Canadian Housing Starts: Recent Numbers and Expectations for 2016
by Yvonne von Jena | January 12, 2016
The Numbers The Preliminary Housing Start Data report by Canada Mortgage and Housing Corporation (CMHC). Overall, Canadian housing starts fell by 18% month-over-month in December 2015 reaching 172,965 units (seasonally adjusted annual rates, SAAR) on the back of very strong performance in November (212,028 units). On a 6-month moving average however, the trend in housing starts still stands at an elevated level of 203,502 units, with activity in 2015 fairly strong overall. Toronto was the only major urban center to see any gains in new home construction in 2015, with starts topping household formation for the first time since 2012. â€œStarts increased in 2015 compared to 2014, largely driven by the condominium market in Toronto. Had the Toronto condominium starts remained stable in 2015, national starts would have declined on a year-over-year basis,â€ noted Bob Dugan, CMHC Chief Economist. Most of the weakness is coming from the highly volatile multi-unit segment (-27%) across other major urban areas. Single-detached urban starts remained flat at 57,743.Â The differences across regions is quite divergent, where starts declined in Ontario (-39%), the Atlantic Provinces (-35%) and the Prairie Regions (-36%) while starts increased in B.C. (26%) and 32% in Quebec (32%). The Implications According to a research noteÂ by Diana Petramala, Economist at TD Economics, Canadian new home construction ended 2015 with a whimper. She notes that the level of new home construction would indicate that we are moving to be more in line with underlying economic and demographic fundamentals,Â althoughÂ one cannotÂ not read too much into month-to-month swings in data. Expectations for 2016 Overall, TD expects housing starts nationally to dip back to below 180,000 units through 2016, following an average of 181,598 over 2015. New home construction in Toronto is expected to come back to a more normal pace during 2016 and elsewhere, the combination of weak economic conditions and overbuilding over the last few years has led to soft housing market conditions with the majority of markets across Canada being either fairly balanced or tipping into buyer's territory. Notes TD, this should keep a lid on new home construction for the next few years. B.C. is the lone market, where market conditions are tight and new home construction remains well below pre-2008/2009 highs so that sharply rising home prices will should encourage more homebuilding in 2016.