In December, Canadian housing starts fell by 22% m/m from November’s extremely elevated level, coming in at 236.1k units. This marked the lowest pace of starts activity since December 2020. However, the six-month moving average remained exceptionally strong at 260.6k units.
In urban markets, declines were registered in both single-detached and multi-family units. Starts of single-detached units fell by 4% m/m to 55.2k units. Meanwhile, multi-family starts dropped by 29% m/m to 157.7k units, almost fully unwinding November’s robust gain.
Urban starts were lower in six of 10 Provinces:
- In Ontario, starts plunged from their November level (-59.1k to 66.3k units)
- Starts fell by 10.1k units in the Prairies, leaving their level at 39.5k units. Alberta was the largest drag, followed by Saskatchewan.
- In the Atlantic Region, starts increased (+1.4k to 14.2k units), boosted by Newfoundland and Labrador and Nova Scotia. December also marked the 3rd straight strong month for starts in the Atlantic.
- Starts declined by 14.3k in Quebec to 41.2k units and jumped by 15.2k to 51.0k units in B.C.
Key Implications
Some easing in December’s starts data was expected, given the outsized November surge. On a trend basis, the pace of starts remains robust, stimulated by strong demand, low levels of unsold new inventories, and elevated prices.
For the fourth quarter overall, starts dipped by a mere 1%. This introduces an upside risk to our forecast calling for an outsized drop in residential investment in the fourth quarter.
Moving forward, building permit data point to starts remaining well above pre-pandemic levels in the near-term. Looking further ahead, we expect starts to move lower, trending towards levels more in-line with underlying fundamentals. Higher interest rates are likely to take some steam from demand, thus moderating the pace of homebuilding, albeit with a lag.
