Canadian housing starts fell to a four-month low in August


Canadian housing starts fell to a four-month low in August

  • Housing starts fell 6.6% to 180,300 annualized units in August 2013, thereby missing market expectations for a 190,000 reading in the month.
  • The pullback in homebuilding in August reflected decreased activity among all components. Urban multiple-unit starts (-8.4%) and urban single-unit starts (-0.9%) were both down in the month while rural starts posted a relatively sharper 13.2% decline.
  • Declines in starts were recorded in the Prairies (-23.9%), British Columbia (-19.4%), Quebec (-4.5), and Atlantic Canada (-0.7%) while a jump in multiple-unit starts drove a sizable increase in Ontario (14.1%) to provide some offset.
  • Despite the monthly gyrations, new home construction has been fairly stable thus far in 2013 with the six-month moving average of starts, which the Canada Mortgage and Housing Corporation (CMHC) defines as the trend rate, coming in at 187,200 in August versus 187,300 in July. While the persistently elevated level of building permits provides some scope for a pickup in homebuilding in the near term (permits held above 200,000 annualized units for the fourth straight month in July), we expect that this underlying stability in housing-market activity will broadly remain in place. As we move toward 2014, our expectation is that a modest deterioration in housing affordability will weigh on demand and lead to a moderation in starts.

Canadian housing starts fell 6.6% to a four-month low of 180,300 annualized units in August 2013. The decline in August followed the cumulative 3.4% decrease recorded during the previous two months and further unwound the 13.9% surge in May to a recent peak of 199,900 annualized units. The pullback in homebuilding in August, which compared to market expectations for a more modest decline to 190,000, reflected lower levels of activity in all components. Urban multiple-unit starts fell 8.4% to a four-month low of 104,700 annualized units while urban single-unit starts slipped 0.9% to 58,400 annualized units, which was the lowest level since June 2009. Rural starts fell 13.2% to 17,200, largely reversing the previous month’s 16.1% jump.

Declines in activity were reported in the Prairies (-23.9% to 35.5 annualized units), British Columbia (-19.4% to 25,000), Quebec (-4.5% to 28,200), and Atlantic Canada (-0.7% to 6,600) while a bounce in multiple-unit starts in Ontario (24.8% to an eight-month high of 47,200) drove the overall pickup in homebuilding in the province (14.1% to 67,800) to provide some offset.

Despite the monthly gyrations, new home construction has been fairly stable thus far in 2013, and the six-month moving average of starts (which the CMHC defines as the trend rate) came in at 187,200 in August compared to 187,300 in July. While the persistently elevated level of building permits provides some scope for a pickup in homebuilding in the near term (permits held above 200,000 annualized units for the fourth straight month in July), we expect that this underlying stability in housing-market activity will broadly remain in place. As we move toward 2014, our expectation is that a modest deterioration in housing affordability will weigh on demand and lead to a moderation in starts. We expect that housing starts will drift lower during the next year and finish 2014 at levels that are more consistent with household formation in Canada.

David Onyett-Jeffries, Economist, RBC Economics

To view the economic data calendars with trend charts, go to:


http://www.rbc.com/economics/economic-data-calendars/ca/calendar.html (Canada)

http://www.rbc.com/economics/economic-data-calendars/us/calendar.html (US)