Canadian housing starts increased to 205.9k (annualized) units in October, 8.5% higher than the 189.7k level achieved in September. October’s pace bested forecasts calling for an increase to 198k. However, on a longer-term six month moving average basis, starts edged slightly lower to 206.2k.
October’s gain was concentrated in multi-family starts, which rose 17% to 149.1k units. Single-detached starts provided some offset, falling 9% to 56.8k units.
Urban starts were up in 5 of 10 provinces. Homebuilding increased in Ontario (+10.2k to 85.7k units) and Quebec (+9.0k to 43.1k units). Starts were also higher in B.C. (+4.4k to 29.9k units) and Saskatchewan (+3.3k to 6.1k units). In contrast, starts pulled back in every Atlantic Province except for New Brunswick (-4.1k to 5.4k units for the region overall), and were also lower in Manitoba (-3.6k to 5.0k units) and Alberta (-3.9k to 16.8k units).
As anticipated, starts increased in October, setting residential investment off on the right foot to begin the fourth quarter. It also helps offset what will likely be reported as a modest decline in October home sales when the national data is released next week.
On a trend basis, homebuilding has embarked on what has so far been an orderly slowdown, with softer demand feeding through to starts.
Looking ahead, modest demand growth should keep a lid on Canadian homebuilding during 2019 and 2020, implying less thrust from what was once a steady contributor to economic growth. Still, the likelihood of a steep downturn in homebuilding is remote, given that Canada’s population is on the rise, the economic backdrop is decent and that markets are generally not overbuilt.