- Housing starts rose to 213k units in June (on a seasonally adjusted annualized basis), recouping most of the ground lost over the last two months. This pushed the six-month moving average close to a 5-year high of 215k units.
- Gains were widespread during the month with both single-detached (+10%) and multi-unit (+9%) starts rising.
- Regionally, strength stemmed largely from Ontario (+24k) and Quebec (+8k), while Newfoundland and Labrador and PEI also recorded increases during the month. Ontario more than erased the losses sustained in May. On the flipside, starts declined in B.C. (-9k) and the Prairies (-6k), with Alberta and Manitoba accounting for the bulk of the Prairie losses.
Key Implications
- The bounce back in housing starts in June puts the second quarter pace of homebuilding at 204k units – a decline of roughly 8% relative to the first quarter. As such, homebuilding activity will detract from growth during the quarter. Having said that, the overall economy remains on track to expand by close to 3% during Q2.
- While we see no harm in the Bank of Canada waiting until October to hike rates, there is a very real possibility that the first rate hike in seven years will come as early as tomorrow. Should the rate hiking cycle be brought forward, Canada’s housing market is likely to be slightly weaker than we currently expect. The impact of higher rates – be it now or later this year – will be most pronounced in regions where affordability is the lowest – such as Vancouver and Toronto.
- The GTA housing market is still adjusting to the Ontario Fair Housing Plan which appears to be having the desired effect of cooling the market, with sales and price growth slowing. While starts did pause in May, the rebound in June suggests that the impact on new home construction may not be as long-lasting. Indeed, while the province’s housing starts are unlikely to return to the highs seen early this year, we expect them to hold near current levels going forward.
- For the country as a whole, homebuilding activity is expected slow modestly over the remainder of the year, but remain close to the 200K mark for the foreseeable future.
