Highlights:
- Nominal Housing starts were stronger than expected in October, rising to 223k from 219k in September. Last quarter’s average, also at 223k, matched the strongest pace in five years.
- A sharp decline in single-unit starts, which hit a one year low in October, was offset by an increase in multi-unit construction. Those moves continue their respective trends seen in recent months.
- On a regional basis, starts picked up in Quebec and British Columbia, led by the multi-unit segment in both cases. Starts in Ontario dropped in both singles and multis.
- In a separate report, building permits fell to 208k annualized units in September from 214k in August.
Our Take:
The trend in Canadian housing starts held up at an elevated pace in October. At the national level there are few signs that a slowdown in the resale market, which began in April, is feeding through to homebuilding activity. On a regional basis, however, we do see some evidence of the two trends aligning. Housing starts have declined in Ontario, particularly in the single-unit segment which was at multi-year highs earlier in 2017 but has been hit particularly hard on the resale side following policy changes at the provincial level. That slowdown has been offset by stronger activity in British Columbia and Quebec. The former has seen a resurgent housing market following last year’s policy-induced slowing, while the Quebec’s strong economy appears to have boosted both starts and resales. Homebuilding has also picked up in the Prairies this year as those economies rebound from a slowdown in the energy sector.
We continue to expect a moderation in starts at the national level over the next year that would be more in keeping with what we are seeing on the resale side. The combination of policy changes, including measures set to go into effect in January, and rising interest rates is expected to result in a sustained cooling in existing home sales and less price pressure. In that environment it is hard to see housing starts remaining so far above 200k, which is still well in excess of underlying demographic demand.
