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Canada Housing January 2023

Canada: Housing starts slump in January

Housing starts fell 13% in January from December to 215,000 units, the fourth consecutive monthly decline. January’s reading was close to pre-pandemic levels. Moreover, home sales were at a 14-year low at the outset of 2023, and home prices declined month on month in January according to the Canadian Real Estate Association.

The latest data is a clear indication of how Bank of Canada’s aggressive tightening cycle is hurting the property sector, and both housing prices and starts will likely drift down further in the months ahead. Moreover, the decline in housing starts in January bodes poorly for residential investment in Q1.

On the reading and outlook, TD Economics’ Rishi Sondhi said:

“January’s level of starts was well below expectations, the decline was broad-based and came despite some indications of warmer weather during the month. […] This may indicate that last year’s outsized weakness in single-detached sales is bleeding over into homebuilding activity. All of that said, we would expect some bounce back in February after last month’s outsized drop. […] After a strong performance in 2022, our forecast anticipates starts trending lower this year, as past declines in demand restrain construction activity.”     

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