2024-08-16 15:17:43
(Ottawa) Canada Mortgage and Housing Corporation (CMHC) announced that housing starts increased 16 per cent in July from June. Analysis by three economists.
Surprise Reveal
The national housing agency reported that Canada’s housing starts came in at a seasonally adjusted annual rate of 279,509 units in July, up from 241,643 in June. Desjardins noted that economists were expecting 245,000 units. Desjardins economist Kari Norman added that the unexpected increase was directly related to “stronger-than-expected collective housing projects.”
“Builders started more condominium construction than expected in July, with Ontario recording its best month in more than a year,” TD Bank economist Maria Solovieva wrote in a note.
However,I Solovieva noted that despite the rebound, housing starts remain below their 2021 and 2022 peaks, especially for single-family and semi-detached homes.
“Given the low presale activity in recent years, coupled with higher borrowing and construction costs, we expect multifamily sales to decline soon,” she wrote.
The provision of affordable housing is a key policy issue. All levels of government are doing everything they can to help stimulate new housing construction.
Despite slowdown, real estate sector remains strong
The housing starts report follows data released Thursday by the Canadian Real Estate Association, which showed that while home sales increased 4.8 per cent in July from a year ago, they were down 0.7 per cent from June 2024 on a seasonally adjusted basis.
BMO senior economist Robert Kavcic said residential construction activity in Canada remains strong despite a notable slowdown in the resale market.
“The fact that cyclical parts of the economy have not collapsed in response to a sharp rise in borrowing costs suggests that structural forces still at work outweigh weakness in some areas,” Kavcic wrote in a note.
City and Countryside
The increase was due to a 17% year-on-year increase in new housing starts in the city to 261,134 units in the month.
In July, urban multifamily starts increased 21% year-over-year to 217,306 units, while urban single-family starts increased 2% year-over-year to 43,828 units.
Rural starts were estimated at an annual rate of 18,375 units this month.
CMHC said Canada’s six-month moving average of housing starts increased 3.2 per cent to 255,783 units in July, up from 247,840 in June.
Desjardins’ Outlook
- The gradual rate cuts that began in June should boost housing starts, as should recent government programs, particularly those that favor the construction of traditional rental apartments.
- However, challenges such as construction labor shortages, rising material costs and declining builder confidence are undermining that optimism.
- Despite favourable changes in monetary policy, a decline in pre-sale activity in the shared ownership market should also slow the pace of construction starts observed in early 2024.
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