Multiple Unit Housing Starts Dominate Residential Construction In Canada

Canadian housing starts declined to 207,968 units in January of 2019 from 213,630 units in December. It is thought that starts running at about a 180,000 annual level would just match demographic needs. In other words, starts were quite elevated in January as well as December. Indeed, on a six-month moving average basis, Canadian housing starts were running at 208,000 units.

Single-detached urban starts declined 10.4% in January to 44,559 units while multiple urban starts increased by 0.7% to 146,353 units. The multi-unit sector is sharply boosting residential construction in Canada as condo starts respond to past gains in pre-construction sales. Rental construction in Canada is also strong due to low vacancy rates in key markets, boosted by government programs aimed at adding more affordable stock to the market.

Housing starts in Canada are expected to remain quite strong this year, and then ease back in 2020.

New construction activity has yet to follow home resales significantly lower — and there appears to be more strong building activity in the pipeline with permit issuance running at a 240,000 annualized rate in the fourth quarter of last year.

Housing starts typically follow resales with a lag, though. We continue to expect housing starts will ultimately begin to slow more significantly later in 2019.

The Canada Mortgage and Housing Corporation (CMHC) still believes that Canada’s housing market is vulnerable because of overvaluation or prices too high. Overvaluation according to the CMHC occurs when house prices are elevated compared to personal disposable income, population levels, interest rates, and other factors.

The CMHC argues that there are is still some market overvaluation — one of four factors the agency tracks to evaluate market vulnerability in Canada's sky-high housing markets. Nonetheless, the CMHC indicates that potential overvaluation pressures are unwinding somewhat in Toronto and Victoria.

Housing Starts In Canada, Annualized

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