EconoFACTS

September 09, 2020 | 09:04

Cdn. Housing Starts (August 2020) — Summer Heat

Economist

Director and Senior Economist
Economics

Robert has been with the Bank of Montreal since 2006. He plays a key role in analyzing regional economic, fiscal... (Read more)

Robert Kavcic

Director and Senior Economist
Economics

Robert has been with the Bank of Montreal since 2006. He plays a key role in analyzing regional economic, fiscal... (Read more)

Canadian housing starts rose again to 262,400 annualized units in August, from an already-lofty 245k in the prior month, the biggest print since September 2007. To say “this is a solid level of building activity considering the pandemic”, and all that, would be a massive understatement. As would saying that “some high profile forecasters got this one wrong”. At any rate, that leaves the three-month average for starts at just over 240k, the strongest pace since 2007.

Of course, the June-to-August period picks up the re-opening phase, so some outsized strength should be expected. But, with the exception of Quebec, residential construction was one sector of the economy that never had to fully shut down in the first place. In fact, the three-month average through May only slumped to 186k, which was subdued, but still well within the range seen during the past expansion. Looking at it another way, on a raw basis (i.e., ignoring potentially quirky seasonal factors) starts are essentially flat from a year ago through the first eight months of the year, suggesting that builders have fully made up any softness through the height of the pandemic.

On a regional basis, Ontario did the bulk of the lifting in August, with starts rising to almost 115k units, the highest level since 1990. British Columbia rose for a fourth straight month, but is well within the range of recent years. Quebec and Atlantic Canada appear to have steadied at a solid level in recent months, while the Prairies are subdued overall.

The Bottom Line: Residential construction activity, typically highly cyclical, has held up remarkably well through the pandemic, and another very strong showing in August suggests that builders have fully made up any lost time during the spring. Where we go from here is another question...starts could ride the back of a very hot resale market (in some locations) in the near term, but could run into softer population flows and less income support over time.

Table 1 - Canada — Housing Starts

(thousands of units : a.r.)

Source: BMO Economics, Haver Analytics