July 18, 2022 | 08:51
Cdn. Housing Starts (June)
Canadian housing starts pulled back to 273,800 annualized units in June, a still robust level of new construction. That leaves the average pace over the first half of the year at 258k, and 272k for Q2. Urban single-family starts fell to 60.4k in the month, while multis jumped above 200k. All in, unlike the resale market, new building activity is running strong—but this segment of the market lags, so any cracks wouldn’t realistically begin to show in the data until later in the year. And, it remains to be seen how much this side of the market will actually crack given that we do (and will) still have demographic demand for housing.
Regionally, the monthly picture was very mixed. Quebec, Atlantic Canada and Alberta posted the largest declines, while activity in B.C. and Ontario was higher. The bigger picture, however, is pretty robust activity across the country (especially Alberta recently), consistent with booming markets from coast to coast through the pandemic.
With that in mind, residential construction is going to be one fascinating area to watch in the year ahead. There are currently a record 340,000 units under construction across Canada, which is also near the 1970s peak on a per-capita basis. Canadian builders are effectively going all out, bringing as much supply to market as they can against constrained labour supply, material costs and development hurdles. So, the federal government’s goal of doubling the rate of construction over the next decade seems incredibly difficult in the best of times. The interesting part will be how construction responds to higher interest rates, compressed margins and a clear sharp pullback in resale demand. We could very well start to see some project cancelations and a pullback in activity through next year, but the depth of any decline could be held in check by demographic needs. Time will tell on this front, but for now, the correction in the resale market is real and starts usually lag on the timeline...