Highlights:
- Housing starts in December dropped as expected by 13.8% to an annualized 217k from November’s outsized 252k.
- For 2017 as a whole starts rose a solid 11.4% to 221k from 198k in 2016.
- The weakness in December was concentrated in urban multiples (22.0%) and regionally by sizeable declines in Ontario (35.1%) and Alberta (33.2%).
Our Take:
As was widely expected, housing starts declined 13.8% in December to an annualized 217k units from November’s outsized 252k with the most recent month’s activity more in line with the average level of permits over the last six months of 222k. For 2017 as a whole, starts were up a solid 11.4% to 221k which represented the highest level of activity since 2007. By unit type the December weakness reflected urban multiples dropping 22.0% though this followed strong gains the previous two months of 16.3% and 12.5%. Regionally the weakness was concentrated in Ontario where urban starts dropped 35.1% to 61k largely reflecting weakness in the multiples component. However, the decline failed to fully offset the multiples-driven 67.9% surge in November. Starts in Alberta also contributed to the overall decline dropping 33.2% in the month to 23k.
Looking ahead, our expectation is that recent tightening of mortgage lending, further official interest rate increases in both Canada and the U.S. and current poor affordability in a number of key markets will contribute to housing starts continuing to trend lower. Our forecast assumes that starts will drop to 195k this year and 185k in 2019.
