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Canada: 208.5K Housing Starts In July

ByThe National Bank of Canada
Published 08/10/2012, 12:57 AM
Updated 05/14/2017, 06:45 AM
IMOB
-1.00%
FACTS:

In Canada, for an eighth month in a row, housing starts exceeded 200K units at an annual rate in July (top chart), reaching 208.5K, a 13.6K or 6.1% drop from June. In July, urban starts decreased 12.8K or 6.4% to 187.3K. Starts in rural areas edged down 800 units, or 3.6%, to 21.2K. Urban single family starts declined 2.7K, or 4.0%, to 64.3K, while multiple starts decreased 10.1K or 7.6% to 123K. On a regional basis, starts decreased in 6 provinces out of 10, but mostly in BC (-10.4K).
Starts In June Above 200k For A Seven Month In A Row
OPINION: July’s drop in housing starts mainly reflects a return to normal in multiple starts in the Greater Vancouver. In our view, further decreases are in the offing. In Toronto, according to Urbanation, unsold supply of new condos (including projects launched but for which construction is not started) set a new market high in Q2. According to Toronto Real Estate Board (TREB), existing condos sales declined 11.7% from last year in July, and the median selling price was flat on a y/y basis (middle chart).
Toronto Existing condos selling prices flat in July
While this does not mean that a crisis is looming, it should induce developers to wait for some of the unsold supply to be cleared before bringing new projects on the market. Also, the full impact of the new mortgage rules are yet to be felt. Mainly for these reasons, we expect housing starts to cool over the next few months even if, according to CMHC, the activity is currently sustained by the lowest historical mortgage rates. Meanwhile, the drop in starts in July means that so far in Q3, new housing construction substracts to economic growth (bottom chart), following an outsized contribution in Q2.
New Housing Construction Contribution To Economic

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