Housing starts picking up pace, CMHC says

September figures indicate homebuilding has gone from ‘controlled simmer to a boil’

OTTAWA— The rate of new housing starts hit its fastest pace since 2012 in September, topping expectations, driven by continued strength in condominium construction. Canada Mortgage and Housing Corp. said Thursday the seasonally adjusted annual rate of housing starts increased to 230,701 units in September. That was up from 214,255 units in August.

Economists had expected the annual pace in September to come in at 200,000 starts, according to Thomson Reuters. BMO senior economist Robert Kavcic said Canadian homebuilding has gone from “a controlled simmer to a rolling boil.

“First, residential construction looks to be a bigger support than most expected in the second half of the year, which is good news on the growth front,” Kavcic said.

“But, second, we probably can’t sustain this level of homebuilding activity for long before excess supply concerns start to build.”

The six-month moving average in- creased to 202,506 for September, up from 195,804 in August. CMHC chief economist Bob Dugan attributed the strength to the launch of some major rental-housing projects as well as continued strength in condominium construction.

“As a result, trend activity is now above the projected annual pace of around 190,000 new households. This underscores the continuing need for inventory management to minimize the number of completed but unsold units,” Dugan said.

The pace of urban starts increased by 7.7 per cent in September to 216,194 units as both multi-unit and single-detached urban starts in- creased. Multi-unit urban starts increased by 10.5 per cent to 157,919, while single-detached urban starts increased by 0.8 per cent to 58,275 units.

Regionally, the pace of urban starts increased in Quebec, the Prairies, Atlantic Canada and British Columbia, but decreased in Ontario.

The report on the increase in new home starts came as Statistics Canada reported its new housing price index was up 0.3 per cent due in large part to higher prices in Ontario.

The combined region of Toronto and Oshawa saw prices climb 0.6 per cent over the previous month, while Hamilton increased 0.8 per cent.

On a year-over-year basis, the new housing price index was up 1.3 per cent in August.

TD Bank economist Diana Petramala noted the strength in new home construction over the past six months is consistent with the acceleration in housing demand and prices. “The increased appetite for Canadian housing will likely keep construction elevated through the rest of 2015 and first half of 2016,” Petramala said.

“However, with interest rates likely as low as they are likely to get, some of the steam in housing demand will likely fade as pent-up demand becomes exhausted.”