Pace of housing starts gathers steam on condos
The pace of new home construction picked up unexpectedly in February, driven by strength in the condo market in major cities, including Greater Victoria, says Canada Mortgage and Housing Corp.
Meanwhile, Statistics Canada reported building permits rose beyond expectations in January — particularly in the condo market — signalling continued strength in the multi-family dwelling category.
CMHC said the seasonally adjusted annual rate of housing starts increased to 229,737 units in February, up from 215,260 in January.
Economists had expected the rate to come in at 216,600, according to Thomson Reuters. Housing starts are considered a leading indicator of how the economy is performing.
TD Bank economist Rishi Sondhi said homebuilding continues to defy expectations. “Starts are being boosted by a relatively firm economic backdrop, healthy population growth and past gains in preconstruction sales in Toronto,” Sondhi wrote in a report. “However, February’s increase was driven by the volatile multiunit sector, leaving some scope for reversal in March.”
Sondhi noted while the pace of starts has held up so far this year, TD expects that cooling demand in the face of restrictive policy measures and higher rates will ultimately slow starts.
New mortgage rules this year mean federally regulated lenders must subject homebuyers seeking uninsured mortgages to a stress test to ensure they can continue to make payments if rates rise.
The overall increase in housing starts for February came as the seasonally adjusted annual rate of urban starts increased by 7.1 per cent in February to 211,211 units. Multiple urban starts increased 15 per cent to 154,535 units while single-detached urban starts fell 9.8 per cent to 56,676 units. Rural starts were estimated at a seasonally adjusted annual rate of 18,526 units.
The six-month moving average of the monthly seasonally adjusted annual rates of housing starts was 225,276 units in February compared with 224,572 in January.
In Greater Victoria, condominium and rental units surged higher than the same period a year ago. “Demand for multi-unit housing of all types remains high in Victoria as inventories of unsold units and rental vacancies remain low,” said Braden Batch, CMHC’s senior market analyst for Vancouver Island.
Data showed 311 housing units were started in the region during February, up from 210 for the same month in 2017.
Last month’s starts included 245 condo or rental units and 50 single-family houses.
The majority of the multi-family units were started in Saanich with 130, followed by Langford at 102. Langford had the most single-family housing starts in February with 14.
For the first two months of this year, 411 homes were started in Greater Victoria, up from 385 last year.
Construction is booming in the capital region as a total of 4,178 housing units are underway, in varying stages of completion. Of those, 3,182 are apartment units, meaning either condo or rental units. Another 621 are singe-family houses.
A separate report from Statistics Canada revealed that municipalities issued $8.4 billion in building permits in January, up 5.6 per cent from December.
Economists had expected the value of building permits to increase 1.3 per cent.