Canada: Housing Starts Dip in March But Remain Elevated

Canada: Housing Starts Dip in March But Remain Elevated

Canadian housing starts edged lower to 225.2k (annualized) units in March, down 2.5% from February’s upwardly revised figure (231k) but still an elevated pace of homebuilding. The underlying trend in starts ticked higher to 227k over the last six months.

Single-detached starts advanced 8% to 76.6k units with the gains offset by a decline in the multifamily segment, where starts were down 7% to 148.6k units.

March’s drop was concentrated in Ontario (-31k to 75k units). This was expected after starts posted an unsustainable gain in February. Starts also dropped in Nova Scotia (-2.3k to 3.1k units) and Saskatchewan (-1.4k to 2.2k units). On the flip side, starts were higher in most other provinces, led by B.C. (+15.5k to 49.4k units), Newfoundland and Labrador (+5k to 6.3k units) and Alberta (+3k to 37k units). Starts were largely flat in PEI during March.

Starts were down notably in Toronto (-33k to 38.3k units), owing to a drop in the multi-family sector from an unsustainably heated pace. Starts also declined in Montreal (-6.7k to 20.3k units). Conversely, starts were higher in Vancouver (+12.2k to 32.4k units)

Key Implications

Homebuilding continues to defy gravity, with another strong print for starts in March. Over the past six months starts have averaged a solid 227k, with healthy population gains and on-going economic growth providing a boost for demand. Builders are also responding to past increases in pre-construction condo sales, a factor that should provide some support to starts going forward.

In the first quarter, starts averaged 227k, about in line with their fourth quarter level. While new housing construction is holding up, a plunge in home sales suggests that residential investment will subtract notably from Q1 growth.

Going forward, starts will likely ease from their solid Q1 pace, in light of rising interest rates, regulation, and a softer price environment. However, recent permit issuance points to only a gradual moderation.

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