Homebuilding strong despite 20% drop: economists

Canada’s homebuilding activity remained historically strong last month even though the annual pace of starts plunged 20 per cent from August, economists said Thursday.

Canada Mortgage and Housing Corp. said the seasonally adjusted annual rate of housing starts was 208,980 units in September, down from 261,547 units in August but in line with average readings in 2019.

Economists had expected an annual rate of 240,000 starts in September, according to financial markets data firm Refinitiv.

The decrease was driven by weakness in Ontario and British Columbia and lower starts in condos.

However, the six-month moving average of the monthly seasonally adjusted annual rates of housing starts rose slightly to 214,647 in September, up from 212,609 in August.

“The national trend in housing starts was largely unchanged in September,” said Bob Dugan, CMHC’s chief economist.

COVID-19 has resulted in volatility in multi-family starts, especially in Toronto.

“We expect national starts to trend lower by the end of 2020 as a result of the negative impact of COVID-19 on economic and housing indicators,” he said in a news release.

Broader demand trends remain resilient in the near-term with starts remaining strong by historical standards, said RBC economist Claire Fan.

“Average starts from January to September were one per cent above the same period in 2019 - despite COVID-19 containment measures that shut down wide swaths of the economy in the spring,” she wrote in a report.

“And in Quebec and Ontario, average starts continued to outpace the national comparable while the others, most notably BC, lagged.”

Fan noted that the issuance of permits has remained strong, “suggesting still-solid momentum for housing starts in the near-term.”

Housing starts averaged 237,300 units in the third quarter, up 22.2 per cent from 194,100 units in the second quarter.