Canada’s housing market has been contending with an overall downturn in recent months, but those softer conditions were defied in September by the strongest new construction data seen since last year.
The Canada Mortgage and Housing Corporation (CMHC) reports that the standalone monthly seasonally adjusted annual rate (SAAR) of total housing starts for the nation hit 305,889 last month, a 11% increase from August, and the highest reading since September 2021.
Urban starts were up 12% to 276,142 units, with multi-unit dwellings up 16% at 216,549 projects started. Single-detached new construction, however, remained flat at 58,593. Meanwhile, rural starts came in at a SAAR of 23,447.
Activity was particularly strong in Ontario, up 35% to reach a record high of 135,940 units, followed by gains in Alberta (+19.5%) and BC (+10.9%). All other provinces witnessed declines.
Bob Dugan, CMHC’s Chief Economist, says new construction in Canada’s biggest cities is being driven largely by condos and other multi-unit dwellings.
“Both the six-month trend and monthly SAAR in housing starts were higher in September compared to August. September’s increase in monthly SAAR housing starts in Canada’s urban areas was driven by higher multi-unit starts,” he states in a release.
“Montreal, Toronto and Vancouver recorded large increases in SAAR multi-unit starts, resulting in the overall increase for Canada. While single-detached units were up 85% in Vancouver, single-detached starts were flat in Toronto and Montreal. Housing starts activity remains elevated in Canada in 2022.”
READ: Expect “More of the Same” From Housing Market in Coming Months: Economist
The six-month moving trend in housing starts -- a measure used by the CMHC as a compliment to the SAAR to offset any swings in monthly estimates and activity in the multi-unit segment -- came in at 276,682 units, a month-over-month increase of 3%.
This surprisingly strong sprint is the fourth-best monthly result ever recorded for CMHC starts, according to an analysis by Desjardins Principal Economist Marc Desormeaux.
However, he points out, the writing is on the wall for a slower housing market, with strong showings in some provinces masking weaker performance in others. Softness in the detached sector also reveals slowing investment in the priciest housing sector.
“Headline numbers exceeded even the most optimistic estimates, but we still see it as a mixed data print,” he writes.
“Clearly, homebuilding is still performing remarkably well in the face of an historic downturn in the Canadian home resale market, particularly in Ontario and BC markets that have been hard-hit in the early stages of that downturn. However, declines across Quebec, Atlantic Canada, and the Prairies -- following reasonably widespread losses in the prior month -- suggest that we are increasingly seeing softness in the existing home market weighing on new construction.”
As well, he adds, while today’s data spells positive news for the economy, it further cements the likelihood of a 50-basis-point interest rate hike from the Bank of Canada in its meeting next week, with more pain to come in the housing sector.
“From a housing market outlook perspective, we still believe that broad and significant slowdown in residential construction is inevitable given pronounced and widespread drop in Canadian home sales and purchases witnessed to date,” he writes.
“These are but the early innings of the Canadian downturn.”
