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).

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Key Implications

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.

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