market. Nevertheless the rebound in the multi-family segment was expected given recent strength in building permits data, in addition to the 12-month lows seen in the multi-family segment in May.
While this rebound is not surprising, its magnitude is more pronounced than expected, resulting in a slightly higher than expected Q2 performance. Nevertheless, it is important to note that the increases were concentrated in one segment, and were mostly within the Ontario region. The higher-than expected growth, accompanied by the recently-released permits data showing declines in issuances, should result in a pull-back during the remaining half of the year, with starts expected to remain modestly below the 200k mark.
Going forward, starts should ease into the remaining part of the year in light of rising interest rates, macro-prudential regulations, and affordability in the Toronto and Vancouver markets weighing on demand.
