In October, Canadian housing starts dropped 5.3% m/m to a still-healthy 236.6k units. Meanwhile, the six-month moving average dipped by 6.4k to 264.3k units.
In urban markets, multi-family starts fell by 5.3% m/m to 156.8k units. In contrast, urban single-detached starts increased by 1.0% m/m to 58.0k units.
Starts declined in five of 10 provinces:
- In Ontario, starts fell back from their extremely strong September level (-17.1k to 83.0k units)
- Starts also dropped in Quebec (-3.5k to 58.6k units), Manitoba (-4.4k to 5.5k units) and Saskatchewan (-3.9k to 2.8k units) while also being down modestly in B.C. (-0.1k to 35.9k units).
- In contrast, starts increased in Alberta (+9.2k to 35.4k units) and in Atlantic Canada (+6.4k to 15.4k units), boosted by firm gains in all provinces in the region.
Key Implications
As expected, starts continued to unwind from record highs achieved earlier in the year, potentially hindered by on-going labour shortages. This is consistent with our view that residential investment will contract in the fourth quarter. However, building permits are holding at high levels, limiting the downside risk for starts in coming months.
Over the longer term, housing starts should be supported by robust demand and elevated prices. In addition, new housing markets remain extremely tight, evidenced by ultra-low levels of unsold inventories, which will likely add some additional support. Improving population growth should also help keep starts elevated.
