Canadian housing starts dipped to 214k (annualized) units in April, down 4.9% from March’s slightly upwardly revised pace of 225k. The pace disappointed expectations for a milder pullback, to 220k, but the rate of homebuilding in Canada remains strong. The underlying trend, defined as the six month moving average, edged slightly lower to 226k.
Single-detached starts decreased by 9.5% to 69k units, while multifamily starts dropped by 2.6% to 145k units during the month.
The bulk of April’s decline was concentrated in B.C. (-8k to 41k), Newfoundland and Labrador (-5k to 1k) and Ontario (-5k to 70k). Starts were also lower in Manitoba and New Brunswick. On the flip side, relatively strong gains were observed in Quebec (+4k to 57k) and Alberta (+3k to 30k).
Starts fell for the second straight month in Toronto (-12k to 27k units), with declines in both the single-detached and multi-family sector. Starts also declined in Vancouver (-9k to 23k units). Conversely, starts were higher in Montreal (+13k to 33k units)
Key Implications
The pace of starts eased but remained solid in April, supported by continued population and income growth. Overall, we expect near-term starts to remain elevated – something telegraphed by permit issuance data.
Homebuilding is proceeding at firm pace across most of the country, and is particularly strong in B.C. and Quebec. The Prairie provinces remain as the key exception, with homebuilding under pressure from oversupplied markets in Alberta and Saskatchewan, with a decline anticipated in Manitoba after an outsized gain last year.
Looking ahead, we expect the pace of starts to pull-back closer to the 200k mark in the second-half of 2018, and dip below that level towards the fundamentally-supported pace next year as higher interest rates and regulatory changes weigh on demand.
