- Canadian housing starts blew past expectations, springing 25% (m/m) higher in June to 245.7k (annualized) units. This follows a slightly downwardly revised 196.8k print in May (prior: 202.3k). On a six-month moving average basis, starts came in at 205.8k units, 5.3k higher than April.
- Multi-family starts advanced 31% (m/m) to 189.2k units, bouncing-back from April’s decline. Single-detached starts were also higher, rising 8% to 56.5k units. However, despite June’s rise, single-family construction remains stuck near multi-year lows. And, modest permit issuance in recent months points to more of the same moving forward.
- Provincially, the breadth of June’s gain was impressive, with starts higher in every Province. After April’s setback, starts bounced higher in Ontario (+17.3k to 66.3k). However, homebuilding has eased significantly in Ontario this year on a trend basis. In Quebec, housing starts picked up by 6k to 56.1k, as healthy housing demand is stoking construction. Notably, starts jumped to their highest level since at least 1990 in B.C. (+6.4k to 62.0k). In the Prairies, starts increased by 9.0k to 31.5k in Alberta while rising to their highest level since 2017 in Manitoba (10.1k). Meanwhile, starts increased by 0.5k to 2.9k units in Saskatchewan. Starts also jumped 9.0k to their highest level since 2012 in the Atlantic Region on much stronger building in PEI, Nova Scotia and New Brunswick and a pickup in Newfoundland and Labrador.
Key Implications
- Any way you slice it, June was an impressive month for homebuilding. Starts were up by double-digits in nearly every province and were higher in both the single-detached and multi-family segments. The upside surprise completes a robust second quarter that saw starts advance 20% quarter-on-quarter. Alongside rising home sales, this supports our call for residential investment to post a solid gain in Q2.
- June’s strong report adds to the list of indicators confirming that economic growth in the second quarter was likely much stronger than the Bank of Canada had projected in their April Monetary Policy Report. We expect to see the Bank revise its near-term growth outlook upward in tomorrow’s Monetary Policy Report.
- New housing construction in Canada continues to hold up well, in contrast to the resale market, which has cratered in recent years in the face of past interest rate increases and government policies. Homebuilding is being supported by robust population growth, strong labour markets, and past gains in pre-construction sales. That said, starts are moving gradually lower on a trend basis, with the 6-month average well off its near-term peak observed in late 2017. We anticipate some further moderation, as starts move closer to a more fundamentally supported level of around 200k. This view is consistent with permit data for May released this morning, which showed a 16% drop from April’s elevated level.
