National housing starts trend declines in December

Friday, January 18, 2019

The trend in housing starts was 206,981 units in December 2018, down from 212,338 units in November 2018, according to Canada Mortgage and Housing Corporation (CMHC). The trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

“The national trend in housing starts decreased in December, the fifth decline in the last six months,” said Bob Dugan, CMHC’s chief economist, in a press release. “Reflecting these recent declines, total annual housing starts in 2018 were lower than in 2017, as lower single-detached starts more than offset a slight increase in multi-family starts this year. Nonetheless, total housing starts remain elevated when compared to historical averages.”

In Vancouver, housing starts continued trending lower in December 2018, closing out the year 11 per cent below year-ago levels, despite rental units rising 40 per cent in response to a tight rental market. The City of Vancouver’s rental and condo sectors are the top two drivers to the annual housing starts. Housing starts in Surrey led the overall decline with starts in the region falling 27 per cent in 2018.

In 2018, Victoria’s housing construction rate reached highs not seen since 1976 in December 2018. Rental units accounted for half of all housing starts last year in response to heightened rental demand and low vacancy rates.

Housing starts in the Edmonton region trended lower in December as inventory levels remained elevated. Year-over-year, Edmonton starts were 12 per cent lower than 2017 levels, which is due to lower demand driven by the current economic climate in Alberta. Housing starts across all types of units were lower, except for row units, which saw gains of 13 per cent in December 2018.

Total starts in Regina trended lower in December 2018 due to a decline in multi-family construction. Last year, housing starts in the region declined by 41 per cent to 1,139 units, down from 1,923 units in 2017. Single-detached starts declined by 47 per cent, while multi-family housing starts dropped by 37 per cent year-over-year. A weak labour market, tighter credit market conditions, rising construction costs and higher resale supply all combined to reduce demand for newly built homes.

In December 2018, Kingston recorded the highest number of starts for any month since September 2013. Rental apartments accounted for 77 per cent of total starts last month. These new rental units will provide needed supply to the market, as the apartment vacancy rate in the region has been trending lower since 2016. The total number of housing starts in Kingston last year was significantly above the five-year average, with gains across all housing types.

The Toronto CMA saw the most apartment starts ever recorded in 2018 and overall housing starts were up by six per cent year-over-year. High prices, borrowing costs and a widening price gap with resale market options slowed single-detached starts significantly, which were the lowest in nearly four decades. The deteriorating affordability for low-rise homes has driven the demand for relatively affordable higher-density housing.

Annual housing starts in the Hamilton CMA were at their highest since 2004, despite the trend measure moving down in December. The high number of overall housing starts in Hamilton in 2018 is largely due to the number of apartment starts, which reached their highest level in over 40 years. In 2018, more homebuyers showed interest in less expensive homes and competition for vacant rental units intensified, leading to greater demand for new apartments, which saw greater demand in Burlington, Hamilton and Grimsby in 2018.

A high number of housing starts in Brantford last month helped annual starts surpass the 700 mark for the second time in the last decade. Average prices of new low-rise homes in the region attracted more growing families and empty nesters from the Hamilton and West GTA markets compared to most years. Single-detached starts rebounded from a slow 2017 as row starts continued to trend up to their highest level in over 40 years.

In Montreal, housing starts increased by one per cent in 2018 on a year-over-year basis. The six per cent decline in condo starts in December 2018 was more than offset by rental apartment starts, which climbed eight per cent, reaching a 30-year record high. Just under half of all housing starts for the region in 2018 were intended for the rental market, including starts of rental retirement homes. However, most rental starts were intended for the non-retirement home sector. Relatively low vacancy rates, the aging population and stronger demand from young households all likely had an impact on rental construction.

The number of housing starts in Quebec’s urban regions remained relatively level from 2017 to 2018. Residential construction over the past year continued to be supported by multi-unit housing starts, a large part of which were rental units. Overall, the growth in the supply of apartments in Quebec was stimulated by an aging population and immigration.

Halifax saw the trend in housing starts rising in December due to an increase in apartment construction. By the end of 2018, multi-unit housing starts were up six per cent year-over-year, driven by strong rental demand and migration. Apartment construction in 2018 was predominantly located in Hammonds Plains and Mainland North, which are both suburban markets, as well as on the Halifax Peninsula.

Total housing starts in Prince Edward Island (PEI) skyrocketed 156 per cent on an annual basis in December. Singles climbed nine per cent, while multiples increased by 347 per cent, which contributed directly to the sizeable monthly increase. This was driven by new multi-unit apartment and seniors’ condo projects, in reaction to a near-zero vacancy rate in the province. For 2018, total starts were up 26 per cent, largely due to strong job growth and positive international immigration throughout the year.

The standalone monthly SAAR of housing starts for the country was 213,419 units in December, down from 224,349 units on a monthly basis. The SAAR of urban starts fell 5.8 per cent in December to 194,594 units. Multiple urban starts declined 6.8 per cent to 144,728 units last month, while single-detached urban starts dropped 2.6 per cent to 49,866 units. Rural starts were estimated at a SAAR of 18,825 units.

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