Falling Canadian housing investment is starting to weigh on new housing activity. Canada Mortgage and Housing Corporation (CMHC) data shows housing starts fell in September. The drop comes after hitting a multi-year high earlier this year. Even with the drop, building activity is still elevated above historic levels.
Canadian Housing Starts Fell To 271,000 Units
Canadian housing starts slipped lower, but remain elevated. The six-month moving average of the seasonally adjusted annual rate (SAAR) of housing starts fell to 271,068 in September. This represents a decline of 4.8% compared to the previous month — a hefty drop. The six-month trend is preferred by the agency, as it yields more stable insights. Month to month data can be a little volatile with shifts in multi-family units.
Canadian Cities Are Seeing Reduced Market Activity
The non-trend average of housing starts wasn’t all that far off last month. The SAAR of housing starts fell to 251,151 in September, down 4.4% from a month before. Urban starts, those in Canada’s larger cities, represent 223,055 of those units, down 4.5% from the previous month. It might seem like a big drop, but this is still much stronger new housing activity than seen pre-pandemic.
Canadian New Housing Starts
The seasonally adjusted annual rate of new housing starts across Canada.
Source: CMHC; Better Dwelling.
Even With The Decline, Housing Starts Are Elevated From Historic Levels
One interesting point worth taking note of — the rate of declines at the national and urban levels. They’re not far off from each other, with the drop in urban starts only slightly overrepresented. This demonstrates a surprising resilience for non-urban housing. It was thought by many to be a pandemic fad, but starts are moving with urban markets. Country living is still at least as appealing as city living, even with parts of the economy reopening.
The CMHC doesn’t sound particularly worried about the decline impacting supply. “On a trend and monthly SAAR basis, however, the level of housing starts activity in Canada remains high in historical terms,” said Bob Dugan, the agency’s chief economist. “Among Vancouver, Toronto and Montreal, Vancouver was the only market not to register growth in total SAAR starts in September, due to a decline in the multi-family segment.”
A similar trend was revealed with building construction investment recently. The level of activity has fallen off its highs, which will provide a drag on economic growth. The level of activity is still much higher than historic levels though, especially pre-pandemic. There’s still a whole lot of supply coming to market, it’s just normalizing at a more sustainable (but elevated!) level.
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