Canada: Housing starts stable in January despite frigid temperatures, trend holds firm
February 8, 2018
Seasonally-adjusted annualized housing starts in January numbered 216,200 units, according to the Canada Mortgage and Housing Corporation (CMHC). January’s reading was essentially unchanged from December’s revised 216,300 units (previously reported: +217,000 units), marking eight consecutive months of housing starts above the symbolic 200,000-unit threshold, and beating analysts’ expectations of a decline to 210,000 units.
Moreover, the six-month moving average of housing starts was broadly stable in January at its highest level in nearly a decade, declining only marginally from 226,300 units in December to 224,900 units. Holding steady from a month earlier, January’s reading reflected a number of short-term trends previously on display through much of last year. Specifically, strong multi-unit urban starts and weak single-detached urban starts—especially in Ontario—again explained the lion’s share of January’s reading although, interestingly, a modest increase in single-detached urban starts led all categories in terms of monthly gains. A breakdown by city showed that Toronto recorded sharp increases in multi-unit groundbreaking, while Montreal posted its largest one-month decline in nearly three decades.
A separate report, released by Statistics Canada, showed that the value of Canadian building permits rose more than expected in December, bolstered by plans to build single-family homes in Ontario. Relatedly, these plans also sent residential permits significantly higher in the same month.
Rishi Sondhi, Economist at TD Economics, commented that:
“Despite the snowstorms and colder-than-normal temperatures in some parts of Canada, with the Maritimes particularly hard hit, builders turned in an impressive showing in January with the level of starts holding above 200,000 [units] for the eighth straight month. The solid beginning to the year is likely to give way to some softening in the pace of homebuilding later this year, in-line with softer permit issuance in recent months. In particular, tighter mortgage lending rules and higher mortgage rates are likely to weigh on housing demand and dampen new home construction. Still, the longer-term fundamentals remain sturdy.”
Author: Christopher Thomas, Economist