Housing starts fell in December, CMHC says

OTTAWA—THE annual pace of housing starts in December fell compared with November, according to Canada Mortgage and Housing Corp.

The monthly seasonally adjusted annual rate of housing starts for all areas in Canada, excluding Kelowna, B.C., fell 12.2 per cent in December from November, CMHC said on Monday.

The December survey was not conducted in Kelowna due to the COVID-19 pandemic, but CMHC said Kelowna’s exclusion didn’t impact the overall trends for the month.

The annual pace of urban starts fell 12.8 per cent in December as urban starts of apartments, condos and other types of multiple-unit housing projects dropped 15.1 per cent. Single-detached urban starts fell 5.5 per cent.

Rural starts were estimated at a seasonally adjusted annual rate of 22,373 units.

“December’s decline is unsurprising as some pullback from November’s massive level was to be expected,” wrote Rishi Sondhi, economist at TD Economics, in a note to clients on Monday.

“Still, homebuilding ended last year on solid footing, buoyed by gains in past home sales and population growth, a declining inventory of unsold new homes, as well as low interest rates.”

Despite the drop in December, CMHC says the six-month moving average of the monthly seasonally adjusted annual rates of housing starts climbed to 239,052 units for the final month of 2020, up from 236,334 in November.

Bob Dugan, CMHC’S chief economist, said that the pace of housing starts in 2020 surpassed 2019 in total.

“Regionally, the December drop was concentrated in Ontario and Quebec, though both provinces saw the best year since 2004,” wrote Priscilla Thiagamoorthy, economist at BMO Capital Markets Economic Research, in a note to clients.

Sondhi of TD Economics wrote that despite a new wave of COVID -19 restrictions in Ontario and Quebec, homebuilders should be “relatively unscathed.”

“Focus now shifts to January, where, in the battle against the pandemic, Ontario’s government recently shuttered ‘nonessential’ construction activities,” Sondhi’s note to clients said.

“Notably, condo projects are allowed to continue.”