EconoFACTS
October 08, 2019 | 08:46
Cdn. Housing Starts (September 2019) — And the Boom Goes On
Economics
Economics
Canadian housing starts dipped slightly to 221,200 annualized units in September, but that was somewhat stronger than expected and continues the relentless level of building activity. Starts for all of Q3 averaged 223.3k, little-changed from the prior quarter, while the year-to-date average is running at 211k. This continues to reflect strong demographic demand, both from international inflows and new households created within Canada. Both single- and multi-unit starts pulled back in September. Regionally, it was a mixed bag in the month, but only three provinces (Quebec, Nova Scotia and Manitoba) saw starts decline. Most provinces are seeing firm building activity consistent with similarly-firm population flows. Here’s a quick recap: B.C. activity has been more or less stable around the 40k-to-50k range. Most notable is the fact that activity in this province never really buckled despite the correction in resales and prices, which have now started to firm. This highlights the fact that high-end single-detached market has been driven by factors beyond demographic demand, which remains solid. Vacancies remain almost nonexistent. Alberta looks stable but subdued, with the year-to-date average running at 26k, consistent with a soft economy. Saskatchewan, also hit by the oil shock, is having a harder time absorbing past supply, and starts are plumbing 20-year lows. Ontario is seeing stable building activity, with the year-to-date, one-year and two-year trends all just above the 70k mark. That’s high by historical standards, but not out of whack given heated population inflows. Builders are seemingly putting up as much as possible given land-use and development constraints—and the market needs every last unit at this point. Quebec starts fell in September, but the trend is still positive (12-month average is at a nine-year high). A solid economy, job market and ramping foreign investment are all at work. Finally, Atlantic Canada is quietly seeing an immigration boom of its own, along with more neutral interprovincial migration flows (for a change). Starts in the region edged up in September, and Q3 was the strongest in just under seven years. In a separate release, Canadian building permits rose 6.1% in August, firmer than expected, with a gain in residential outweighing a dip in nonresidential permits. On the residential side, the number of units came in at 247k annualized in the month, flagging continued strength in housing starts down the road. Indeed, the year-to-date average for permits is a lofty 237k, so it looks like there’s plenty in the pipeline to keep residential construction activity humming. The Bottom Line: There’s a lot of homebuilding activity going on across the vast majority of Canada. If firm rent growth and low vacancies are any guide (in most markets not tied to oil), the demographic backdrop warrants such activity. |
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