Canadian housing starts dipped to 201.0k (annualized) units in August, down 2.3% from July’s 205.8k level. The pace disappointed forecasts calling for an increase to 216k. On a longer-term six month moving average basis, starts edged slightly lower to 215k.
Single-detached starts dropped 3% to 64k units. Meanwhile, multi-family construction fell 2% to 137k.
Urban starts fell in half of the provinces. Homebuilding pulled back notably in Quebec, with urban starts falling -6k to 28k units. Starts also fell in Ontario (-5k to 61k units) and three of four Atlantic Provinces (PEI providing the lone exception). Conversely, gains were recorded in Saskatchewan (+0.6k to 3k units), Alberta (+3k to 32k units) and B.C. (+4k to 46k units).
Starts dropped notably in Toronto (-11k to 29k units), Montreal (-6k to 12K units) and Vancouver (-0.5k to 25k units).
Key Implications
August’s moderation in homebuilding, while surprising, is consistent with our view that starts will pull-back from their elevated first-half pace to a rate more in-line with underlying fundamentals. That said, homebuilding remains healthy when viewed on a trend basis, supported by robust population growth and firm economic conditions. Moreover, solid permit issuance points to homebuilding maintaining a healthy pace in the near-term.
For the third quarter, housing starts are averaging 203k, softer than the 218k pace averaged in the prior quarter. This suggests that the new housing construction component of residential investment will be somewhat softer in Q3. Still, residential investment overall is likely to add to growth, driven by rising resale activity.
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