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National housing starts trend down in July

Monday, August 13, 2018

The national trend in housing starts decreased slightly to 219,988 units in July 2018, down from 221,738 units in June 2018, according to Canada Mortgage and Housing Corporation (CMHC). This 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 July, reflecting a decline in the SAAR of multi-unit dwellings in urban centres from the near-historical high registered in June,” said Bob Dugan, CMHC’s chief economist, in a press release. “Despite decreasing in July, the trend remains well above historical averages, reflecting elevated levels of multi-unit starts in most major markets that has more than offset declining single starts.”

In Vancouver, housing starts trended lower in July 2018 as fewer projects in both the single-detached and multi-family segments began construction. The densifying cities of Vancouver, Burnaby and North Vancouver saw the most multi-family construction last month. Despite the generally weak response of housing supply to changes in home prices in this Census Metropolitan Area (CMA), particularly large increases in home prices and strong demand from an increasing population in the Vancouver region have resulted in an elevated level of new home construction so far in 2018, which are on par with levels recorded in the first seven months of 2017.

The trend for housing starts increased in July 2018 in Victoria, due to strong construction activity continuing in the first half of 2018 for the Victoria CMA. While the number of multi-family projects beginning construction fell on a year-over-year basis, single-detached starts increased, particularly in the municipalities of Langford and Colwood. Due to strong demand for all types of housing in this CMA, builders have responded by starting 14 per cent more units in July 2018, compared to the same period last year.

The housing starts trend in Lethbridge fell slightly on a month-over-month basis in July 2018. Actual housing starts fell 19 per cent year-over-year in July, with both single-detached and multi-family homes responsible for this decline. Higher inventories and slowing demand in Lethbridge are resulting in downward pressure on housing starts in the region.

Saskatoon’s total housing starts trended down in July as fewer multi-family projects began construction. Homebuilding activity in 2018 so far has been mixed, as single-detached starts fell 31 per cent and multi-family starts rose just under one per cent, compared to the previous year. So far in 2018, modest economic growth has resulted in residential construction remaining below levels seen during the same period last year.

In Toronto, the total number housing starts remained virtually unchanged in July 2018. The decline in the single-detached starts trend was matched by climbing multi-unit starts. High home prices continued to result in buyers reconsidering low-rise units in favour of relatively more affordable condominium apartments. As a result, condominium apartment starts were the highest for the month of July since 2005. The majority of condominium apartment starts were in the City of Toronto (60 per cent), with the rest split between Mississauga (19 per cent), Vaughan (11 per cent) and Oakville (10 per cent).

Oshawa’s total housing starts trended down in July 2018, as both single-detached and condominium apartment construction fell, with July 2018 seeing the lowest number of single-detached starts for the month since 1992. While demographic and economic conditions remain favourable, the number of units under construction is the highest it has been in over 25 years, which slowed the pace of new projects.

The overall trend for total housing starts in Peterborough was relatively unchanged in July 2018, remaining on par with the high levels of starts experienced over the last 19 months in this CMA. These results are due to a strong year for housing starts in 2017 and healthy single-detached starts in the first seven months of this year. Demand has been driven by the relative affordability of single-detached homes, compared to other CMAs in Ontario.

In the Quebec CMA, housing starts fell by 10 per cent so far this year, compared to the same period in 2017. This decrease was due to the condominium and freehold housing segment, which is comprised of single-detached, semi-detached and row houses. However, the rental housing segment continued its strong trajectory, as conventional rental or seniors’ housing units increased by 48 per cent over the same period last year.

From January to July 2018, New Brunswick has seen total housing starts increase by eight per cent year-over-year. Construction of multi-unit projects is largely responsible for this growth, as multi-family starts increased by 13 per cent in July 2018, compared to three per cent for single-family housing starts. The increase in multi-family construction projects are due to a seven-year low in New Brunswick’s apartment vacancy rates.

The trend measure is used to complement the monthly SAAR of housing starts to account for considerable swings in monthly estimates. At times, analyzing only SAAR data can be misleading, as this data is largely driven by the multi-unit segment of the housing market, which can vary significantly from month to month.

The standalone monthly SAAR of housing starts for all regions of Canada was 206,314 units in July, down from 246,200 units in June. The SAAR of urban starts fell by 16.2 per cent in July 2018 to 190,093 units. Multiple urban starts dropped by 20.3 per cent to 136,231 units in July, while single-detached urban starts declined by 3.6 per cent to 53,862 units. Rural starts were estimated at a SAAR of 16,221 units.

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