- Housing starts inched up to 210.2k in February from an already-elevated 208.9k units in January.
The monthly increase was led by a 21.5% jump in Quebec urban starts (in large part reflecting a 21.7% jump in the multiple-unit component as a number of large condo buildings in Montreal reportedly began construction). Starts declined 14.9% in Ontario but that only retraced a portion of the outsized 74% surge over the prior two months. Starts inched higher in all other regions, including a 23.3% gain in the prairies, 14.6% increase in Atlantic Canada and a 6.8% gain in B.C. On a year-over-year basis, starts are still down sharply in B.C. but up in all other regions of the country.
Our Take:
Homebuilding has been strong to start 2017 with the third consecutive 200k+ reading in February marking the first such streak since October 2012. Although strength has been weighted to areas where housing markets have been tighter (ie. Ontario) with offset coming from areas where markets have cooled (B.C.), the aggregate level of starts nationally is nonetheless well-above most (including our own) estimates of the underlying pace of household formation. Unseasonably warm winter temperatures in much of the country probably played some role in boosting building activity over January and February and we expect recent moderation in resale activity, driven by a combination of new macro-prudential regulations and stretched affordability conditions, and a modest up-drift in lending rates will ultimately be reflected in slower homebuilding ; however, recent permit issuance (230k residential building permits were issued in January, released separately this morning, and the average over the last four months has been a whopping 238k per month) suggests that the strong pace of starts could also persist over the next couple of months.
